What is a Ripple in the Crypto World?
By Space Coast Daily // January 17, 2022
Ripple is another cryptocurrency that also functions as a digital payment network in the bitcoin for ecommerce. In the year 2012, Chris Larsen and another company partner, Jed McCaleb, co-founded ripple for the first time. Ripple’s major services include a payment settlement system, asset exchange, and remittance.
It is comparable to the SWIFT system, which is favoured by banks and financial intermediaries trading in numerous currencies for security and worldwide money transfers.
The company and network, which we know as Ripple, uses XRP as their digital coins or token. They named their cryptocurrency as XRP and the main goal of their cryptocurrency is to act as person who will do the intermediate settlement of layer domination. They act as an intermediary mechanism of trade between two different currencies or networks.
Ripple as a Hawala Network in the Digital Age
To demonstrate how the system works, consider a payment processing structure in which the two parties on each end of the transaction use their preferred intermediaries to obtain the money. Ripple may be thought of as a virtual hawala service. Hawala is a non-conventional method of transferring payments, often across borders, without the use of cash.
Ripple utilizes a medium known as a gateway to serve as a link in the trust chain between two parties wishing to do business. Also on Ripple network, the gateway serves as a credit mediator, receiving and sending money to public addresses. Anyone or any firm can register and run a gateway, which allows them to act as a mediator for currency swaps, liquidity management, and payment transmissions around the globe.
A currency converter, XRP, is also a digital currency. It makes no distinction between fiat and cryptocurrency currencies, making it simple to convert one to the other. It is not necessarily necessary for a person to hold Bitcoin in order for someone else to accept Bitcoin as payment. Another person can obtain Bitcoins from his gateway and send money in Canadian dollars to his gateway (CAD). To begin a complete transaction, several gateways can be used, creating a trust chain that spans all users.
When a user uses a gateway to keep balances, they are exposed to counterparty risk, which is also present in traditional banking. The client might lose the value of their money kept with the gateway if the gateway failed to perform its responsibilities. Users that detest a gateway can exchange with another trustworthy gateway, which will handle the “untrustworthy” gateway. The IOU will be completed through a trustworthy or creditworthy-certified gateway in this situation.
How Ripple functions
Like Bitcoin and Nxt, Ripple does not employ a proof-of-work (PoW) or proof-of-stake (PoS) mechanism. Transactions rely on a consensus procedure to validate account balances and system operations. The consensus aims to enhance the system’s integrity by minimising double spending.
IOU credits and transactional movements between Ripple wallets are tracked by the Ripple consensus ledger. The data is not tied to any person or company’s ID or account, regardless of the fact that payment-processing history is publicly recorded and accessible on a blockchain. Because all records are kept on a public ledger, the data is vulnerable to de-anonymization procedures (the blockchain).
Ripple is a cryptocurrency that tackles some of the problems that traditional banks face. It is just a matter of seconds for a transaction to be finalised on Ripple network. On the other hand, an NEFT or a bank transfer might take several days to be completed. Ripple charges a cheap transaction price in compared to banks’ exorbitant fees for processing cross-border payments, with the lowest transaction cost for a regular transaction set at 0.00001 XRP.
Ripple, as a cryptocurrency also functions as a payment settlement system. Ripple is quite similar to the SWIFT system, which facilitates worldwide transfer of money. Ripple acts as an intermediary, allowing two parties to take part in a transaction without using cash. If one party intends to make payments in form of Bitcoins, it is not necessary for them to hold Bitcoins.
The IOU, which is the abbreviated form of a “I Owe You” document will be completed through a trustworthy or creditworthy-certified gateway in this situation. IOU credits and transactional movements between Ripple wallets are tracked by the Ripple consensus ledger. It is just a matter of seconds for a transaction to get finalised on Ripple network.