The digital currency craze started with Bitcoin, then moved to litecoin and ethereum. Now that Ripple prices have sky-rocketed, it has become the world's second largest cryptocurrency in terms of Market Capital, and the talk of the town.
From $9 billion on December 10, 2017, the market capitalization numbers have doubled to reach $18.1 billion. The rise in its price has been consistent. It had surpassed the value of $1 per coin on December 21 and crossed $3 as of January 5th, 2018. However, in terms of value, it is much behind Bitcoin or ethereum.
What is Ripple?
Ripple is actually a payment protocol and exchange network company. The currency whose value is being spoken about is officially called XRP or XRP tokens.
So, Ripple is a technology that allows digital payments of financial transactions within its network, like RTGS. Axis Bank was the first in India to offer payment services using Ripple.
How does it work?
Ripple allows the transfer of funds between institutions who have agreed to use the service.
Consider two parties that have agreed upon a middleman to send or receive the funds. Ripple has a gateway or medium that serves as the trustworthy middle man that links the two. The gateway receives the amount and sends it to the public address mentioned over the Ripple network. Any business or individual can register for this network.
The network can be used to exchange currency or to make a transfer of payments. XRP acts like a bridge to the currency. Each currency has its own gateway. So if a party wishes to receive money in Yen, it can do so even if the payment was in USD. You can also choose to receive the payment in cryptocurrency forms like bitcoin or ethereum. The sender does not necessarily need to make the payment in cryptocurrency for it. You can apparently also use virtual assets like air miles.
More than one gateways can be used to complete or initiate a transaction, forming a chain of trust 'rippling' across the users. The transfer takes only seconds unlike traditional banks situated in different countries which take days or weeks for wire transfer. The transactional fees on ripple are also minimal due to the large number of transfers it can handle.
There are a lot of other complexities involving in the network; this explanation just to give you a basic understanding.
A few facts on Ripple:
- Unlike bitcoin, this cryptocurrency cannot be mined; it cannot be used to go shopping.
- XRP tokens act as intermediate currency. It is issued by the company Ripple Labs, now known as Ripple.
- Ripple was not created for digital currency trading; it was formed to revolutionize fund transfers between banks of different countries.
- Most of the tokens are held by the founders and the company, unlike Bitcoin.
- It is not entirely a decentralized network. Ripple is a registered private company and can be held responsible.