Five reasons Ripple (XRP) could revolutionize financial transactions


When you finally wrap your head around bitcoin, you realize there’s an entire world of other cryptocurrencies, protocols and exchanges that you don’t understand. Ripple fits the bill. It’s different than other cryptocurrencies, and a lot of people don’t bother trying to figure out what it is. Do that at your peril. Here five reasons Ripple (XRP) could revolutionize financial transactions:

1) Instantaneous transactions. Where bitcoin transactions take 40 minutes to get confirmed, ripple transactions happen instantly (or near instantly – they currently take about 2 seconds). Other cryptocurrencies like Fastcoin confirm transactions must faster than bitcoin, but they can’t beat ripple yet (check out our list of the fastest cryptocurrencies). Because ripple works as a system of IOUs, it doesn’t matter if a transaction in bitcoin takes 40 minutes to confirm. When that bitcoin transaction is executed on the ripple network, it happens instantly because that IOU is transferred instantly. The IOU system is why trust is so important on the ripple network.

2) A faster form of Paypal. The simplest way to think of ripple is imagining it as a new and improved form of PayPal or Mastercard. When you send money to a business via PayPal, there numerous layers and fees imposed on every step of the transaction. These are mostly transparent to the end user, but they impact the ultimate cost you pay for products. Once you have cash in the network, ripple doesn’t require ACH, banks, or credit card networks to function. It’s a standalone way to send money anywhere around the world instantly with only nominal fees.

3) All currencies allowed. Unlike bitcoin, which is a single currency, ripple is a protocol that supports the buying and selling of any currency – from Chinese yuan to hobonickels. To facilitate transactions in other currencies, ripple created its own currency called XRP. Should ripple prove itself useful as a financial platform, it’s likely that the value of XRP will rise over time.

4) Currency soup. Because ripple supports any currency and has a currency exchange built-in, all sorts of exciting things are possible. For example, a user could perform a transaction in one currency and have it automatically exchanged for another. If I want to buy a 3D printer from China, I probably want to pay with dollars. The vendor in China wants yuan. By using ripple, I could send my transaction in dollars and let the exchange convert my currency into yuan so both parties get the cash they want instantly.

5) Ripple could enhance bitcoin. In the cryptocurrency community, there seems to be this notion that ripple is challenging or threatening bitcoin. I think that’s misguided. Should ripple become widely accepted, I think it has the potential to enhance bitcoin’s reach by making bitcoin a part of transactions even if one party never uses bitcoin (reference No. 4 above). Ripple has also attracted lots of outside funding from major players including Andreessen Horowitz, Google Ventures, and Lightspeed Venture Partners. Since bitcoin isn’t owned by any one entity, investors can’t dump cash into helping it grow. They have to fund offshoots like Coinbase instead. When ripple raises money, though, that good news for ripple and great news for bitcoin, too.

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