Everything you need to know about Ripple and XRP (continuation)
As we discussed in the previous post, Ripple is not exactly a coin, but a cross borders finance solution company. The Ripple coins or tokens are more or less enablers of this system. This “coin” has managed to become an altcoin (alternate coin) competing with the giants of Bitcoin and Ethereum.
Ripple coins have few interesting differences from Bitcoin. In the first instance, Ripple is based on a private, centralized blockchain, while Bitcoin is the complete opposite — it is based on a public, decentralized blockchain. Secondly, the Ripple is designed to be much faster than Bitcoin: while Bitcoin can perform maximum 7 transactions a second, Ripple can handle 1500.
In the third instance, Ripple is non-mineable currency. The Founders of Ripple have issued all tokens that were possible to issue, and no more can be added. We are talking about 100 billion coins already mined.
so what is so special about altcoin? lets take a deeper look.
1. Ripple is not exactly blockchain in the real sense
Bitcoin is based on blockchain technology, while Ripple doesn’t use blockchain but uses a distributed consensus ledger using a network of validating servers and crypto tokens called XRP (sometimes referred to as Ripples)
2. Ripple is not exactly a currency
While Bitcoin is a digital currency intended as a means of payment for goods and services, Ripple is a payment settling, currency exchange and remittance system intended for banks and payment networks. The idea is to provide a system for direct transfer of assets (e.g. money, gold, etc.) that settles in almost real-time, and is a cheaper, more transparent and secure alternative to transfer systems used by banks today, such as the Western Union or MoneyGram.
So, how does XRP tokens work?
XRP – which is the actual cryptocurrency – is a token which is used on the Ripple network to facilitate transfers of money between different currencies. Existing settlement systems generally use US dollars as a common currency for converting between other currencies. This incurs currency exchange fees and takes time – which is why bank transfers between accounts in different countries often take up to three days to process.
So, what ripple did was to reduce cost by using ripple token; XRP coins as the medium of exchange and conversion. By first converting the value of the transfer into XRP, rather than USD, exchange fees are eliminated and processing of payments is reduced to seconds.
To be continued.