One of the first industries that blockchain technology could disrupt is transfer of money.
Money transfers have long been dominated by the traditional banking systems and payment providers, where fees and wait times have made the process long and difficult.
Other issues around the traditional model of money transfers can make the process even longer and more complicated increasing the cost of the process. For example:
- What if one bank enters the wrong account number?
- What if one party in the transaction defaults or reneges on the agreed transaction?
- What if there is no bank at the destination country to receive the transfer?
To improve the system and address these drawbacks, banks and payment companies across the world need a shared protocol to provide real-time data, reliable tracking and cost efficiency.
Ripple Labs, founded in 2012, enables real-time global transfer of money across a network of 100+ banks and payment providers. In essence, Ripple’s network functions as an exchange for banks and payment providers to operate under the same payment protocol, powered by a distributed open-source internet protocol, consensus ledger and the decentralized native cryptocurrency known as XRP.
XRP is a token used for representing transfer of value across the Ripple Network. For example, $100 in John’s account can be converted instantly into equivalent XRP tokens, which can be instantly transferred to Pierre’s account over the Ripple network, who could then convert it into another fiat currency or crypto asset. This process would typically take seconds or minutes instead of days when using a wire transfer.
Unlike Bitcoin, XRP is pre-mined meaning that every single unit of the currency that will ever exist has already been created at the beginning of the network with a grand total of 100 billion. Thus, no miners are needed or need to be incentivised to validate each transaction. Instead, a network of servers is established and developed to validate transactions across Ripple Network based on a consensus protocol.