Ripple is making blockchain waves

Ripple is making blockchain waves

Almost a year ago I wrote my blog “Blockchain and the Ripple effect: did it Ripple?”. Now twelve months later we may conclude it did. And even more than that. Ripple is making many waves. A lot happened  both in broadening their offerings and in enlarging their network. A growing number of banks and payment providers, increasingly join RippleNet, Ripple’s decentralized global network, to “process cross-border payments efficiently in real time with end-to-end tracking and certainty”. By using the growing set of Ripple solutions they are able to expand payments offerings into new markets that are otherwise too difficult or too expensive to reach. The focus of Ripple therefor has especially moved towards emerging markets.

BROADENING RIPPLE OFFERINGS

Ripple was set up in 2012 to create a streamlined, decentralized global payments system named RippleNet, using technology inspired by the blockchain, to record transactions between banks. RippleNet is an enterprise-grade blockchain platform, that nowadays has over 100-member banks and financial institutions. These partners can use all the Ripple offerings.

Solutions

Ripple makes software products based on blockchain technology and sell them to banks, payment providers and others to be used on RippleNet. These are aimed to make cross border payments truly efficient for these players and their customers. Next to their digital asset XRP, the XRP Ledger, and xCurrent, that helps banks settle transactions, Ripple has added a number of new services/offerings to the platform including xRapid and xVia. This in order to attract more clients to enter RippleNet. Ripple is now taking the next step to help build the Internet of Value (IoV), by establishing an Infrastructure Innovation Initiative. 

a. XRP: digital asset

From the outset, XRP, Ripple’s digital asset was expected to be an important part of Ripple’s decentralised payment system. Ripple uses its own XRP cryptocurrency as a payment method to make it easier for banks to move money internationally. Banks and payment providers can use Ripple’s digital asset XRP to further reduce their costs and access new markets. One rationale for using XRP is that unlike Bitcoin, the token has one narrowly defined (payments method!) but clearly useful purpose: to help banks move cash faster and more cheaply, especially across borders. The token could be used as a kind bridge currency between fiat currencies. For example South African rands in Johannesburg could become XRP, which could then be turned into baht in Thailand. That  could help banks avoid the time consuming and expense of tying up money in different currencies in accounts at other banks.

b. xCurrent: processing payments

RippleNet is powered by xCurrent, for payment processing. xCurrent is the new name of Ripple’s existing enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking (and bidirectional messaging across RippleNet). It provides real-time messaging, clearing and settlement of financial transactions.  The xCurrent messaging platform however does not involve XRP. It includes a Rulebook developed in partnership with the RippleNet Advisory Board to standardise all transactions across the network. That ensures operational consistency and legal clarity for every transaction. The Interledger Protocol (ILP) is the backbone of the solution and makes it possible for instant payments to be sent across a variety of different networks.

c. xRapid: sourcing liquidity

xRapid is one of Ripple’s newly developed solutions. It is aimed for payment providers and other financial institutions who want to minimize liquidity costs “while improving their customer experience”. This especially is useful in emerging markets where payments often require pre-funded local currency accounts around the world. As a consequence, liquidity costs are high.

xRapid uniquely uses digital asset, XRP, as a money-transmission medium. This to offer on-demand liquidity. By embracing XRP, banks and other providers  will solve the liquidity issue most financial institutions face right now. With xRapid and XRP, financial institutions can eliminate the need for costly intermediaries or pre-funded Nostro accounts in destination currencies. This may dramatically lower the capital requirements for liquidity, thereby firmly lowering costs while enabling real-time payments in emerging markets.

“Ripple, XRP and fiat currency fit hand in glove. What we’re doing together is realizing one of the best use cases for frictionless transactions, which is international settlement. xRapid allows us to drive down the cost of currency exchange and global settlement, making our customers more competitive and saving them tens of millions of dollars each year.” Brad Garlinghouse, CEO of Ripple

d. xVia: sending payments

The xVia solution is also a newly presented product for corporates, payment providers and banks who want to send international payments across various networks (through a bank or payment provider) on RippleNet. By using a standard interface as a simple API, xVia enables users to send global payments with transparency into the payment status and with rich payment information (like invoices), without the need of software installation.

e. Internet of Value 

Ripple is now taking the next step to help build the so-called Internet of Value (IoV). This by establishing an Infrastructure Innovation initiative.  IoV is Ripple’s long-term vision for moving money the same way information moves today — instantly. The ideal global payments network works just like the internet does — by using a common language to connect all those disparate systems (read ledgers!).

“All ledgers should work the same way and use a simple, common language so that money can move around the world real-time, much like information does today — enabling the Internet of value. “Dilip Rao, leader Ripple’s Infrastructure Innovation team

The goal of the Initiative is to help central banks, regulators, and market infrastructures pilot real-world blockchain solutions. Potential blockchain solutions include creating regional networks, reducing the cost of payments and opening up networks to new participants while managing risks. Ripple’s vision is that in the in the future (5 to ten years from now?) there will be a large number of isolated payment networks (as supply chains of value - trading houses or clearing exchanges) that have adopted blockchain and cryptocurrencies.

This Internet of Value will depend on interoperability between all these ledgers. There is a global technical standard that provides this level of interoperability: The Interledger Protocol (ILP). ILP can connect any network or payment system, without fundamentally changing how they work. All banks and payment providers — from the smallest bank to the largest institution — can use the open protocol to power payments across networks globally.

 “My first priority will be piloting interoperability between payment systems, the use of DLT for domestic clearing and settlement and novel applications of xCurrent as well as our digital asset XRP.” “I look forward to exciting new initiatives in building the internet of value in 2018!” Dilip Rao, leader Ripple’s Infrastructure Innovation team