Ripple - The payment service revolutionizing cross-border payments and its global influence
In this article, we present Ripple, announced as the future replacement for the SWIFT network and aiming to optimise the current banking model thanks to crypto-currencies. Founded in 2012 by the creators of Open Coin (Chris Larsen and Jed McCaleb), Ripple is taking off on the basis of an innovative and promising idea: to create a new digital currency that facilitates payments between third parties. Asserting that international transfers had too many limitations, both in terms of costs and speed, a new payment protocol was developed, called Ripple.
What is Ripple?
Ripple is an American company founded in 2012 that offers a payment service that uses the blockchain to make valuable transactions as quickly as possible and at low cost. This is thanks to RippleNet, Ripple's main product, which is a platform that allows third parties to carry out transactions. The company's ambition is to set up a network where thousands of transactions can be carried out very quickly and at low cost. Ripple operates worldwide and is used by global financial institutions and companies such as UBS, Unicredit and Santander.
What technology has Ripple developed?
Of the two most coveted crypto-currencies, Ethereum uses Proof of Stake and Bitcoin uses Proof of Work, where transactions are validated by Bitcoin miners. Ripple's technology is very different. To validate transactions, the company has created its own validator called the Ripple Protocol Consensus Algorithm. This algorithm is based on nodes, and once the nodes in the network are in agreement, the transaction is validated. It is through this algorithm that Ripple avoids validating hostile or dangerous transactions.
What is the purpose of the XRP token?
XRP is the token of the Ripple project. It is open source. It facilitates payments between countries, making transactions cheaper, faster and potentially more secure via RippleNet. Ripple Net is mainly used for international money transfers. Thanks to blockchain technology, value transfers can be tracked and traced to ensure that the token is used properly. The token is used to generate low-cost fees. It is also a governance token because by stacking its tokens, users will be able to vote on the future of the project in DAOs (Decentralised Autonomous Organizations) in particular. In addition, XRP is used as a relay currency by banks, known as a clearing currency. In detail, it is a clearing currency because to carry out international transactions, you need to exchange your currency ($, €, etc.) for XRP and then XRP for yen, for example. Ripple uses this mechanism to make transactions easier and cheaper.? Banks and institutions therefore have every interest in buying XRP to facilitate their international transactions.
What about XRP Tokenomics?
First of all, the existing number of XRP tokens is 100 billion and today there are 51 billion tokens in circulation. XRP is currently ranked as the Top 6 crypto-currency in terms of market capitalization on CoinMarketCap, representing $24.3 billion. What's more, the trend is likely to be deflationary over the long term, as no tokens are being created and some of the tokens traded are burnt, which is positive for mass adoption.?
In addition, this crypto-currency is the subject of much debate because, unlike the majority of crypto-currencies, some consider that its algorithm (Ripple Protocol Consensus Algorithm) is centralized because Ripple controls 60% of its tokens and also because Ripple is considered to be the main owner of all the XRP tokens on the market. Despite the scale of the project, the XRP token is still not widely adopted by the general public, even though Ripple regularly enters into partnerships with major institutions.
2. Ripple's global influence - The desire to expand internationally (Africa, UAE and China)
Ripple is promoting its payment protocol and its on-chain-liquidy solution, which enables money to be moved around the world in a decentralized way (without banking intermediaries), and has already been conquering the world for a number of years through investments and partnerships.
Africa, a promising operating ground for Ripple?
In Africa, it is now possible to create one's own currency without reprisals. Indeed, this will lead to Africa's economic independence. Current currencies such as the CFA Franc are often hampered by currencies that have lost their relevance and are not adapted to today's economic reality, rendering them unusable.
This is why, since 2015, Ripple has been opening up internationally by forming numerous partnerships in Africa and the MENA (Middle East and North Africa) zone.?
A report by Crypto Valley Venture Capital entitled "African Blockchain Report 2022" shows significant growth in the African territory of XRP.? Ripple is now popular in more than 13 African countries and XRP adoption is growing exponentially as more and more Ripple users come to Africa. Indeed, the cryptocurrency appeals to Africans because there are very low fees. What's more, the population is also young, which makes it easier to adopt and use new technologies like XRP. The speed of transactions and transparency also encourage African residents to use such technology. African countries include C?te d'Ivoire, Nigeria and even Burkina Faso. The Ripple token is therefore a real asset, providing a solution for many countries that do not have direct access to new technologies. Even though Ripple accounts for less than 10% of payments made on African soil, its technology is attracting more and more people and is developing day by day to democratize crypto-currency transfers. In fact, Ripple recently established a partnership with MFS Africa (a powerful mobile payments center) to promote crypto-currency payments and use its cash technology on the African continent.
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The Arab Emirates, the new Eldorado for Ripple?
More than 5 years ago, the Saudi Sovereign Wealth Fund (SAMA) recognised Ripple as one of the world's most powerful payment systems. In fact, the technology implemented by Ripple is used by numerous institutions and companies to transfer funds. In May 2023, Ripple increased its presence in Dubai by inaugurating its new offices. Indeed, Dubai wants to become the future global hub for crypto-currencies and Web3, so they set up a favorable environment for crypto-currency companies. Indeed, they are keen to innovate and create infrastructures aimed at adopting cryptocurrencies more quickly. Their plan is to create a Bitcoin Tower to learn more about the benefits of this crypto-currency.??
As far as Ripple is concerned, the company is now considered to be the leading provider of enterprise blockchain solutions in Dubai.?
The fact that Ripple has established itself so quickly in the UAE can be explained by the many tensions between the US and the crypto ecosystem as a whole. In fact, Ripple is in court with the SEC (Securities and Exchange Commission) because the SEC considers that XRP had been traded as an unregistered security without authorisation. This lawsuit pits the Chairman of the SEC (Gary Gensler) against Ripple. It is an ongoing lawsuit that could jeopardize the stability of cryptocurrency businesses in the United States if the SEC were to win. Moreover, given Gary Gensler's many confusions and the evidence put forward by Ripple, the Californian company has every chance of winning and this could have a significant impact on the crypto-currency ecosystem and mainly on XRP.?
Faced with the complex context that is setting in the United States for Web3 and Biden's latest comments last week ("I'm not going to accept a deal that protects wealthy tax evaders and crypto traders while endangering food aid"), many companies are shutting down their operations on US soil or moving their head offices, as is the case with Circle, a peer-to-peer payment technology company managing the popular stablecoin cryptocurrency USDC. So it's the great escape for the crypto ecosystem in the US.
Acquisition of Metaco : what opportunities for the Californian company?
This week, Ripple acquired Lausanne-based startup Metaco for $250 million, becoming the sole shareholder of the Swiss-based digital asset custody and tokenization technology provider. This strategic decision enables Ripple to integrate Metaco's technology into the Ripple network in order to offer more services for its tokenized asset, XRP. In effect, the Californian company will be able to benefit from the custody and digital asset management services that Metaco provides. This is essential and represents an opportunity, as many investors are perplexed by the idea of leaving their funds on a platform, particularly after the fall of FTX.
In addition, Ripple benefits from the knowledge and expertise of Metaco's partners BNP Paribas and Société Générale-Forge (which has just launched its own crypto-currencies). This purchase strengthens Ripple's position as one of the most coveted crypto-currencies in 2023.
3. Analysis of the project by Kurious
Strengths:?
Weaknesses :?
In conclusion, XRP is a very different project from the rest of the ecosystem because there is a desire to add crypto-currency technology to the current system and not to replace it.? It is therefore a project that remains unloved because it is ideologically contrary to the rest of the crypto ecosystem. On the other hand, XRP meets a real need and is a great opportunity for companies wanting to offer blockchain-related services. The fees and speed of transactions encourage economic agents to use it (Africa). However, it is important to remain cautious, particularly because of the volatility of XRP, which may prove to be a brake in the future, even if Ripple and its XRP are promising and expanding.