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  • Writer's pictureJoy Yuan

XRP To Replace SWIFT? How XRP Works and Why Banks Use It

The goal of the Ripple money transfer network is to meet the needs of the existing financial services industry. The native cryptocurrency token of the Ripple network is called XRP, and it consistently ranks in the top ten by demand capitalization. The firm behind XRP is called Ripple, and it operates a network for trading currencies and a system for payment agreements.

What is XRP

The cryptocurrency XRP serves as Ripple's native token. Like other cryptocurrencies on the market, XRP has a currency regulation similar to Ethereum's Ether (ETH). The Ripple team introduced the XRP tally in 2012, which featured XRP, which would act as the native token. The development of XRP primarily improves currency exchange and international financial transactions.

Compared to most other cryptocurrencies, the XRP blockchain runs slightly differently. Some other cryptocurrencies allow anyone who can quickly solve complex equations with computing equipment to participate in the blockchain verification processes. Transactions are secure yet are only added to the blockchain if the network participant agrees with the verification.

The Ripple network of XRP employs an agreement mechanism and graciously centralizes impacts. Although anybody may utilize its confirmation software, it also keeps a specific node list from which users can choose to confirm their transactions according to which actors they believe to have the lowest likelihood of defrauding them.

Crucial implications

  • The native coin of Ripple, created in 2011 by Jed McCaleb and Chris Larsen, is called XRP.

  • There are 100 billion XRP tokens in circulation, and they were pre-mined.

  • Transactions on the XRP ledger (XRPL), a decentralized, open-source blockchain, are made possible via the Ripple transaction protocol (RTXP).

  • Compared to bitcoin, XRP is more efficient, quicker for transactions, ecological, and scalable.

How does Ripple XRP work

Ripple Net, Ripple's blockchain service, aims to provide banks with rapid, affordable, and straightforward cross-border transactions. Ripple is a viable alternative to the Society for Worldwide Interbank Fiscal Telecommunication (SWIFT), the most widely utilized international payments system.

The XRP cryptocurrency uses a multi-server agreement system owned by banks to verify transactions. By comparing proposed agreements to the most current interpretation of the XRP Ledger, validators confirm that the deals are legitimate. A transaction needs to be approved by the validators for confirmation. Ripple Net offers a wide range of cross-border payment outcomes for enterprises and monetary institutions.

Advantages of Ripple XRP

A peer-to-peer trust network is the simple definition of the initial concept of XRP from the beginning. According to Ripple, XRP is a more rapidly, affordably, and energy-efficient digital currency than some of its rival cryptocurrencies. It can complete transactions in only a few seconds and uses less energy overall.

  • Transaction confirmations happen rather quickly. In contrast to the days banks could need to complete a wire transfer or the seconds or even hours it might take for Bitcoin transactions to be confirmed, they typically take four to five seconds.

  • On the Ripple network, a transaction only costs 0.00001 XRP, or around one penny at current rates.

  • Large businesses may also use Ripple as a platform for sales. Numerous companies, like Standard and Bank of America, use this network, proving that it has historically had higher institutional request relinquishment than the majority of cryptocurrencies.

Which Top Banks use Ripple and why?

The benefits of using Ripple XRP in the banking and Fintech industries are excellent. Today, Ripple XRP is a well-known trading platform many banks use worldwide. Here are several large banks that utilize Ripple XRP.

Standard Charted Bank

In 2016, Standard Chartered, a multinational banking and financial services company headquartered in London, England, joined the Ripple blockchain network. They began to implement xCurrent in 2016 but continued to trumpet the growth of the Ripple (XRP) Network. By the end of 2018, they want to offer cross-border payments for a further five pairs of nations. Still, the bank opted in November to use Ripple (XRP) to increase its influence and enter the $15 billion commerce corridor between India and Singapore.

J.P. Morgan Chase

Shockingly, this financial institution has ties to cryptocurrency, even with the CEO's tough stance against digital currencies. On the other hand, JP Morgan and Ripple partner with Al Fardan Exchange LLC, a financial institution based in the United Arab Emirates. The organization wants to quickly and inexpensively reuse cross-border payments via ripple net.

Bank of America (USA)

Bank of America (BofA), the second-largest bank in the United States in terms of asset value and one of the top 10 banks worldwide, has been collaborating with Ripple for a long time. In 2020 XRP and Bank of America began a public partnership. Several of BofA's senior directors were involved in building up Ripple Net's guidelines, along with its compliance standards for international payments. The bank is crucial to ensuring that Ripple XRP is functionally and legally compliant.

Final Thoughts

Adopting blockchain technology for global banking comes with many difficulties, but XRP is making strides with big financial players. The XRP blockchain has many applications, and many banks employ it because of its practical advantages. The use cases and demand for Ripple XRP should grow in the upcoming years. Considering significant improvements and direct competition to the SWIFT banking network, XRP could become a future standard for international bank payments.

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