Is Ripple (XRP) a SCAM?

Ripple is the worlds third largest cryptocurrency created in 2012 by banks and financial institutions. This cryptocurrency is based on a private blockchain that is permission-based and centralized which has drawn a lot of criticism.

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What is Ripple/XRP?

What makes Ripple so unique is it's a private, centralized, permission-based blockchain, which is almost the complete opposite to Bitcoin which is a public, permission-less based and decentralized. The two are very different but they're made for different applications so there's been a lot of criticism of Ripple (XRP) and I can understand why when you look at what the first blockchain was originally made for.

Although Ripple has a very useful place in the market. It's servicing a need and for a very particular instance, Ripple can actually be a great cryptocurrency and has a lot of value and huge potential. Before we talk about Ripple, we need to talk about the way the currency is exchanged between countries. If I go into the DMV and get a drivers' license in California, but I leave the United States and go live in Australia, I have to go through a completely different application process to get another drivers license within Australia's municipality. I have to take a different test. I have to abide by different laws, I have to go through a completely different system A lot of these municipalities don't take into an account the previous experience that I had in the United States.

The Problems Ripple/XRP Solves

The same goes for a credit score. If you have a great credit score in the US and you move to England, well you don't have a credit score anymore.

So there's a lot of problems in the world with the different systems and in the financial industry, it's no different. The technology in the financial sector moves very slowly, because as an industry there's a lot of regulatory requirements and there's a lot of approvals necessary so if you go into a bank it's not unheard of to see them run those old green screen computers from the 80s, in fact, same for the DMV. The more regulations you place on an industry the slower it's able to move. The bank has a way of doing transactions between countries right now and that's what they would call the SWIFT system and if you've ever done a wire transfer that's the system you use.

The problem with that is, it's not really updated to date with the technology and it's not really allowing customers to take full advantage of the new features. So if you do a SWIFT transaction it's expensive, the last one I did was $3,000,000 it took 5 days to clear and if you have to exchange between currencies you have to then go into 2 markets that are controlled by the banks and they have their own way of manipulating the process into another currency until finally, you get your money.

Well, with Ripple we'd have an agreed-upon protocol that would be real-time so the money would be, for example, the same way you can send money from Wells Fargo to another Wells Fargo account instantly and there's no charge for it, it's free and it's fast, it's incredible. That's what Ripple is going to be like but instead of transferring money between your internal bank accounts you're going to be able to do that at an international level and you're going to have to do that with almost no fee, what they're calling an almost free system. It's a big deal for banks but it's also really a big deal for remittances, if you look at the Philippines or Mexico, they immigrate to the US and they send money home and Western Union is expensive to use in comparison to Ethereum, Ripple or IOTA. So this has the potential to disrupt currency exchange, remittance, the SWIFT system for sending large amounts of money to different countries.

They don't have a lot of competition, the institutions that are out there right now are really there by default. They've set up so long ago, they have the locations, they've set up the infrastructure, they don't need to offer the latest technologies, they don't need to be competitive because there's not an alternative. Ripple is saying there is an alternative.

Ripple/XRP As a Blockchain

It's allowing us to get around some of the problems that are created in the other blockchain currencies. It's made to work with regulators and taxation officers. If I'm sending money from a bank in Indonesia to the US I can comply with the US anti-money laundering laws and I can make sure that money, when it's transferred automatically, reports the information to the government.

In that sense, it's working like the blockchain technologies like Bitcoin and Ethereum but it's also doing the same thing trying to comply and it's allowing the flexibility to comply and trying to do the heavy lifting for the day to day for these banks and financial institutions.

One of the interesting things about this coin is that it's almost free to use, and the reason why it's not completely free, that if they made it free if it would be possible to spam the network. What happens when you do a transaction is you get a very small fraction of a percentage of coin and then that small amount of the coin is destroyed and what that does is increases the scarcity of the available supply, and that increases the demand for the coin and it also prevents people from just spamming the network. Unlike the traditional blockchains which can't handle anywhere near the volume of Visa or Mastercard, this system is designed with that type of volume in mind. Ripple can handle thousands of transactions a second and it can handle huge fluctuations in the network traffic. It doesn’t have the same fee structure that Bitcoin has in order to move all of that data through.

Now, this does come up with a cost. The cost is that 70% of the network is owned by the institutions. This could be good or it could be bad because when you look at cases like the liquor or the diamond industry they're able to regulate prices. They're able to get consistent prices for diamonds which give people a lot of confidence in buying them in the future. They're able to see diamonds as an investment when in reality, diamonds aren't in anyway an investment. If you searched for and found this page I'm going to assume you're already somewhat familiar with Bitcoin and cryptocurrencies and you probably already realize that Ripple is a cryptocurrency.

Pretty much all cryptocurrencies have people who love them, and people that hate them and it seems that Ripple is one of the more controversial cryptocurrencies, critics say there's too many in existence and the holders control too many. Supporters say it's the future of banking. So on this page, we'll be talking about what Ripple is.

What Ripple (XRP) Really Is

Ripple is a global settlement network making it easy to transfer nearly any currency to anybody in the world in just seconds.

The Ripple platform has rendered the archaic system of sending money through SWIFT or Western Union obsolete. At this point in time, Ripple is focused entirely on working with banks offering them a more efficient and cost-effective way to send real-time payments around the world. Consider this hypothetical example. Directly transferring currency inexpensively from Japan to Nicaragua, which is the currency ticker JPY/NIO isn't generally feasible. Instead, an individual bank will usually trade JPY/USD and then USD/NIO or Nicaragua.

At each step, the fees add up making fees for an expensive way to send money internationally. By using Ripple, one can trade JPY/XRP, Ripple's currency, relatively inexpensively, send XRP to the recipient, either the individual that has a Ripple wallet or a bank in Nicaragua and from there trade the XRP/NIO. In other words, XRP is the grease that allows any currency to be easily exchanged for any currency on the Ripple platform.

While banks, in general, have been slow to adopt Ripple, there is no doubt that the real-time worldwide payments are the future. The Ripple platform gives banks a huge advantage both over their competition and financially. Ripple is focused on the internet of value, meaning the money transfer should move as quickly as information does in a technological age. With Ripple, there is no reason to pay a fortune and wait days when transferring money globally. 

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