A Cheat Sheet for Understanding Ripple

Ripple, a blockchain company that also has its own cryptocurrency, made news yesterday when Sagar Sarbhai, the company’s head of government and regulatory relations for Asia-Pacific and the Middle East, told CNBC that its new product will launch in the next month or so. That product is called xRapid, and it’s a way to speed up and reduce the cost of sending money internationally.

Sarbhai didn’t provide an exact launch date for xRapid, and neither will Ripple’s communications team. However, with the launch looming, it’s a good time to take a look at the company’s past and plans for the future. Here are all the basics you need to know about Ripple:

Isn’t Ripple just another cryptocurrency?
Though many refer to Ripple’s cryptocurrency as “Ripple,” it’s actually called XRP. It claims to process payments faster than the top two cryptocurrencies (four seconds compared to ether’s two or more minutes and bitcoin’s hour) because it can handle 1,500 transactions per second.

What sets XRP apart most from ether and bitcoin, however, is its origin. XRP’s first iteration, Ripplepay, launched in 2005 as a secure digital payments service. Canadian developer Ryan Fugger created the product before passing it along to a team that founded OpenCoin, which went on to develop the Ripple transaction protocol and payment network. After rebranding as Ripple Labs, the company received funding from Google and Andreessen Horowitz in 2013.

The company, now known as simply Ripple, picked up a New York State virtual currency license (known as a BitLicense) along the way. Ripple now processes payments for banks like Santander and American Express as well as smaller operations like MoneyGram and UniPay.

Does that mean XRP is centralized?
Yes and no. Ripple, as a centralized company that works with big banks, holds onto the majority of the total existing XRP and decides when and how it gets released to the public. But the company’s executives will be quick to tell you about the cryptocurrency’s decentralized aspects.

“Anyone can run a server, anyone can run a validator, and they do,” Ripple chief cryptographer David Schwartz said in this short YouTube video. He went on to call XRP owners “stakeholders” and noted that if Ripple the company went away, XRP wouldn’t. Furthermore, Ripple can’t simply create more of the cryptocurrency.

That being said, Ripple owned 60 percent of all the XRP in existence as of March 2018, according to Schwartz. Since no one can create more XRP, the company releases it over time at a rate of a billion XRP per month. It will take around 55 months for Ripple to release the majority of its XRP holdings. Not all that monthly billion gets used, however, and what doesn’t goes back to the company to be held in escrow—while also getting recorded in XRP’s public, transparent ledger.

Schwartz promised “landmarks where the network will be increasingly independent of Ripple’s operations” going forward.

Besides XRP and the soon-to-launch xRapid, does Ripple have other products?
Yes, xCurrent and xVia.

xCurrent is a way for banks to communicate with each other. While it relies on blockchain technology to send information and foster secure connections between the banks to let their customers send and receive money, xCurrent doesn’t have anything to do with XRP.

Like xRapid, xVia launched in beta in summer 2017. It targets businesses and banks and connects them to other financial institutions through a set of standard APIs. Payments sent using xVia are meant to appeal to corporations because they can travel with “rich data” like invoices, which is helpful if, say, a corporation is paying a team all the way across the globe from headquarters.

What makes xRapid different from those two products?
Neither xVia nor xCurrent uses XRP to complete transactions. xRapid does.

Usually, when people send money from one country to another, the amount of money they want to send needs to already be sitting in a bank in the country they want to send it to. Banks in wealthy nations like the U.S. tend to have that money ready, but the same can’t always be said for banks in developing countries. Those banks have to go through a third “correspondent bank”—established ones like JP Morgan Chase or Wells Fargo—to get that money, which means fees.

Instead of going through additional banks to send money internationally, xRapid uses cryptocurrency. The sender’s money goes to a digital currency exchange (like Bitrex, Bitso, or Coin.ph—all of which have already partnered with Ripple), where it gets exchanged for the equivalent amount of XRP. That XRP gets exchanged for the fiat currency of the receiver’s country and goes straight to their bank. This all, according to Ripple, happens within a couple of minutes and costs less than a penny’s worth of fees.

Who’s going to use xRapid?
Not big banks—at least not at first. Rather, xRapid’s pilot customers have been smaller companies like MoneyGram, MercuryFX, IDT Corporation, and Cuallix. It would take prohibitive amounts of time and finances for massive banking institutions to switch their money transfer processes over to a new system.

So there’s Ripple for you—a centralized company with a semi-decentralized cryptocurrency that aims to make it easier for people to send money overseas. If xRapid works out, it could have the potential to drastically change the way people transfer money worldwide. Then again, you could say the same for any cryptocurrency that gains widespread adoption.