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Ripple is the world’s fourth-largest cryptocurrency. However, despite its recent growth, it still remains to be an unfamiliar name to most people.
The native currency of Ripple, XRP, has taken the banking world by storm, rising from under $0.01 to $0.79 a coin in less than one year. But why did its value quickly increase by 4300 percent?
How Does Ripple Work and Are There Risks?
Ripple works as RippleNet, a payment network, and Ripple XRP, a cryptocurrency.
The platform makes it easier to transfer almost any type of currency to about any other currency in the world within a maximum of four seconds.
Currently, Ripple is concentrating on working with banks and other institutions in an attempt to offer a cost-effective and efficient way of delivering real-time payments across the globe.
By using Ripple, if a consumer intends to directly transfer currency from China to the United States, they can trade CNY to XRP, Ripples currency, and then send the XRP to the recipient who will have a bank in the USA or an online Ripple wallet. From there, they can trade back the XRP into USD.
In comparison, the transactions on Ethereum can take over two minutes, and on Bitcoin payments can take over an hour in order to be processed.
Ripple claims that banks can save an average of $3.76 for each payment by using their network.
Since XRP exclusively works directly with banks, the growing cryptocurrency is set to concentrate on developing networks to benefit finance corporations.
Critics have suspected why the platform currently focuses on banks exclusively since it was launched to help everyday people perform global transactions much easier.
However, Ripple can seem to be risky. Its open nature means that nodes are vulnerable to attack, which could have users unable to access their accounts.
The technology of Ripple is still in its infancy, so this means that Ripple is subject to innovation and competition.