The evolving digital market has led to the discovery of various digital currencies, including bitcoin, Ethereum, litecoin, etc.
It has also given rise to different virtual exchanges. Ripple acts as a digital currency and a platform for sending, receiving, and trading in the digital market. This article throws light on the ripple company, XRP, and other related factors. Read also on how Bitcoin for mobile world works.
What is Ripple?
In the digital market world, ripple refers to a dual system. It acts both as a digital coin and a network for financial transactions. It was discovered in 2012. It is used to send and receive money across the globe while ensuring security. XRP denotes it in digital trade. It is based on a blockchain technology system.
How does it work?
Ripple coins are not created by mining. Instead, they pre-exist in the company and are sold or purchased on its exchange. It works on an XRP ledger using distributed ledger technology. Instead of nodes, XRP uses a consensus mechanism that uses servers associated with banks to confirm transactions.
Association with Hawala Network
Ripple also works as a digital hawala network which refers to a linkage of trusted entities for transactions between two parties. For instance, if a person wants to send money to another person across the border, he must hire a secret agent who knows the transaction information.
On the other hand, the receiver also registers a trusted entity and tells him the details. If the trusted entities share correct information, the transaction occurs successfully. This is how it acts as a hawala network. It is a method of transferring money without physical money moving.
It uses a medium that acts as a gateway and a trusted intermediary between two parties for transactions.
It does not belong to fiat money or digital currency; instead, it acts as a bridge between these two currencies. If the funds of sender and receiver belong to different currencies, they do not necessarily need to shift money as the ripple is designed to exchange it automatically. The coin is exchanged using a gateway.
What are the Risks Associated with XRP?
Digital currency is always risky because of price swings and volatility. It is not user-friendly, and the complexity can pose a risk to the users. Moreover, lack of protection also relates to the dangers of XRP.
Pros of XRP
The pros of XRP are mentioned below:
- The transactional charges applied to XRP are pretty low. The transactions in the traditional market charge a considerable amount of money; therefore, it is a cost-efficient transactional method
- The transactions are confirmed within seconds, otherwise taking a few days. Thus it saves time as well.
- The exchange platform of ripple provides exchange against fiat currency, other cryptocurrencies, and even commodities such as gold or silver.
- In some countries, it is associated with highly reputable banks.
- It is relatively safer in decentralized markets.
Cons of XRP
Following are the cons of XRP:
- Since XRP does not correspond to the process of mining, investors do not have any idea about the issuance and circulation.
- It is partially decentralized, not entirely like other digital currencies.
- The Security and Exchange Commission once took legal action against Ripple for issuing XRP coins anytime. The SEC showed concerns regarding security matters. This can lead to mistrust of users.
Is it legal?
It is not entirely legal and is under a lawsuit in the United States. Following the unregistered security offerings, ripple is restricted in most states of America.
Should I Invest in XRP?
Investing in digital currency is always risky because of high volatility, hacking fears, scamming, and unregulated funds. Thus, one must be highly cautious before investing in cryptocurrency.
The Bottom Line
Ripple Company provides the users with both a digital currency and a platform to exchange cryptocurrency. It can be beneficial for the users but can also lead to some serious cons. Investors must have deep critical knowledge about cryptocurrency and its risks before investing significant capital in it and resulting in losses.