Ripple crypto at third place in capitalization after Bitcoin and Ethereum

In these days Ripple‘s virtual currency has reached stratospheric capitalization (> $ 10B). Too bad to have not invested before I would say. But you know how it is, before investing in something you need to know how it works and what it is for. In short, better safe than sorry. The easiest way to find out is through Ripple’s website. The first thing that jumps into your eyes is:

Ripple works with banks to transform how they send money around the world
So Ripple is not, like Bitcoin, an open network where everyone with their PC can send and receive coins, validate transactions, and theoretically generate new bitcoins. Ripple has as main end user the banks and it defines

Global Settlement Network

So it looks like a modern and certainly more efficient alternative to two other pay-per-view points: Clearing House and Swift Consortium. The former are bank banks that are responsible for ensuring that all interbank transactions are actually “cleared” ie that at the end of the day every bank has what it takes after millions or billions of micropayments between different banks (we think Customers paying with POS, transfers between different banks etc.) are arranged from all over the world.

Swift, on the other hand, is an interbank consortium that manages the electronic communication protocol that allows you to have payments between a bank A and a bank B. An old protocol, perhaps, that now has to deal with Ripple.

“The key benchmark that we aim to achieve is to become more decentralized than Bitcoin, which at the time of writing is 51% controlled by just five mining pools. This means that the largest five pools working together could achieve a 51% attack and reverse transaction (double spend) at will. For Ethereum, this number is even lower: only three pools are needed for a takeover. ”
Ripple is not decentralized by design as Bitcoin, but according to their founders there is a roadmap to make Ripple the most decentralized among the value exchange networks.

“Today, RCL has 25 validator nodes running, but continuing to grow and diversify this list of recommended validator operators is a priority for us”
25 knots do not seem so much to talk about decentralization, not to mention that these seem to be all ruled by Ripple for now. Considering that, for example, the Bitcoin network has about 6000 full nodes.

“Ripple will add attested validators to its Unique Node Lists (UNLs). UNL is a list of transaction validator nodes that are viewed as ‘trusted’
So Ripple proposes adding third-party nodes to its validating nodes. This “seen as trusted”, however, immediately makes the nose tick, who decides who is trusted? Is not there a protocol for this, then? Decide Ripple? I think so.

The impressive thing is that Bitcoin has only 6k knots. Ethereum 14k, Ripple 25 (all her). Obviously, pears are not compared with apples, and what matters is Bitcoin’s hashing power, and perhaps behind a full Chinese node there is a whole farm. However, the biggest decentralization projects in history are spinning on 20k machines in total. 5-6 pools control 50% of Bitcoin mining, maybe 3-4 control Ethereum while Ripple does everything on its own.

Compliance

The magical word that pleases banks and financial institutions is Compliance. Compliance is what a company fintech should expect to occupy a good deal of resources  in anti-money laundering, in the correct identification of its customers, in the reporting and management of the entire amount of personal data, which, incidentally, must be retained for 5 years after termination of the business relationship with customer. So much compliance, so many resources used in the law firm of bankers and payments.

“Ripple offers seamless integration with your bank’s existing systems and processes, such as anti-money laundering controls, fraud detection, sanction screening, and regulatory reporting.”
What this means is not immediately clear, does Ripple perhaps send its advisors to banks for the due integration?

The Coin

But now we come to XRP, its asset, its digital coin. At the end for the settlement services described above so far it is not immediately understood why Ripple also needs a coin. And what a coin! At this point, in fact, the total capitalization of all XRPs has exceeded that of ether and is closer to that of bitcoins. Today is July 9, 2017, an XRP is worth over $ 0.24, thinking that the type 2 months ago was worth a hundred times less. In short, it is driven by mad speculation or there is a real expansion of this network that pushes the value.

Liquidity providers can bridge any currencies directly through XRP in a trade. Similar to USD in today’s currency market, XRP enables liquidity concentration around fewer pairs, creating order book thickness and competitive FX rates, especially for exotic currency pairs
In practice, the idea is that to provide multicurrency payment services rather than having a currency-per-currency exchange market (NxN possible markets) it is more efficient to have a standard coin that makes reference and focus liquidity on N markets alone Advantage that …

Unlike USD, trading through XRP does not require bank accounts, service fees, …

Consent

And now we see some details of the consent protocol. In practice, as with any Distributed Ledger Technology (DLT) we will have a ledger, which is a validated transaction log that represents the status of the network at a given time. Each tot seconds the ledger is updated with a new version that will contain new transactions and so on. The protocol stipulates that validating nodes are expressed on the validity of the observed transactions and with a superimplementation mechanism: only transactions that are approved by a high percentage of validating nodes will be part of the next ledger. Accurately reproducing the words of the documentation

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