Ripple had the second-largest market cap out of any cryptocurrency at the end of 2017, and it's currently in third place (behind Ethereum and Bitcoin), according to CoinMarketCap. Each individual XRP token is worth $2.14, but there are a whopping 38.7 billion of them in circulation, indicating a total value of nearly $82.8 billion. On Thursday the company behind Ripple -- which is also called Ripple -- announced a partnership with MoneyGram, its most significant validation to date.

So what's all the fuss about? What makes XRP special, when there are so many cryptocurrencies out there? It comes down to speed. XRP is designed to be much faster than Bitcoin, with very low transaction fees. Ripple the startup -- it's both a cryptocurrency and a startup, sorry -- makes a product called xRapid that is intended to automate cross-border money transfers for large financial institutions. It offers increased liquidity and lowers capital requirements.

In other words, xRapid is a rapid, XRP-based process that is otherwise equivalent to buying Bitcoin with fiat currency, sending the money to someone in another country, and having the recipient sell the Bitcoin for his or her own local fiat currency. (There's no reason why an individual couldn't substitute XRP for Bitcoin and do the whole thing by hand, but price fluctuations would pose more of a risk.)

In a phone conversation with Inc., Ripple head of product Asheesh Birla gave an example based on current Ripple client Cuallix, which facilitates cross-border money transfers (among other things). "What Cuallix does today is they have opened a bank account (that took several months to open) in Mexico. They then hire a broker to convert their U.S. dollars into Mexican pesos, and they park that, idle, in Mexico, so that they can do local payments."

Modern consumers expect internet-speed financial services, Birla said, and the status quo is not sufficient: "It's time-consuming -- takes a couple of days -- it's costly, and it's not a good experience."

Birla went on to explain how Ripple does it. "There's a digital asset exchange in Mexico and there's a digital asset exchange on the spending side, in the U.S. What these digital asset exchanges do is they convert U.S. dollars to XRP, if [the money transfer] came from the U.S. side. In the receiving nation, depending on what you want to pay out, [xRapid] converts that digital asset -- XRP -- into Mexican pesos." Voila!

That all seems pretty straightforward, doesn't it? And yet Ripple is quite a controversial cryptocurrency, for two main reasons. The first is that people are skeptical about whether financial institutions actually want to use xRapid or XRP.

New York Times financial reporter Nathaniel Popper tweeted that his sources at banks were dismissive of Ripple. A representative comment: "It's not clear to me why XRP would be used by banks at all." (Popper's tweet triggered a public back-and-forth with Ripple CEO Brad Garlinghouse, with Popper decidedly getting the last word.)

Even the MoneyGram announcement leaves some critics unimpressed, since they say the level of traction is overblown.

The second reason critics disregard XRP is that Ripple the company, which makes the xRapid product and aims to serve large financial institutions, is inextricably entwined with Ripple the token. Unlike Bitcoin, which is "mined" by computers using their processing power to run complex equations, Investopedia explains, "Ripple has no mining or miners whatsoever. Instead, transactions are powered through a 'centralized' blockchain to make it more reliable and fast."

Ripple has complete control of XRP, which makes it no better than fiat currency in the eyes of the radical crypto-libertarians who make up crypto's early-adopter class. Furthermore, "Ripple is not finite, and can be 'printed' on-demand, [which removes] the ability to accumulate and store value as only a deflationary asset can" -- Bitcoin's key selling point as an investment.

The company isn't fazed by its naysayers. "We don't know when the future is going to be ready," Birla told Inc., paraphrasing former Ripple CEO Chris Larsen, "Internet of value is the future, and if we can continue executing on that future, big things will happen and we will change the world."

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Published on: Jan 12, 2018