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The Ripple Effect: Decentralized Finance and the Rise of XRP 

 May 1, 2022

 Ripple (XRP) and its underlying protocol, RippleNet, are two of the most exciting developments in the financial technology space to date. 

Not only do they open up the gates to an entirely new, global economy, but they also allow us to rethink current financial models and processes. 


That’s what we’re going to focus on today. Our goal is to explore how Ripple enables decentralized finance and the potential impact it has on the future of XRP adoption and other related topics.


An Introduction to Ripple


Imagine that all financial transactions in your life were able to take place instantly, securely, and nearly free of charge. No more waiting for checks to clear or paying hefty fees when sending money internationally. Ripple aims to fulfill that vision by offering both a currency exchange as well as a payment platform upon which all currencies can be traded with no delays or fees. 


The company was founded in 2012, but its founders began working on it while they were still at MIT. It has been adopted by several major financial institutions including Santander Bank and BBVA (Banco Bilbao Vizcaya Argentaria). The technology behind it is open source so that anyone can create new applications for their own purposes-and. More than 100 organizations have already done so. 


There are also three different ways to use Ripple’s protocol, depending on what you want to do. The most basic way is simply exchanging one currency for another using an intermediary token called XRP, which is used as a bridge between other currencies. Suppose you’re looking to trade fiat currencies like dollars and euros. 


In that case, you can just send them directly from your bank account into someone else’s bank account using Ripple’s payments channel feature instead of relying on traditional banks. 


And suppose you want to trade cryptocurrency like Bitcoin or Ethereum. In that case, there are third-party exchanges built specifically for that purpose. You don’t need any kind of permission from anyone because it’s all decentralized.


A Look Into How It Works


What is Ripple? In 2012, Ryan Fugger came up with an idea for a new system that would enable individuals to create their own money. This idea quickly became a reality, as did his company’s name-Ripple Labs. What exactly does it do? Unlike Bitcoin, which requires specialized computers to mine coins, anyone can use Ripple’s software to create their own currency for exchange on what’s known as the Ripple. 


It works simply-you send your currency (fiat or crypto) via your bank in a transaction that gets converted into Ripples. The power behind Ripple comes from its ability to enable global transactions at low costs and with fast speeds. 


How Does It Work? To understand how Ripple works, you first need to know about something called consensus. Consensus means that there is an agreement between all parties involved in a transaction. 


When you want to make a transfer using fiat currency, banks must verify that you have enough funds available before approving your request. With cryptocurrencies like Bitcoin, miners help verify these transfers by solving complex mathematical problems while also verifying these transfers are legitimate. 


However, when using Ripple’s network and protocol, all of these checks are done by other people on their network who have agreed upon certain rules within rippled servers worldwide. If you want to have it but don’t know where to buy XRP, well, you can get in on any popular marketplace.


How Does XRP Work?


Central to Ripple’s value proposition is its payments network, which aims to streamline cross-border transactions. The primary draw of Ripple is that it allows banks to settle cross-border payments in real-time. 


Rather than having several financial institutions play middleman, a bank can simply send money via blockchain directly to another bank with whom it has an existing relationship. This cuts down on fees and shortens transaction times, thereby lowering costs for all parties involved.


In Conclusion


When you’re thinking about adding a new asset to your portfolio, ask yourself if it has a story that appeals to you. If there is no narrative underpinning an investment, you should think twice. In other words, stick with what you know; don’t chase returns or try to be clever. Remember, time in the market beats timing the market.



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