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A Ripple in the Crypto Pond

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For those who are new, my name is Jeremiah. I’m not a cryptocurrency expert, nor am I an economist. I
 

The Block

January 3 · Issue #8 · View online
Weekly curated #cryptocurrency news and commentary.

For those who are new, my name is Jeremiah. I’m not a cryptocurrency expert, nor am I an economist. I am an enthusiast and early adopter. I believe cryptocurrency and its attendant technologies are the prelude to a Cambrian explosion of innovation in “real/cyber-space,” where the digital and physical meet.
This is a weekly email digest comprising one or two short topical essays followed by a manageable collection of curated links.
If you know anyone who’d be interested in this kind of content, they can subscribe here. I’ll be playing around with the format from week to week to see what I like best, and I love feedback, so don’t hesitate to email me.

Today marks the 9th anniversary of the mining of the first block of Bitcoin. Happy birthday to the grandpappy of crypto! Now, let’s get into our topic this week.
A Very Long Journey
The challenges any two financial entities face when transacting come down to trust and accurate accounting. We’ve already discussed how blockchain technology eliminates the need for a intermediate party for trust/verification.
In the world of international corporate finance, the SWIFT payment system is designed to authenticate payments sent across borders. Here’s how it works:
Source: ripplecoinnews.com
Source: ripplecoinnews.com
Despite its name the current system is painfully slow, with multiple intermediaries taking up to three days (and sometimes longer) to confirm that various monetary ledgers agree. This is equally, if not more complicated when it comes to fiat currency exchanges.
Ripple aims to disrupt this using a centralized blockchain, a blazing fast network with inter-operable ledger swaps utilizing a unique currency token to power the whole thing. All it will take is convincing the majority of big financial institutions to abandon their legacy payment verification system. Simple! But first…
A Tale of Two Ripples
When you hear talk of Ripple, you’re more than likely hearing about the cryptocurrency (designated as XRP on exchanges). But the entity behind XRP is Ripple–a company that has been around since 2004 (longer than Bitcoin!) and has quietly and steadily made in-roads where few dare to tread.
Ripple has developed three primary innovations, which they hope will make international currency transactions as smooth as triple cream Icelandic yogurt. Here’s how it all works.
XCurrent is Ripple’s Interledger Protocol-based payment & messaging solution. Basically, it can connect any ledger to any other ledger that supports the Interledger Protocol, which was developed as an international payment standard.
XRapid is Ripple’s liquidity solution for XCurrent, using their custom cryptocurrency, XRP. According to Ripple’s blog, “XRP offers banks and payment providers a highly efficient, scalable, reliable liquidity option to service cross-border payments.”
Finally, XVia is a corporate payments API.
Of the three, XRapid is the only one that requires the use of XRP. Because XRP is the native currency of the XRapid network, using it for currency transactions can save time and money, since you can conduct international cross-border value transfers in near real-time. This means no more waiting multiple days for SWIFT payments. 
The reduction in cost in transaction fees is also a significant benefit. For individuals, this may not seem like too much of a big deal, but for corporate entities, especially any that rely on international payments transfers, this is huge.
But why would any institution use XRP to grease the rails when they could simply develop their own currency or use an existing one?
It appears that Ripple’s strategy is a one-two punch. Ripple is already well on their way to convincing a significant number of partners to transact using their Interledger Protocol. It would naturally follow that companies would be encouraged to use XRP, which is already well-integrated and seamless, rather than expending time and resources to develop their own liquidity solution, similar to being upsold on a product that works on its own but greatly benefits from auxiliary integrations.
This is the speculative part, and what seems to be driving the current price jump. Investors in XRP are betting that partners will readily adopt the native currency once they see how cool the XCurrent network is.
What makes XCurrent so interesting?
XRP Ledger can handle 1,500 Transactions Per Second (TPS), which far outstrips Bitcoin in terms of speed. There is also an underlying “payment channels” in which a transaction is summarized and transmitted to the network–but the originator of the transaction can process as many transactions as it would like before that summation occurs–a process known as “off-ledger.” 
Tests of payment channels resulted in over 70,000 Transactions Per Second, and this can be scaled with computing power. Payment channels operates on a flat-fee basis, which means for vendors processing millions of payments, this solution presents tantalizing savings possibilities.
One thing Ripple seems especially poised to capitalize on is affordable micropayments. Right now the minimum transaction fee using XRP is 10 millionths of one XRP. I’m not aware of any system that can operate as cheaply or efficiently as XCurrent.
If You Can't Beat 'Em
Banks, especially central banks, don’t like the idea of a decentralized blockchain any more than you like paying bank fees. But they also know the future is trending toward blockchain adoption, and they’re finding it necessary to adapt quickly.
Ripple’s entire business is predicated on a semi-centralized blockchain (which the libertarian wing of the cryptocurrency contingent hates) that works well with the financial establishment. This explains why Ripple has so many detractors within the cryptocurrency community.
It seems as if Ripple and the central banks could be natural allies, if they can get on board with the tech. This explains Ripple’s steady growth in partners who have signed on to use XCurrent. As of October 2017 over 100 companies have licenced Ripple’s blockchain technology, likely incentivized via their XRP Accelerator program.
Speculators in XRP had a very happy new year as XRP vaulted to number 2 in total market cap at the close of 2017 with the largest gain in the cryptocurrency market–over 36,000%!
Will 2018 be the breakout year for Ripple? Stick around!
Links of Note
Ripple was the best-performing cryptocurrency of 2017
Thiel's Founders Fund Has Been Quietly Buying Bitcoin Since 2012
The Criminal Underworld Is Dropping Bitcoin for Another Currency
This company will self-destruct after its ICO
Accelerating Bitcoin Adoption
Why Quantum Computers Won’t Break Classical Cryptography
Cryptocoinopoly: Play the markets with family and friends!
Donating Bitcoin to Charity
95 Crypto Theses for 2018
Wrap Up
That’s it for this week. Thanks again for reading. If you find this newsletter useful and interesting and you think someone else would enjoy it, please forward it to them. You can always subscribe or read back-issues here.
If you want to get started with Bitcoin or one of the two major altcoins (Ethereum and Litecoin), sign up for a free account on Coinbase. Once you buy or sell $100 or more of digital currency, you’ll get $10 of free Bitcoin.*
That’s all for this week. Thank you again for reading. Please send me any articles you think would be good for future newsletters. If you have any questions you’d like addressed, feel free to contact me. I do respond to everyone who writes me.
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