Entry {4} - {Cryptocurrency in International Banking: Ripple}

Cryptocurrency in International Banking: Ripple

     When John Doe in New York, United States wants to pay Jane Doe in Berlin, Germany, the processes through which he must go to pay Jane are unnecessarily inconvenient. First, he must ask a bank to authorize the transaction. Next, the bank will wire the amount of money to the country where Jane lives. Then, the bank in Berlin must exchange the U.S. dollars for Euros. This occurrence happens after a two business day delay (1). Then, Jane must wait until the bank is open to have her funds settled and ready to be utilized. As cryptocurrencies become more accepted and more prominent across the globe, one coin has been created with the goal to make this tedious process more efficient:
Ripple.
     
     Ripple, the payment protocol which "provides one frictionless experience to send money globally using the power of blockchain," (2), was introduced in 2012 to counter the inefficiency in modern day global transactions. Instead of waiting for days for wires across the globe to be confirmed by other people and third parties, Ripple uses the blockchain technology to bypass these entities and instead utilize computers around the world to verify the transfers. In doing this method, John Doe's money will instantly be exchanged for Ripple by his U.S. bank, the equivalent amount of Ripple will instantly be sent to Jane Doe's bank in Germany, and the Ripple will instantly be exchanged for its equivalent value in Euros.

     Today, Ripple has partnered with more than 75 banking clients. These institutions are from all over the globe, including Spain, Japan, Turkey, Sweden, India, the United States, and more (3). The Ripple platform is gaining steam, and as globalization continues to occur, international banking will need to step up the pace. Older financial methods are fading away, and Ripple, with the help of blockchain technology, may be the solution.

Infographic

     This infographic serves as a guide to show Ripple's potential to innovate and expedite the way the world currently approaches international banking.

(4)

Relation to Computer Science

     Using the blockchain, Ripple evades third parties by allowing miners to confirm transactions through the proof-of-work concept. Miners use their computing power to solve increasingly complex mathematical formulas and algorithms to ensure that a transaction took place. Because Ripple is available in every country, it will be interesting to see how the large mining pool will impact Ripple's efficiency and ability to smoothly conduct transactions on the global stage. Additionally, if Ripple is widely accepted, hardware will need to increase to keep up with the undoubtedly immense amount of transaction data pouring into Ripple's blockchain.

References

  1. https://www.bankofamerica.com/foreign-exchange/wire-transfer.go
  2. https://ripple.com/company/
  3. https://finance.yahoo.com/news/75-banks-now-ripples-blockchain-network-162939601.html
  4. https://gigaom.com/2014/09/24/two-us-banks-are-ready-to-embrace-the-ripple-protocol-allowing-instant-global-money-transfers/

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