XRP is an innovation in cross-border payments. The cryptocurrency takes a multiple-day process and shrinks it down to seconds. This transformation is a real-world example of blockchain technology improving existing financial services. Institutions such as Westpac and NAB are trialling XRP as their cross-border payment method.
What is XRP?
Ripple Labs created XRP in 2012. It transforms cross-border payments from a centralised to a decentralised model.
XRP runs on a decentralised blockchain network. A decentralised network is numerous connected computers that process transactions. Whereas a centralised network, like a bank, channels transactions through a single central computer system.
XRP is the third largest cryptocurrency by market capitalisation. It is currently valued at over $17 billion. You can buy, sell or trade XRP on cryptocurrency exchanges like BTC Markets.
What are the benefits of XRP?
Transaction speed and low fees are XRP’s party piece. On average, it takes four seconds to process an XRP transaction.
These features make the cryptocurrency an ideal asset for cross-border payments.
XRP tokens are limited to 100 billion, all of which have already been created. This is unlike other cryptocurrencies such as Bitcoin. As all XRP tokens exist, there are no set-up costs when transacting. This keeps XRP transaction fees low.
How is XRP used for cross-border payments?
XRP tokens are the key piece in Ripple’s On-Demand Liquidity (ODL) cross-border payments network. Traditional cross-border payments take anywhere between two and five days. ODL settles international payments in seconds.
How does this transformative technology work? Let’s say Jane wants to send $100 from Australia to her uncle in the Philippines. An ODL remittance partner would first convert her $100 into XRP. It then sends the XRP via an Australian exchange, to the receiving Filipino counterpart. The XRP is then exchanged to Filipino pesos by the local ODL remittance partner. It is now available in her uncle’s account. This process happens in just seconds.
It works by using XRP as the liquidity source rather than a standard currency. Liquidity refers to the ease of converting an asset into cash. XRP is considered a liquid asset. It’s readily available to send and can be quickly converted to cash. This makes it the ideal asset for quick and affordable cross-border payments.
Who uses XRP?
XRP is used, or being trialled by, established financial institutions to improve their cross-border payments. This includes Australian banks Westpac and NAB as well as international banks Santander and Barclays. Money transfer companies like FlashFX and Moneygram have also adopted XRP for cross-border payments.
BTC Markets are the Australian partner for ODL. The platform is one of a handful of exchanges worldwide with technical capabilities to process ODL payments.
Ripple’s XRP token is a prime example of how blockchain technology innovates existing financial systems.
BTC Markets is Australia’s leading digital asset exchange, trusted by 270,000 verified clients who have traded over $9.8 billion. Buy, sell and trade Bitcoin (BTC), Ethereum (ETH), XRP and more with AUD today. Visit BTC Markets for more information.
This article was developed in collaboration with BTC Markets a Stockhead advertiser at the time of publishing. This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.