Coming to a (Virtual) Shelf Near you: Everything you Need to Know About xRapid, Ripple's new Crypto Service
Ripple has been experiencing a significant rise in 2017 and it's one that is continuing. Since 2017, Ripple's rise has been driven by its newly forged partnerships with banks such as Santander, Western Union and American Express.
But there's one thing that people have generally misunderstood when it comes to XRP, and that's the fact that there aren't any banks actually USING XRP just yet.
Where this does come as a certain surprise, considering the rapid embrace of RippleNet products and partnerships which have been forged, this factor may be subject to change in the very near future, especially as Ripple prepared to push the launch button on the latest in its line of XRP products, referred to as xRapid.
In an interview with the news outlet CNBC, Ripple's Sagar Sarbhai stated that xRapid will be going live in the “next month or so.”
“I am very confident that in the next one month or so you will see some good news coming in where we launch the product live in production.” Sagar Sarbhai.
But what is xRapid and how does it use cryptocurrency? First, let’s clear up a few terms.
There's A Difference Between Ripple And XRP
Ripple: refers to a company which aims to improve the overall speed of cross-border payments and transactions. At the moment, Ripple has partnered up with more than 100 banks and consists of a wide range of money transfer services that use blockchain and some kind of associated cryptocurrency.
XRP: refers to the cryptocurrency that was originally developed by Ripple. At the moment, XRP is not used by banks, but it represents a major component in the future plans and much anticipated xRapid service.
Ripple's Bank Partnerships – How They Stand So far
Among Ripple's activity, the company has, so far, partnered up with more than 120 separate banks and money services. As we've previously seen, it can often take days in order to successfully send money overseas, and are often followed with extortionate fees for doing so. Ripple, on the other hand, want to go ahead and change that.
Out of all these respectiver partnerships, most of them take advantage of a Ripple based service called xCurrent. This product makes use of blockchain technology in order to help banks streamline this international payment service, allowing them to make faster payments and communicate more effectively.
But it does not use XRP to settle transactions. That’s where phase two comes in: xRapid.
So What Is xRapid?
xRapid is the latest product to come from Ripple, and intends to make those same transactions even faster than under xCurrent, while making them even cheaper. More importantly, it takes advantage of XRP in order to settle the money transfer.
How exactly can XRP be put to use here? Well, it's used as a ‘Bridge currency' in order to streamline the process.
Here's an example of how it operates.
If person A in the UK wanted to send some money to Person B in India, let's say £1,000. Through the use of xRapid, Person A would be able to transfer this money by converting it to XRP, and is then sent across to Person B within seconds, then being converted into the native currency, Rupees. The fees are almost zero and the whole process takes four seconds.
Had Person B gone ahead and used the traditional bank system, it would take days and cost him a large fee
xRapid Spells The End Of Nostro Accounts
This example from above is one of the quick descriptions that we can give on how exactly how xRapid works, but there's a whole other reason for why it'll prove so powerful.
In order to have an effective and stable bank, it needs a good level of liquidity, or a high quantity . of available money, in order to make a successful foreign exchange. So why dose this impact on cross-border payments? Because the current system of exchange is incredibly inefficient.
If we are to head back to the previous scenario of sending a payment from the UK to India. Let's say that Person A decided to use the traditional system instead, the first person's bank would need a ‘Nostro Account' in operation in India. The nostro account is pre-funded with millions worth of a local currency, hence the liquidity.
The money is then exchanged from one type of currency to the new one through this pre-funded account, and then across to Person B's account in India.
Traditionally, banks have these sorts of pre-funded, local nostro accounts for any kind of currency, all in order to facilitate the various cross-border payments. And while it's done to a high volume, it's an expensive and incredibly inefficient system.
If these banks were to switch the local nostro accounts, and replace them with a digital cryptocurrency, it'll completely remove any need for specific bank accounts full of foreign currencies all around the world. As a result, xRapid will make for a far faster, cheaper and more efficient cross-border payment system.
So With Such A Good System, Are Banks Actually Using It?
Well, at the moment they're not, but that may be a matter of when, not if.
The vast majority of companies that Ripple has a partnership with are currently on xCurrent, but Ripple is making an explicit effort to nudge its partners towards putting xRapid to use. Currently, it's a strategy that's working, with a number of its partners beginning testing the xRapid product and have already seen a reported 40-70% in savings.
The . CEO of Ripple, Brad Garlinghouse has mentioned that “dozens of banks” will be using xRapid by the end of 2019.
While that makes for an optimistic view for Ripple, it's no easy task to get so many major banks and financial institutions to switch, as Ripple's Sagar Sarbhai explains:
“a couple of years ago the narrative was: blockchain good, crypto bad,” It's only been a recent development where banks have become more receptive of the idea of using blockchain, and they remain wary of cryptocurrency payments still.
Sarbhai says that’s beginning to change.
“I think that narrative thankfully is now changing because policymakers, regulators are seeing that there is a strong benefit that digital assets, cryptocurrencies bring in.”
xRapid Expected To Go Live In The ‘Next Month Or so'
This is the sort of thing that investors in XRP have been really waiting for. xRapid is being hailed as Ripple's silver bullet because it makes use of the XRP token in order to settle payments efficiently. If banks do adopt xRapid, the volume (and price) of XRP is likely to increase dramatically.
If we take into consideration this: if xRapid managed to replace even just 1% of the current international bank transfers which take place through SWIFT, the daily volume of XRP would surge by over 250x its current amount.