Ripple’s ‘Convergence’ to Bring xRapid and xCurrent Together using xVia?
Ripple users, like any of those that firmly support any kind of cryptocurrency, have been in an extensive discussion regarding why the majority of Ripple's existing partners are using its xCurrent product as opposed to others, such as the xRapid?
That's a bit of a challenging question, but worth asking, especially considering that, while xCurrent is commonly used by a number of different partners, there are only a small number of financial institutions that use xRapid at the moment.
Most of these same companies are just running test pilots of this product, but that's not so surprising, especially considering that it's a product that's still in its Beta stages and has not moved into full-scale production just yet.
So why xCurrent? It's because it's a type of product that can be seamlessly incorporated into the existing financial systems of companies interested in using it. Currently, over 100 banks use xCurrent to allow for a more consistent and frictionless experience on top of the correspondent banking system.
But while it does carry with it a unique and highly successful track record of use, the ultimate irony is that xCurrent, like Ripple themselves, are being used by the very same companies and institutions it wants to render obsolete.
Currently, xCurrent uses a system wherein financial institutions lock up capital in accounts that exist overseas, these are commonly referred to as ‘nostro accounts', and they provide additional amounts of liquidity for cross-border transactions. Effectively, this means that the recipient can receive an additional amount of financial liquidity, all thanks to the original locking in of Nostro accounts.
While it proves somewhat effective, the emphasis is certainly on somewhat, this is because, while providing further liquidity, it's ineffective in the way that it manages this, at least in its current form. Along with this issue, the existing network used for international payments has its own slew of problems.
Referred to as the Society for Worldwide Interbank Financial Telecommunication or SWIFT for short, has significant problems which can prove a logistical headache for cross-border payments, especially considering SWIFT transactions can sometimes be riddled with errors, losing both the payer and recipient essential days. The SWIFT system is also outdated in terms of its cybersecurity, leaving it susceptible to a number of breaches or hacks.
For financial institutions that put it to use, xCurrent directly replaces SWIFT as a means of cross-border transactions for users, providing a much higher level of efficiency and accuracy for the movement of money.
Now, while this works incredibly well in the minds of the institutions that use xCurrent, once again, the application of Ripple's product here stands paradoxically when compared to the financial landscape that Ripple wants to pioneer, and it's one that doesn't involve using or revamping the existing system.
In contrast, Ripple's desired system would pull liquidity from a completely different area that financial institutions use (nostro accounts). Ripple would rely on its XRP to provide the liquidity, operating as a bridge currency between the respective currencies being exchanged or moved.
What this equates to? It means that the previous SWIFT transaction, which takes days, would take Ripple's proposed alternative a matter of minutes to complete.
One of the features that sets xRapid apart from other systems in existence, is the companies that put it to use, report that they gain anywhere from 40-70% in financial savings when using it. So what this demonstrates is another way that Ripple is working to streamline transactions, but the question is this: how do you go about enticing clients to use xRapid and moving away from xCurrent as a result?
Of those able to give an analysis and answer to this question, one is Jim Chauncey-Kelly, Ripple's Director of Talent Acquisition. During a conversation on the show, Interview Now, on August 9th, Chauncey-Kelly gave his statement on the matter:
“Earlier in the year, a big part of what my team was focused on was hiring a lot of engineering. This was probably our biggest push because we are building a software called Convergence that syncs together all of our 3 major products into one seamless format.”
As the interview continued, Chauncey-Kelly further fleshed out his point using an example:
“For example, if American Express (one of our clients) wants to send $500 to a bank in Thailand, there is an immediate quote of what that exchange is and the money goes through. This is something that brings together all of our products to further enhance RippleNet which is very exciting.”
Upon being drafted, the article was subsequently deleted, but was made available thanks to there being a saved, cached version of it from the 16th of August. There was also a tweet by Kelly posted on 17th August, which was also deleted after a short amount of time. Reportedly, the tweet stated:
“Hi All – for clarity — we have 3 products – xCurrent (in production) and 2 more on the way – xVia & xRapid. They will be on a ‘convergence’ release soon. There isn’t a software actually called ‘convergence’.”
This comment made many readers believe that any additional product does not exist, primarily because it was overtly denied by the previous announcement.
In another Tweet, this time by David Schwartz, the Chief Technology Officer for Ripple, Schwartz addressed the concerns regarding Ripple's existing partnership with three exchanges spoke about payments using xVia. This could be the Convergence that Kelly was speaking about.
Within the Tweet, Schwartz stated:
“xVia can initiate a payment that uses xRapid to settle with XRP. xVia is for payment initiation, like a browser for the internet of value. xRapid converts currencies on demand through XRP liquidity. That pipeline can settle payments initiated elsewhere.”
xVia, according to the tweet, is Ripple's third product alongside xCurrent and xRapid, with the xVia acting as a standard payments interface which can be used to conduct payments using both xCurrent or xRapid.
Along with this capability, xVia also allows for two different kinds of payments and settlement to work together through a single, standardized interface for RippleNet.
One example that can be used to demonstrate how this would work would be the following. Bank A sends USD to Bank B, between the two, Bank A uses xRapid, while Bank B uses xCurrent. After going through the conventional procedure of converting the USD into XRP, it sends the XRP to another exchange where it is converted into the receiving currency. This is done through xRapid.
After these stages have been accomplished, xVia can then be used to settle the payments using the xCurrent system instead of going through the traditional payment mechanism. The end result? between these three products, these financial institutions would be using a system that completely uses Ripple.
While the premise is interesting, it remains to be seen what the finished product would inevitably look and function like. But with the upcoming launch of both the xVia and xRapid, as previously mentioned by Kelly, thee bring a newer range of variables to the table, especially when it comes to the prospect of fully porting over transactions systems to Ripple.