Pasted: The first thing to know is that Ripple is both a platform and a currency. The Ripple platform is an open source protocol which is designed to allow fast and cheap transactions.
Unlike Bitcoin that was never intended to be a simple payment machine, Ripple is definitely going to rule all the international transactions worldwide. Pretty ambitious, but who knows? Maybe currency exchanges will disappear in a few years like Blockbuster stores did.
The platform has its own currency (XRP) but also allows everybody to use the platform to create their own via RippleNet.
What is RippleNet? RippleNet is a network of institutional payment-providers such as banks and money services businesses that use solutions developed by Ripple to provide a frictionless experience to send money globally.
Let’s give an example: Firstly, Mr. Jones lives in New York and has a chocolate box he doesn’t need. He is very interested to watch a baseball game, but doesn’t have a ticket. Secondly, Ms. Smith lives in Los Angeles and has a rare stamp she would like to give away for a chocolate box. Lastly, we have Mr. Brown who lives in Alaska and is looking very much for a rare stamp, and he a ticket for a baseball game in New York.
In our current system, these people would probably never find each other and remain with their ‘not valuable’ valuables.
But in Ripple world they could say: “Hey, I have chocolate, I want baseball” and the system will look for a shortest and cheapest combination to make it happen.
Changing a chocolate box for a rare stamp via Ripple
Moreover, the platform allows to make payments in any currency including Bitcoin and have a minimal internal transaction commission of $0.00001, yes that’s the right amount of zeros. The only reason it’s not free is to prevent DDos attacks.
What is XRP XRP is a token used for representing the transfer of value across the Ripple Network. The main purpose of XRP is to be a mediator for other - both cryptocurrencies and fiat - exchanges. The best way to describe XRP is a ‘Joker’. Not the creepy Batman enemy, but the card that can be any other card. If you want to exchange dollars to euro, it can be dollar with dollars and euro with euros to minimize the commission. As highlighted above, the transaction cost on Ripple is $0.00001.
Joker with Bitcoin
An interesting fact: after the transaction the amount of $0.00001 ‘disappears’ from the platform and can’t be replenished. So, with every transaction the world becomes $0.00001 poorer. It is designed that way to prevent spammers attacks.