Every day, people and companies around the world send remittances worth more than $ 76 billion over banking networks. Without inflow of money, cargo ships would be idle at the port, salaries would not be paid, and supply chains would be cut off. Over the past six years, Ripple, a technology company based in San Francisco, has worked on how to change the world’s money cycle by implementing  blocking technology .

Already in itself this situation is interesting as the history of the formation of business. However, by the end of 2017, Ripple had become part of a grandiose crypto currency boom. The company owns a large number of tokens called XRP. From the end of September to the beginning of January, the cost of XRP soared to an incredible 1300%, leaving behind its competitors –  bitcoin  and ether – and turning platform executives into billionaires.

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One of the reasons for buying XRP is the fact that unlike bitcoin, these tokens are issued with a definite purpose: to help banks make money from point A to point B faster and cheaper, in particular across borders.

The problem is that banks are not interested in using XRP. The present and former heads of seven world banks, some of which have become business partners of Ripple, argue that the chances that they will ever trust the money of their corporate clients are crypto currency is negligible. The names of managers are not subject to disclosure.

“I do not understand a thing. It’s actually a completely useless token – the company is just using it to earn a lot of money and finance its activities, “acknowledges Joseph Lubin, founder of ConsenSys, a start-up that develops applications based on the Ethereum blockbuster.

100 billion XRP was issued, and, according to the Ripple website, the company owns about $ 61 billion worth $ 1.23 each (as of January 28), which is equivalent to $ 75 billion. Most of them are stored on escrow accounts and can only be sold by a limited edition to avoid a  market collapse . According to the data published by the company, since September 2016 Ripple has sold more than $ 185 million in XRP.

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General Director Brad Garlinghouse says that Ripple is cooperating with more than a hundred banks in order to change the system for conducting customer payments.

“Ripple wants to become a catalyst for the development of the whole industry. The current system is fraught with conflicts, but also characterized by a lack of transparency and low speed”.

However, there is a difference between Ripple and XRP. XRP “completely underlies what Ripple does,” says Garlinghouse, but at the moment the company’s main product, the RippleNet network, does not involve it.

In the banking market, Ripple pushed its main competitor, the Society of Worldwide Interbank Financial Communications Channels (SWIFT) with its head office in Brussels. This is a messaging system – in fact, an air traffic management system in the world of finance when moving  cash flows . It unites about 11 000 financial companies.

“This is quite typical of the Silicon Valley, the struggle between David and Goliath,” says Garlinghouse. At stake are trillions of dollars in the flow of assets, and intense rivalry between the two companies is exacerbated in earnest.

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The Ripple project was founded in 2012 with the goal of creating an orderly decentralized payment system using block-based technologies. Initially, there was a hope that XRP would become an integral part of this project. For example, a token could be used as a transition currency:  Mexican pesos  can be converted to XRP, and then received in the form of baht in Bangkok.

The introduction of lingua franca into the payment system could help banks avoid the hassle and  costs of  converting money to different currencies on the accounts of other banks.

Banks, however, abandoned the XRP, explaining that they will not be able to use a tool that may never get approval from above, says a representative of the company’s management in the cross-border payments industry, which dealt with Ripple.

Moreover, the real power in the sphere of cross-border transfers belongs not to banks, but to large companies that use the payment system to meet their financial needs around the world. According to the representative, no financial manager of the Fortune 500 company will try to persuade his bank to contact a crypto-cash start-up.

Thus, Ripple shifted the course from XRP and focused on RippleNet, which is similar in functionality to SWIFT and is a messaging system that signals to banks where to send money. It also includes a service that helps banks process transactions.

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The total cost of XRP in the ownership of Ripple is $ 75 billion.

Ripple has introduced many banks into its network and sold stakes in its capital to Standard Chartered Plc and Banco Santander SA. Influential figures from Wall Street are also starting to cooperate with Ripple – for example, former co-chairman of institutional  securities  and  asset management  in Morgan Stanley, Zoe Cruz joined the board of directors of Ripple.

However, from more than 100 partner companies, Garlinghouse could allocate only one, Swedish bank Skandinaviska Enskilda Banken AB, whose transaction volume for RippleNet already amounted to 1 billion dollars. Even investors of the Standard Banked Hong Kong Bank and Spanish Santander do not dare to take decisive steps and are limited to the test mode.

This does not mean that the technology does not work. The British division of Santander is testing an application that uses Ripple technology to send international payments via mobile applications in just a few seconds. In November, Standard Chartered launched a circulation program between Singapore and India for its corporate customers. Although none of the banks plans to use XRP in these projects, both are optimistic about the Ripple technology itself.

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Ripple is not the only company that is trying to modernize payment systems. London-based company Earthport Plc, which manages a payment network in 65 countries used by TransferWise Inc. and other large customers, is steadily increasing its  turnover . SWIFT also does not give up without a fight. He recently released his own update called Global Payments Innovation, or GPI. It allows corporate customers of banks to make payments for a couple of hours and monitor the transaction in the same way, in the courier service FedEx Corp.

“This is a giant leap forward,” says Harry Newman, head of the banking business at SWIFT. – “Can someone else boast of similar progress? I do not think so. “

The head of the Standard Chartered correspondent banking department, Shirish Vadivkar, notes that the RippleNet network has become a pioneer in the provision of tracking services for payments. However, GPI also allows this.

As a consortium owned by world banks, SWIFT enjoys an advantage in its field. The GPI system was deduced a year ago, and it relies on cloud computing, rather than blocking. At the same time, 36 banks are already working with it, carrying out cross-border payments for more than $ 1 billion a day.

Garlinghouse says that comparing GPI with what his company offers is an attempt to compare a cart with horses and a car:

“GPI is trying to speed things up using the existing architecture. But no matter how much you squeeze a horse, it will not go faster than a car. “

As for XRP, they are used by at least one financial company – a provider of credit and payment processing services for Cuallix with offices in the US and Mexico. According to the financial director of the company Nicholas Palacios, since October last year, she used XRP in 10-12 transactions in the amount of $ 500 to $ 1000 when sending money between the two countries. On January 11, Ripple announced that MoneyGram International will begin testing XRP for remittances. Since then, two more money transfer services have expressed their willingness to cooperate with Ripple.

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Now the rate of XRP has decreased more than twice compared to $ 2.92 in early January. Harry Newman of SWIFT says that this  kind of volatility  scares off bankers and their customers:

“If the price of the crypto currency is jumping up and down, like yo-yo, then it can not be considered a serious means for exchange. When a solution to a problem gives rise to new difficulties, then it is hardly better than the problem itself. “

Garlinghouse says that the first users of XRP will be not large banks, but companies that send money in less common currencies.

As an object of investment, XRP so far attracts not so much connoisseurs of international payment technologies, as many as willing to “feel part of the crypts”.

Angela Wolch, researcher at the University of London’s University of Lockheed Research, says:

“Investors need to understand the qualitative differences between XRP and other crypto currencies – and, among other things, recognize the ambiguous role of Ripple in XRP.”

A student at the University of Wales, Ibrahim Alcurd, bought some XRP for less than $ 1 in December. He did this because of rumors that the currency will be added to the Coinbase list. However, this did not happen. But Alkurd is optimistic about Ripple’s partnership with banks. He felt that the price of XRP would double with a greater probability than the price of bitcoin.

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