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“World bridge currency” is a term that has gained a lot of traction in the ever-changing world of cryptocurrencies. However, what exactly is the global bridge currency?
The native Ripple token, XRP, is frequently referred to as the global bridge currency. In what precise way is this related to XRP? Let’s investigate.
A digital or FIAT currency that acts as a middleman in financial transactions between various countries or institutions is referred to as a “world bridge currency.”
For example, when selling oil to overseas nations, Saudi Arabia uses the US dollar. This indicates that the US dollar serves as a medium of exchange between the different FIAT currencies and the rial.
A bridge currency’s main goal is to reduce bottlenecks and enable smooth transactions between various ecosystems. It serves as a worldwide link, lowering the obstacles and inefficiencies related to international trade and banking.
Using its token, XRP, Ripple is attempting to fill a similar void in the blockchain industry. To facilitate cryptocurrency payments between various currencies, XRP seeks to serve as an intermediary.
If big financial institutions wish to take advantage of Digital Ledger Technology, XRP has to be accepted as a global bridge currency. With a market valuation of more than $30,000,000, XRP is still the sixth-largest cryptocurrency in the world, despite Ripple having some rivals.
Because of its unmatched security and lightning-fast speed, Ripple has attained this status. Ninety thousand transactions per minute can be handled by the Ripple Network, and transactions settle in less than five seconds. Compared to other cryptocurrencies like ETH, which charges 0.0005 per transaction, it has low fees of just 0.00001 XRP.
In addition to being quick and affordable, Ripple offers two other significant benefits that contribute to easing cross-border transactions and solidifying its standing as the global bridge currency.
Ripple has two key advantages over its closest rivals: On-Demand Liquidity and the RippleNet Protocol.
Within the Ripple network, cross-border transactions are made possible by the RippleNet protocol. This system reduces the traditional pain points of speed and cost, making payments easier for banks and other financial institutions.
By letting institutions use its decentralized platform for transaction settlement, RippleNet aims to establish itself as a major player in the global payments market.
To guarantee extremely quick transactions, Ripple has developed a special liquidity management system known as On Demand Liquidity. This pool of liquid XRP is integrated into RippleNet, as the name suggests, and eliminates the requirement for banks to pre-fund accounts.
There are still certain hazards, though. Any increases or decreases in XRP could change the total value of the transactions since XRP is being leveraged for liquidity.
In the end, there are several benefits to employing XRP as a bridge currency.
The Society for Worldwide Interbank Financial Telecommunications is the main opponent of Ripple. While SWIFT payments might take anywhere from one to four working days, XRP transactions can happen in as little as three to five seconds.
The open-source XML ledger, which can record up to 1,500 transactions per second, is where all RippleNet transactions are recorded.
Transaction fees on the Ripple Network are far less than those of its primary rivals, at 0.00001 XRP. By contrast, SWIFT payments often impose a 3-5% fee on the transaction value.
The ability of XRP to perform 1,500 transactions per second, or 90,000 transactions per minute, is its main efficiency. Institutions do not need to pre-fund transactions because of their on-demand liquidity pool, which settles them virtually instantly.
Ripple is the first blockchain to run a carbon-neutral policy and validate transactions without the need for proof-of-work or proof-of-stake. By 2030, Ripple wants to achieve net zero.
Over the years, Ripple has encountered several obstacles, mostly as a result of legal disputes and adoption issues.
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple in December 2020 for violating securities laws. When Ripple raised capital for its native coin, XRP, in 2013, the SEC claimed that the company had filed for an IPO. Due to Ripple’s lack of securities registration, the SEC started legal action against the business.
In response to the case, Ripple said the regulator should not have warned anybody that XRP would be considered a security. The SEC dropped its allegations against the company’s leadership team after a federal court upheld the blockchain company’s position. The status of XRP is still somewhat unclear because the broader lawsuit is still pending. A positive decision down the road would provide XRP with some market stability.
To fulfill its vision of serving as the global bridge currency and eventually taking the place of SWIFT, financial institutions must adopt XRP in a significant way. Adoption has always been hindered by unclear regulations.
Although Spanish lender Santander resists the temptation to deploy its whole global payment network, it does make use of a few Ripple products.
Still, given the continued regulatory uncertainty, elite banks are unlikely to process payments with the XRP world bridge currency.
Like any investment, several variables determine whether XRP is a wise choice. First off, despite two significant victories in the case thus far, the drawn-out legal fights with the SEC have not yet come to an end. Recently, Ripple has requested time to contest the SEC’s request for an extension of the deadline for filing remedies in the case.
The price of XRP, which is now down over 80% from its previous record high, may rise if the litigation is resolved. Furthermore, XRP’s value might rise even higher if prestigious financial organizations start using it for cross-border and international transactions.
XRP still has upside potential, therefore now could be a good moment to invest. Though XRP is one of the most popular cryptocurrencies on the market, you might want to think about investing in other popular cryptocurrencies in 2024.
The path XRP is taking to become the global bridge currency is paved with obstacles as well as opportunities. Its distinct qualities—like transaction efficiency and speed—put it at the forefront of the global digital currency market. However, for XRP to reach its full potential, regulatory obstacles must be cleared and broad acceptance must be ensured.
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