The following article is the final part of our guest author’s scientific paper and takes a close look at the Ripple ecosystem.

Ripple Labs is a company

This company offers banks a technology that enables them to exchange money between continents in a matter of seconds. So far, banks have used SWIFT to do this.

If you follow the social trading channels in which small investors hope to get rich with Ripple, they always stress again that there is another bank somewhere in the world that does a proof of concept with Ripple Labs. The technology used in these Proof of Concepts, however, is in most cases the xCurrent product. But xCurrent does not require a ripple.

How does xCurrent work?

xCurrent is a replacement for the outdated SWIFT protocol. But xCurrent does not use a ripple which banks exchange with each other to transfer money from Tokyo to London.

Ripple Labs benefits as a company when banks use xCurrent to replace the SWIFT process. However, this product has no discernible connection to the Ripple token, which is traded on the stock exchanges with the abbreviation XRP for enormous sums.

When banks like StanChart or Axis Bank use Ripple Labs’ technology to make transactions in US dollars, euros or yen, they obviously don’t use Ripple for that, just the technology they buy from Ripple Labs. However, Ripple Labs wants them to be able to use Ripple later. Ripple would create an inter-currency that the local recipient banks would have to convert into their local currency. The product that connects Ripple with xCurrent is called Ripple Labs xRapid. According to Brad Garlinghouse, CEO of Ripple Labs, it will be a long time before banks use xRapid on a large scale. There are tests, but a broad deployment is still pending.

In March 2018, Ripple Labs announced that, together with 61 mainly Japanese banks, it would like to launch an app called Money Tap for the cashless society. The customers of the 61 syndicate banks should be able to make payments faster with the app. It is sufficient to have a bank account with one of the banks and then pay using the telephone number and a QR code. However, obviously no Ripple is used here again, but only Ripple Labs SWIFT replacement called xCurrent.

An investment in Ripple (XRP) is therefore only indirectly related to Ripple Labs and the many banks that use Ripple Labs technology to replace SWIFT. The way in which Ripple Labs documents its technology and at the same time appears on the market suggests that the mixing of its various successful products such as xCurrent with the crypto currency Ripple is deliberately kept nebulous by the public so that the price of the digital currency Ripple rises.

According to Bloomberg, around 76 billion US dollars are transferred internationally via SWIFT every day. Ripple Labs would like to see these 76 billion US dollars processed via its products. The business idea is unique: instead of SWIFT, international payments are processed faster and more cost-effectively via a block chain. Unfortunately, banks have little interest, for example, in exchanging their customers’ euro money for the crypto currency Ripple, which they then send from Frankfurt to New York in two seconds, where Ripple would have to exchange it for US dollars. According to Bloomberg, there is only a very small probability that exactly this will be accepted by the banking market. The reason is that Ripple, as a crypto currency, is an unregulated financial construct that has not yet been accepted by the banking supervisory authorities.