Ripple blockchain is one of the largest crypto platforms today. The company behind it, Ripple Labs, has been around since 2012 and is one of the pioneers in the blockchain field. This blockchain protocol was designed to be cheaper, faster, and more scalable than the popular Bitcoin. Its native token, XRP, can facilitate transactions as a bridge. The application of the XRP token is tailored for financial institutions like banks as an efficient international payment system. As a result, the Ripple blockchain is centralized, with no mining for XRP tokens.

How does Ripple Work?

The XRP Ledger (XRPL) keeps track of transaction data such as transfers, accounts, and balances. The Ripple blockchain is cryptographically secured by key pairs. Transactions in Ripple can only be authorized by private key holders.

The Ripple network does not use the popular proof-of-work or proof-of-stake consensus mechanisms. Instead, it uses a quorum-based method called RPCA (Ripple Protocol Consensus Algorithm) to allow validator servers to participate in the consensus process. These validators participate in consensus to agree on which transactions should be allowed to be entered into the ledger. Once recorded, ledger entries can never be altered or changed.

Ripple network has a default list of about 35 validators based on past work. But each default node is free to choose its validators. The recommended validator list is known as the Unique Node List or UNL.

Each validator can suggest which new transaction blocks can be added to XRPL. Consensus is achieved when 80% of validator nodes agree on the set of blockchain transactions. These entries are then added to the XRP Ledger. Validators can modify their proposals on failed transactions to come closer to what other validators suggest on their UNLs. This process can repeat itself multiple times until consensus is achieved.

Ripple DeFi Solutions

The Ripple network and the XRP token are two distinct entities. The Ripple network is used by financial institutions to settle cross-border payments. This network also supports the exchange of fiat and crypto. The XRP token provides liquidity and acts as a bridge currency. This crypto token can be used to transact on the Ripple Network. Ripple eliminates the need for pre-funded accounts for cross-border transactions because XRP provides liquidity.

Ripple allows users to perform cross-border transactions with any currency of choice, including digital and fiat currencies. It also offers a feature called auto bridging, which finds the best exchange rate for users who want to exchange crypto or fiat currencies. It makes cross-border transactions cheaper and much faster.

Ripple DeFi adoption

Ripple aims to be an alternative to the SWIFT network. It wants to transform international payments by making them cheaper and faster-using blockchain technology. It eliminates the multiple steps that SWIFT needs to operate, making the payment transaction process faster and more transparent. The payment settlement is instantaneous. Initially, Ripple was introduced as three different offerings: xCurrent, a bank-focused payment system; xRapid, a liquidity provider; and xVia, connecting the previous two services. Ripple unified the three services in 2019 to expand the use of XRP.

Ripple uses a blockchain protocol called the Interledger Standard that connects the ledgers of two or more banks. It removes the need for intermediaries and central ownership or control of the system. Intermediaries like the internet’s IP protocol, which enables computers to communicate with each other. The interledger allows interconnected ledgers to communicate with each other, which results in cheaper and faster cross-border transactions.

Read more: What is Ripple

Ripple’s Impact on the DeFi Ecosystem

Ripple offers an alternative global payment network and has partnered with popular banks and financial institutions. Its native token, XRP, is used to facilitate exchange between different currencies. It aims to solve some of the issues associated with traditional banks. It can handle millions of transactions and settle them within seconds. Traditional financial institutions like banks can take days or weeks to complete cross-border transfers. Compared to the high fees levied by traditional institutions like banks, Ripple charges low fees to settle cross-border payments.


Compared to other blockchain pioneers, the Ripple network is more centralized due to its relationship with traditional institutions like banks. A few central entities control this network and have the power to block transactions. For those who prefer efficiency over centralization issues, Ripple can prove to be a worthy investment due to its popularity and trust among financial institutes. It has the potential to disrupt cross-border payments and revolutionize the banking space. It can replace the current SWIFT system and provide a cheaper and faster way to conduct cross-border payments.

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