When faced with the issues of today’s antiquated cross-border payment system, we often focus on the difficulties of scalability with banks struggling to handle the amount of transactions, causing it to take three to five days to complete. In a time where you can send a text message to someone across the world in an instant, days can seem like an eternity. Ripple’s hope is that instead of waiting days we can move money the way information is moved today, creating the Internet of Value. But as fintech companies continue to grow, concerns are mounting around scalability and performance. Those who cannot solve these issues by increasing their transaction throughput (measured by transactions per second) to the level of companies like Visa and American Express will be left behind.
We’re excited to be introducing several new features that improve the Ripple Consensus Ledger (RCL) and Interledger Protocol (ILP), by bringing the Internet of Value to life. ILP can now communicate with RCL to meet the needs of digital assets, traditional payments, and the traditional financial world, creating a network that can interconnect all the world’s value on ledgers. Ripple is now the best suited network to accomplish this.
The two new features Escrow and Payment Channels, which help to increase the performance and scalability of RCL, became active for all users today. Escrow allows RCL and ILP to communicate to secure XRP for an allotted amount of time or until certain conditions are met. This can be used to hold funds until a service is completed, or until a moment in time such as a birthday. The benefits to Escrow are two-fold:1) it completes this task securely without having to trust intermediaries; and 2) no single institution is in charge of holding the funds. Banks traditionally have done this through the use of a vault, but this is the first readily available feature of its kind that facilitates this for digital assets.
As digital assets have become more popular, many have realized that these technologies weren’t designed to handle high levels of volume, and as a result the transactions are slowing from seconds to days. To solve this issue, Ripple built their own Payment Channel specifically designed for XRP, the digital asset native to RCL. An XRP Payment Channel allows transaction throughput to increase to tens of thousands of transactions per second, bringing our scalability to the same level as Visa. With the capability to send money as fast as a credit card swipe, XRP Payment Channels have the ability to transform the way people send money and the payments industry as a whole.
The new features will allow companies to adopt RCL and ILP, and those using the technology will receive the benefits of XRP, providing them with a faster, cheaper experience for cross-border payments. XRP is the best liquidity option particularly in emerging markets where liquidity is difficult and banking infrastructure is old or non-existent, because it increases flow and enables better usability. This milestone highlights the strengths of XRP, together with ILP.
Ripple’s long term goal is to make the Internet of Value possible, and in order to accomplish this the right infrastructure must be in place. With the new features implemented, ILP and RCL will provide that necessary infrastructure, unlocking our future for enabling the Internet of Value. The ability to send tens of thousands of transactions per second is not only a massive step toward the IoV, but it continues to help Ripple progress as the category leader in global payments. We look forward to this new world order, where Ripple will propel the financial industry into a new definition of how value is transferred.