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Why
a cryptocurrency is necessary
That’s what you’re wondering now,
isn’t it? Why can’t the ledger work sans cryptocurrency? Well, the truth is,
Ripple’s cryptocurrency, abbreviated as XRP, isn’t necessary. But it’s useful
and good to have.
As mentioned before, most
cryptocurrencies these days exist just for the sake of existing (Bitcoin being
one of them, by the way.) XRP, however, has a very important role to play in
the Ripple network: Allowing entities to transfer each other value regardless
of currency.
As we mentioned before, currency
exchanges are part of the problem with wire transfers. If you want to send,
say, Mexican Peso to someone in Russia, the process includes converting the
money to USD at first, moving it around the world as USD, and then converting
it to Rubbles once it reaches Russia.
It’s a double exchange (or triple or
quadruple – banks will perform exchanges as they see fit) and it comes at a
cost, both in time and commission money.
Is
Ripple sure to appreciate in value?
If anyone ever finds an investment
that’s 100% sure and not a scam, it would be nice of them to share it with us.
Because as far as we know, there’s no such thing as a safe investment.
However, while there’s no such thing
as a safe investment, there are investments that are more (or less) likely to
offer decent or good returns.
We can’t really tell where the price of a cryptocurrency
or stock will go, but we can make educated guesses based on how it has been
doing so far, and the buzz around the market it is in.
With Ripple and its XRP token, it’s
difficult to imagine a situation where it would become worthless. If it were a startup
project barely getting started, and with more dreams than accomplishments, it
would be wise to doubt it. After all, many entrepreneurs will promise you
everything and deliver nothing when their dreams happen to be too big and the
market overestimated.
This means XRP is likely to appreciate
over time since cryptocurrency prices more often than not reflect the public
trust in a blockchain. However, it’s still good to be cautious.
Conclusion
XRP’s price
will generally depend on how many institutions adopt it as their go-to token
when sending or receiving money over Ripple, which implies they’ll prefer it to
IOU tokens.
At the moment, it isn’t clear if that
will happen. Many financial institutions do use XRP, but the market is divided
between those that back the cryptocurrency and those who would rather use IOU. Logic
shows that as the crypto market settles, more banks might migrate to XRP, but
that’s far from a sure bet.
Still, it’s unlikely that banks will
just stop using XRP abruptly either, so even if the currency dies it’s likely
to have ample warning.
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