Libra, Xrp, Ripple, Commerce

Libra, Xrp

Altcoins: Ahead of Libra, XRP cryptocurrency gains toehold in commerce

Explainer: Ahead of Libra, XRP cryptocurrency gains toehold in commerce

10.10.2019

Explainer: Ahead of Libra , XRP cryptocurrency gains toehold in commerce

Facebook's Libra may be grabbing all the headlines at the moment, yet a major cryptocurrency already exists that's gained a toehold in mainstream ...

XRP, the third-biggest cryptocurrency by market value, seeks to succeed where bitcoin and other digital currencies have largely failed: in powering fast and low-cost transactions.

In a rare example of a cryptocurrency finding a practical use beyond speculative trading, it has gained a certain amount of traction, with some large financial firms using XRP for international payments.

To track the emergence of hundreds of smaller rivals to bitcoin, collectively known as"altcoins", Reuters is looking at the leading players as they grab the attention of investors, companies and regulators.

The third in the Reuters series on altcoins looks at the prospects, and challenges, for XRP.

It has been developed by California-based tech company Ripple, which offers a blockchain-based payments platform. XRP is intended to act as a kind of bridge for cross-border payments for firms that use Ripple, and can also be used for e-commerce and peer-to-peer transfers.

The currency was designed to help these companies - from payment providers to remittance firms - settle transactions instantly, pay lower fees and free up capital typically tied up in payments using traditional money.

It says payments using XRP settle in four seconds, compared with over an hour for bitcoin and three to five days for traditional systems used for fiat money.

XRP, like Facebook's proposed Libra, veers away from the ethos of bitcoin, the original cryptocurrency, which aimed to sidestep the financial establishment by dispensing with a central authority.

While bitcoin"miners" compete against each other using powerful computers to solve algorithms and earn new coins, XRP's entire supply of 100 billion was created at its birth.

And while XRP's value fluctuates, Libra's doesn't: it is a"stablecoin" whose backing by traditional assets such as bank deposits and short-term government securities is designed to dampen volatility.

London-based Mercury FX, which counts small businesses and wealthy individuals as clients, uses XRP to facilitate payments into and out of countries such as Mexico and the Philippines.

XRP has slumped around 25per cent this year, versus a near-115per cent gain for bitcoin. To be sure, other altcoins have also failed to match bitcoin's advance. Yet other major players such as ethereum, the second-biggest by market value - the price of a coin multiplied by the number of coins in the market - have stayed above water this year.

Ripple holds XRP in escrow accounts and sells directly to the market to boost liquidity. It said in a July report that XRP markets should resemble traditional foreign exchange markets, which are typically highly liquid and efficient.

Still, some market players said the heavy supply of XRP in markets pushed prices down and thus makes it unpopular with longer-term investors.

Read more: CNA

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