Ripple made Ethereum the second most important cryptocurrency in the world by market capitalization after the California-based cross-border payments company saw its market price surge towards the end of the year.
While the soaring price of Bitcoin has attracted the most attention this year, smaller rival Ripple’s XRP currency has started to fill the void in recent weeks after several major financial institutions signed up to use its technology.
Last week’s announcement that three of the major Japanese credit card companies signed up to use Ripple technology sparked another spike in XRP price, which has increased six-fold in the past month and nearly 300-fold in a year.
Market capitalization jumped to $ 76 billion on Friday, above Ethereum’s $ 73 billion market value, but well below Bitcoin’s total of $ 246 billion, according to coinmarketcap.com. Ripple’s current market value would make it one of the 30 largest banks in the world, ahead of Britain’s Lloyds Banking Group or Japan’s Mizuho Financial Group.
Ripple’s cross-border payment system uses blockchain technology – an electronic record-keeping system – to move money between countries and currencies almost instantly and at low cost. Blockchain is a core component of cryptocurrencies like Bitcoin and Ripple’s own XRP.
“Ripple has done a good job convincing large institutions to use their currency,” said Eddy Travia, managing director of Coinsilium, which advises and invests in companies that use blockchain. “The concern is that when the price goes up that much, the focus will shift from technology to just speculation.”
With Ripple’s technology, cross-border payments can be completed in 10-15 seconds, compared to around three days for interbank transactions over the Swift network, which was founded 44 years ago by a consortium of the world’s largest lenders.
The recent price rally at XRP began after a group of Japanese and South Korean banks last week announced the launch of a pilot project to use Ripple’s technology to transfer money between the two countries.
Ripple has much more XRP reserves than publicly traded, which gives it a war chest worth approximately $ 115 billion to encourage banks and other large financial institutions to use their technology.
The US company has committed more than 100 financial institutions to move large sums of money across borders with its blockchain technology.
Ripple offers different types of cross-border payments. A system allows customers to buy and sell XRP to move money between countries and currencies almost instantly. Another uses a blockchain ledger to record and coordinate transfers between banks’ own accounts.
“2017 was the year of the digital asset, and XRP clearly outperformed all other digital assets,” Brad Garlinghouse, CEO of Ripple, told the Financial Times. “This is because the market has recognized that XRP is a highly efficient payment mechanism that solves real-world problems for real-world customers with real money.”
He said that “people are increasingly realizing that Bitcoin will not be a panacea for all of these payment problems that people thought it would solve”. He added, “Payments with XRP are processed in a matter of seconds, but when you buy a cup of coffee with Bitcoin, it’s cold when the payment is made.”