Last week a friend went on a business trip to New York …. told her we were able to exchange some dollars, laying around in the house. She traded her Euros for Dollars and without thinking, the trade was done …. Euros for Dollars within minutes … Our little corridor.
Thinking about this in the international banking business this is absolutely unheard of. Many obstacles are standing between an easy transaction what many people are forgetting … why doesn’t Ripple just open corridors all over the world and let those transactions lead the way … let those XRP do what they were designed for, be used in XCurrent 4.0 –> XRapid …… no no no wait the buzzword is: O D L —) On Demand Liquidity ! ! !
We first have to establish something before we go into the issue Corridors: What is an international transaction and how is it done today. If you want to send some money from Germany to Belize, for example, you could basically go to a MoneyGram or Western Union, or Ria and 1. pay a fee 2. take it for granted that the service takes between 1 to 4 days and 3. risk anything that could go wrong within those 1 to 4 days; this of course, embodies one word: SWIFT.
Well, corridors, what are those: Corridors are pairs of fiat. Pools of liquidity in which XRP is held by exchanges and / or market makers in a partnership …… allowing a work around.
If we look at Ripple, they offer Banks multiple ways of sending money:
Bank-to-bank Fiat Currency Relationship
A fiat currency relationship is a bank holding a liquidity position with another and this liquidity is used for payments. One of the banks will be the Nostro Account; this bank holds the assets and the receiving banks is the Vostro Account; the liability issuer. This relationship can be pre-funded or with credit. The bank that holds the assets can earn Forex revenues; this would be ideal for high-volume corridors.
Third party Liquidity Provisioning
In this relationship a bank authorizes a third party to provide the FX liquidity for delivery of payments. Third-parties can hold accounts with both transacting banks and provides the FX for the transaction. Third parties take care of the “corridor issue” for banks as they have it already in place.
Settlement Through Digital Assets (XRP)
With International transactions settled using XRP, the sending bank and the receiving bank hold XRP; the digital asset. Makes it ideal for the not so common settlements, the exotic corridors, so to speak. No Nostro Accounts have to be in place, what by itself is already a huge advantage. These settlements will make use of the XRP Ledger.
So obviously readers of this blog are more interested in the third option: where XRP is used.
Looking at this third option, using XRP, … well, let’s take a little deeper look. Exchanges are helping to move a currency payment into XRP and back into another currency. So … , it all starts with Crypto Exchange partnerships.
At the moment Ripple has 4 preferred exchanges they work with:
- Bittrex: preferred digital asset exchange for US Dollar transactions.
- Bitso: preferred digital asset exchange for Mexican Pesos
- Coins.ph: preferred digital asset exchange for Philippines Pesos.
- Bitstamp: preferreddigital asset exchange for US Dollar transactions.
What we need to know is that all start-ups are required to get an M.T.L., a Money Transmitter License for each state of planned operations; according to U.S. law. Digital Currencies are still very new, so the rules are not that black or white … This is the first step that need to be taken.
Ripple, according to FinCEN, is a Money Service Business and is required to obtain a Money Service Business License; Money Service Businesses are businesses that transmit or convert money. It is not only Banks, but also Non-Bank Financial Institutions that fall into this category. Often you will find these doing services in underdeveloped regions/ countries where you hardly find banks.
Exchanges of virtual/ digital currencies are Money Transmitters per FinCEN. Corridors can be opened with the appropriate licensing.
So relationships with exchanges need to be made, have been made. More exchanges will be chosen in the (near) future … we all have heard names like CoinBase, Binance, Bitrue, Coinfield, … we’ll just have to wait and see ! ! !
Second step is finding small or medium size payment companies, start using these and start with the transactions.
This is where MoneyGram and other money transfer companies come into play. Starting from scratch is time-consuming but using Moneygram, Ria and Transfer Go for example, MoneyGram, with its 20.000+ corridors, gives you a head start. There is already volume in many of these corridors, so XRP can go into low volume production, they can use to build up liquidity and attract Market Makers.
Another important reason why MoneyGram, Ria & Transfer Go are important, they will allow banks to use XRP without touching it. The MoneyGram, Ria & Transfer Go’s of this world will do the transactions and this will be way to get around regulations. This will bring a new revenue stream for money transfer companies, for how long it takes though, as regulations will be clearer and banks would like to do their own transactions for data and for saving money.
How Does Ripple View New Corridors?
ForEx trading, and its role in providing an active market for cross-border remittance processors and banks, is an important one.
An ‘efficient’ market is one in which a transaction can be completed using one spot rate – the current exchange rate between currencies.
However, if there is not a lot of liquidity being traded between two currency pairings, it can sometimes result in ‘slippage’ of a rate as an exchange must dig deeper into its order book to find enough offers to meet the size of a large transaction.
Eventually, RippleNet’s ODL will be able to compete in efficient corridors (such as between the US Dollar and the Euro), but for the moment, inefficient corridors are regarded as low-hanging fruit.
David Schwartz’s Take
In a Reddit post from two years ago, David Schwartz elaborated on this point, and indicated that the creation of RippleNet’s products to replace SWIFT kept the long-term vision in mind with regards to using a digital asset (XRP) as a bridge between currencies.
Basically, Ripple’s plan is to ‘start with xCurrent’ (their real time messaging solution), and then ‘flip the switch’ using digital assets when XRP exhibited sufficient liquidity in a corridor:
"It's (lack of corridor liquidity) a painful chicken and egg problem. So instead we designed a modern payment system that could support any form of settlement through ILP. The improvements on the payment side were so drastic that banks found value in the system even if the settlement still takes place using the correspondent banking system. As this system gets adopted by FIs, more and more payments will be able to be bridged by XRP the minute XRP has the liquidity to bridge them."
This last part is the most exciting portion of his description of Ripple’s strategy, of course, because it indicates that eventually, XRP will be used for many corridors as its liquidity increases. It has shown that XRP’s average daily trade volume has been steadily increasing over time, even during the later stages of the crypto bear market.
Ripple’s In-house Liquidity Experts and Traders
In a recent interview, Brad Garlinghouse mentioned that Ripple no longer feels OTC sales of XRP are necessary as part of its ODL roll-out. He indicated that new customers could acquire XRP at market on exchanges dynamically, and that there was sufficient liquidity in newly targeted corridors.
This was a bit of a surprise for me, given Ripple’s recent acquisition of Algrim; but it also makes sense:
If Ripple is advocating that new customers utilize ODL by dynamically sourcing the XRP as transactions are processed, that means that the only thing they have to do to support these new corridors is to monitor liquidity and perhaps step in when needed. Having the team from Iceland ready to help supports this notion.
In the same interview where Brad Garlinghouse mentioned that sales of OTC were no longer needed, he also stated that low-interest loans of XRP may be possible for institutions that wish to replace their Nostro account holdings with a stack of crypto.
It was a nice surprise to hear, since the last time I’d heard Ripple discuss the potential of XRP Loans was in an XRP markets report from over a year ago.
The notion of loans is an interesting one, since it potentially opens the door for other institutions or even individuals to enter the space; loaning XRP for interest is a fascinating prospect, although I’d wager the ‘low-interest’ portion of Brad Garlinghouse’s comment might provide a short-term monopoly on that business for the company, since it is the largest holder of XRP in the world.
How Ripple’s ODL Works Currently
Of course, the execution of a plan at a low level will sometimes reveal unexpected patterns or ways to minimize slippage. the implementation of Ripple’s ODL product is no exception, and XRP Community fans and researchers have noted certain patterns.
The most experienced researcher of Ripple’s ODL product and its resulting transactions on the XRP Ledger is, arguably, @H_M_X_ (Twitter avatar). He’s published his detailed approach for separating out these ODL-generated payments from the background noise of the ledger, using a combination of techniques. He’s open-sourced his tools and techniques on Github in the event that others would also like to use his approach on their own: @H_M_X_’s Github Repository
Using a US-to-Mexico example, the basic ODL transaction steps include:
Purchase XRP with USD at Bitstamp (**Originating** Exchange) Send XRP to Bitso (via **RippleNet**) Purchase Mexican pesos with XRP (**Beneficiary** Exchange)
These steps are reflected in Ripple’s public-facing collateral:
While we don’t have an insider’s viewpoint into how time frames and amounts of transactions are organized, we can see the ledger-based portion of how ODL works.
@H_M_X_ noted that transactions of various sizes are communicated in periodic intervals, in an effort to reduce slippage and access the best rates:
Of course, there may be other considerations at play as well, such as regulatory prohibitions of transaction sizes, or other requirements, but those are the aspects that are opaque to outside viewers.
@H_M_X_ has done an amazing job of isolating and identifying these ODL transactions, and noted that the number of payments in his tracked corridors has been growing quickly:
It’s an inspiring reminder of what’s in store for XRP holders as the digital asset continues to be adopted as a bridge asset for more and more remittance processors and banks.
To even show more of the great work done by @H_M_X_ , we will share two more graphs.
The count of transactions of only the destination tags that are suspected to be ODL customers
The amount of the transactions.
The Vision For The Future
In the same Reddit thread where he discusses the challenges associated with new corridors, David Schwartz provided the following inspiring comment:
"We're not trying to fight for a bigger slice of a tiny pie but for the biggest slice we can get of all the payments in the world, as the payment volume goes up because payments become faster and cheaper."
It’s a comment that reveals the big-picture, win-win thinking that’s driven many of the visionary solutions that Ripple has created; and based on the number of banks and other FIs that have been signing on, it appears that RippleNet may be more than a niche solution in banking; it may indeed grow to become the world’s payment backbone.
What would this mean for XRP?
There are limited quantities of XRP available for usage as a bridge asset, but it is divisible by one million, down to individual ‘drops.’ There will be no problem with enough units to represent value as it flows across the world’s borders.
Almost any significant percentage of the global payments utilizing ODL would translate into new a intersection of supply and demand that may make XRP holders quite satisfied.
Will Utility Outrun Speculation?
Brad Garlinghouse noted that, when the current corridor for the Mexican peso is activated within the ODL solution, it typically will comprise 80% of Bitso’s liquidity for the XRP-MXN pairing.
It’s an anecdotal example based on one of the first corridors to go live for ODL, but it may offer a glimpse into how Ripple’s solutions can significantly outstrip speculative traders. One reason to hesitate before extrapolating based on that example is that speculation should follow utility.
Markets will eventually correct themselves, even as obsolete industry icons like Bitcoin continue to coast on their fading momentum.
Recently Bitso was in the news regarding Ripple and XRP. Ripple has invested into the Mexican exchange in order to ensure liquidity of the cryptocurrency XRP. This enables the flow of cross-border payments. Besides the investment, Ripple’s SVP of product, Asheesh Birla, will join Bitso’s board. This may help for expansion to other countries in South America like Argentina, Brazil and the alike. Bitso plays a key role for Ripple and this will only prove to be a smart move. The Mexican corridor is already in place, let’s see where this Bitso investment moves us.
New Gateways are Forming
Another great example and very up to date is South Africa’s Xago launching an XRP-exclusive gateway. The first thing that needs to be addressed is South African liquidity. The price of XRP, yes, everybody is waiting for it to rise, but the liquidity is step one, price follows. Moving money across the world, starts with liquidity and companies like Xago make this happen. Seeing how important this is, we reached out and had a nice interaction with the Capetown-based Company. Debra Ogilvie-Roodt, Xago’s Chief Commercial Officer, took the time and shared some insights into Xago’s world
Interview with Xago: Debra Ogilvie-Roodt
Starting off our conversation, we would like to know a little more about Xago and the people that work for the company, how it all started
Hodor / XRPTwin:
Can you tell us something about the company and the people that work at Xago, how did it all start and what are the backgrounds?
Xago / Debra Ogilvie-Roodt:
It’s been a long road for us! The journey of Xago started in 2012 when Jurgen Kuhnel was at the time attempting to build a QR code payment system. During this period Bitcoin was becoming more prominent in South Africa and Jurgen & Sonya saw the potential and began to explore this avenue because they believed that QR code payments and Bitcoin made for a frictionless experience in removing the third party processors. Jurgen and Sonya then started attending Bitcoin meetups and became the first Bitpay affiliates for South Africa. It was then that the decision to focus all efforts on building a crypto payment platform was made and in 2016 and approached Mark Chirnside, a payments expert and together built a proof of concept.
It was during the development of this proof of concept that they became aware of Ripple and XRP and quickly realised the utility of this solution and the impact it could have on payments.
We then found a technology partner called Tenacious Digital, where our current CTO, Grant Pidwell, was a director, to develop the gateway backend for us. It was at this point that we finally had real tangible code and tech that would prove our theory. We then managed to secure additional funding from a number of Angel investors, and continued to build out the gateway and vision before securing a significant investment from African Technology Investments in order to build the team and launch our first product, the Ripple Gateway and XRP only exchange. This is the first step in fulfilling our long term vision of moving money faster more efficiently and of course reducing costs.
Maybe a long answer but we found it too informative to leave out words and to shorten Debra’s answer !!!
Xago / Debra Ogilvie-Roodt:
As mentioned above we initially believed that Bitcoin was the solution we required, however Sonya, who became a serious advocate for blockchain technology, then suggested that we look at Ripple because of the speed of transactions, cost of transactions and number of transactions per second, it certainly seemed like the most competitive product for a retail payment environment. We engaged with the market and received positive feedback on Ripple and the use of XRP and we then forged ahead and built our proof of concept showing how you would be able to effect a Ripple payment, using your phone number at a retailer utilising their existing hardware and software.
A peak at the office!
Hodor / XRPTwin:
The Exchange only allows customers with a South African Bank account, will you look into adding customers from other countries in the (near) future? Will this be the same for the currency that is used, the South African Rand?
Xago / Debra Ogilvie-Roodt:
Right now, we are fully focused on making our exchange a success in South Africa and building XRP / ZAR liquidity. We custom built our exchange and added unique features, such as the pegged order system, as we need to create price parity in order to fully realise our vision of building a payment platform that reduces cost. We do have a number of other African countries on our roadmap where we will be able to add other Fiat to XRP pairings but this will only be further down the line.
Hodor / XRPTwin:
What role will you have in South African Business’ accepting XRP as payment? Is this something you are trying to achieve?
Xago / Debra Ogilvie-Roodt:
Accepting XRP is a use-case we are looking at, but our main goal for utilising the XRP Ledger is to open up new payment channels for the retailers. This can be, for example, accepting any crypto at their point of sale where we act as an aggregator using XRP as our value transfer. For domestic use-cases this can be done without utilising a decentralised ledger, however, we see a future where we open up retail payments that incorporate the power of XRP in order to affect cross border transactions at the point of sale.
Today cross border transactions in Southern Africa averages 9.5% in fees and sometimes take up to 5 days to clear. The reason for this is because of the exotic currencies and small amounts that people are sending. The current local money transfer platforms have to batch payments and introduce processes like derisking (not holding onto these exotic currencies) in order to open up these channels. Most people sending money back home are usually doing this because of a serious need and have no choice but to pay these massive fees and wait.
We believe that if we can solve the liquidity issue and bring the XRP premium in line with the USD price we will be in a position to lower the fees and speed up the flow of funds between these customers. We would then integrate with retailers to use the point of sale as cash-in /cash-out facilities.
Hodor / XRPTwin:
Will two-factor authentication technology in some way slowdown adoption as this is time consuming and not every customer likes 2 FA?
Xago / Debra Ogilvie-Roodt:
We have designed our system where 2FA is mandatory and believe that other crypto providers should do the same. We would much rather enforce security, slowdown adoption and bring security to the font of mind of all users, particularly given that settlement is final with crypto. As a consumer you need to understand that there is no recourse once the transaction has taken place. We also believe that we should follow similar processes set out by banks to protect your assets and 2FA plays an important role in protecting the users assets on our exchange.
Hodor / XRPTwin:
How far is South Africa with crypto currency regulations? How does the country look at the regulations situation in the United States?
Xago / Debra Ogilvie-Roodt:
Regulation really differs quite dramatically from country to country with each central bank taking their own view and approach to crypto, and whilst we try to keep informed of the role regulation is playing with regards to crypto globally, at present we are focused on South Africa and Africa as these are the markets we will serve. In South Africa, our Central Bank has been quite progressive, and though there is no formal regulation we have had papers published by the Central Bank to provide guidance on what regulation will most likely look like, what will be expected of exchanges and the requirements we will need to meet. The most important of these being KYC requirements and customer due diligence in order to comply with strict AML/CTF policies. When the regulation comes out, we expect that it will incorporate all these policies and therefore have built our business platform and procedures so that we will be ready for it. We are engaging continuously with the Central Bank as we believe that working closely with them can only be beneficial for the long-term vision of our business.
Hodor / XRPTwin:
As we all know Mojaloop, made available by the Bill & Melinda Gates Foundation, also tries to bank the un-banked? Have you spoken to the Foundation or have you looked at Mojaloop?
Xago / Debra Ogilvie-Roodt:
We have engaged with the Bill & Melinda Gates Foundation regarding Mojaloop but at the time our product was not at a stage where we were ready to formally open discussions. We do hope to pick-up the discussions as we believe collaboration would be beneficial for the ecosystem as a whole and we aspire to their vision of financial inclusion.
This final question is just a confirmation Xago is on the right path and ready to lead the way in the African continent with Ripple at their side. We want to thank the team for their great efforts in making time for us, especially Debra Ogilvie-Roodt. We will hear a lot of this team in the (near) future.
We have not nearly touched everything in this blog regarding corridors, as it is a massive topic.
Where it started so smooth with a “friendly transaction”, we figured out there is a lot more to get the payment done in real life. We are definitely getting much closer to a situation where sender and receiver are sharing the same amount of money; wherever you live in the world at whatever time it is in the world. Let’s stay close with all the changes that are coming.
Thank you Ripple , @H_M_X_ , Rick, Xago, especially Debra and Hodor (and XRPTwin a little bit) for the teamwork getting this blog done.
This one is specifically for Hodor, my Big Blog Brother ! ! !
LATAM: Low Interoperability Highlights Crypto’s Big Potential
Across Latin America, a fragmented payments landscape has resulted in low interoperability, often leading to high fees for both senders and receivers of payments. Regulators in the region are working — with varying progress and approaches — to enable real-time payment options that foster greater interoperability, increase financial inclusion, generate revenue for banks and businesses and help protect economies from global market volatility. With use cases like inbound remittance flows seen as a critical component of GDP for numerous LATAM countries, identifying ways to reduce costs associated with those remittances is a key driver of regional growth.
At the same time, central banks are becoming more interested in re-examining their relationship with crypto, creating an opening for the crypto and blockchain sectors to help bring forth a unified LATAM payments system to make low-cost, faster and more seamless transactions a real possibility. Of course, not all crypto is created equal. Using a digital asset that was designed specifically for payments will be key to implementing a successful digital payments system that can handle high transaction volumes without friction.
Latin America as a region is highly dependent on the US dollar: from US remittance flows and USD as a reserve currency, to economies like Costa Rica and El Salvador that use dollars interchangeably with local bills. Some LATAM businesses even use USD as a liquidity source by routing payments through American banks to transfer funds to international accounts within the region. This reliance on USD means crypto adoption in the States is likely to have a major impact on crypto adoption in Latin America.
There are also various new fintech players in the market that are working to get involved in consumer payments. From an awareness standpoint, for example, the sponsorship of football clubs across the region by crypto exchanges is helping to bolster public understanding of how to access crypto. Public adoption and embrace of crypto as an alternative to cash holdings or bank accounts is also gaining popularity in some countries as an easier, less volatile alternative to local currency. In one case, the use of crypto as an alternative to cash is being promoted by the government in El Salvador where the adoption of Bitcoin as legal tender is significant. And there are central banks, like that of Brazil and Mexico, that have recognized the value and potential of crypto and have started developing and providing their customers with digital wallets.
Because Brazil is often a leader in Latin America in the adoption of new technology, it’s worth noting that the country is driving smart and progressive crypto use and regulation. In March of 2022, Brazil announced that it had selected nine projects to advance in its quest to develop a Central Bank Digital Currency (CBDC), indicating a real thirst for a digital future. Brazil’s central bank has also been ahead of the curve in showing public-facing interest in the potential of DeFi, NFTs and even the metaverse. And in terms of consumer adoption, Brazil is seeing crypto trading activity boom, portending a bright crypto future for the region.
From a compliance perspective, businesses in the region are able to use the same fiat compliance measures, like Know Your Customer (KYC) and Anti-Money Laundering (AML), for crypto transactions to ensure the safety of these flows and help protect the integrity of the financial system.
Barriers and Challenges to Success
Because crypto has, at times, been perceived as a threat to the established bank sector — which has historically controlled the financial markets and influenced regulatory and legal structures in the region — any major movement toward crypto is likely to encounter some level of structural resistance. As payments infrastructure is often dictated by larger banks and their governmental relationships, this could make it difficult for digital banks to compete for market share on a level playing field. But, in fact, as we’ll describe below, crypto offers all kinds of financial institutions powerful new business opportunities.
From a consumer perspective, there is also a disconnect between traditional banking and the use of money for everyday transactions across many LATAM economies. Lower incomes often equate to less acceptance of fee-based banking services, meaning that both convenience and efficiency take a backseat to value in many markets. This can manifest itself in people being more willing to wait in line to pay cash rather than incur a fee for an online transaction that might be completed in seconds. Without implementing better ways to make digital payments and financial services available, large sections of the LATAM economy are often left underbanked.
Lastly, with such a high dependency on USD and US clearing institutions, as costs rise in the States, fear and volatility in the LATAM marketplace also rise. The possibility of insulation from other regions’ financial swings underscores a major reason why achieving interoperability across Latin America and avoiding the de-risking trend in the US is so critical for LATAM economies.
Opportunities and What’s Next
There is a lucrative opening for traditional banks, fintechs and governments to increase adoption of crypto-forward technology to address this underbanked and fragmented market. These challenges will be much easier to solve once digital banks have more ready access to the market, helping drive down high fees and frictions associated with institutionally-controlled transactions. This will also help move people away from physical cash and into the digital payments space — increasing convenience for consumers and creating new markets for both businesses and banks without heavy reliance on the traditional US banking sector.
The COVID-19 pandemic has had a significant impact on both consumers and banks in the region that have historically relied on cash transactions. Many financial institutions are already seeing growth in digital payments due to an uptick in cashless transactions as the region looks for safer, quicker and more convenient payments alternatives. An Americas Market Intelligence study shows that Brazil’s banked population grew to 88% in 2021 with Chile not far behind at 82%. Argentina, Colombia, Mexico, and Peru all experienced growth that year as well. The region will need to continue prioritizing foundational infrastructures like internet connection, electricity, and institutional trust for digital payments to remain viable and financially inclusive.
Smart and progressive regulation will beget further successful regulation — leading to increased innovation and progress around crypto across Latin America. In the wake of the regulatory debate happening in the United States, there is a large opportunity for banks and fintechs to work with regional regulators to create smart public policy frameworks to ensure that all boats rise.
LATAM is a diverse and varied region, with both developed and emerging economies breaking into the digital payments landscape to varying degrees. But by finding interoperability across the region, Latin America can become more financially independent, more financially attractive to outside investment, and more financially inclusive.
Learn how Ripple’s payments solution can help absorb price fluctuations, allowing for more certainty, visibility and transparency in real-time payments.
For the Love of NFTs: VSA Partners and Rare Air Media Bring Jordan NFTs to the XRPL
Non-Fungible Tokens, or NFTs, are creating tremendous opportunities for creators and collectors of art, memorabilia, and other digital assets. Since the initial launch of Ripple’s Creator Fund, we have seen incredible momentum and exciting NFT use cases come to life on the XRP Ledger (XRPL). Creators like Justin Bua, xPunks, and Sebring Revolution continue to prove out tokenization projects and capabilities for metaverses, gaming, art and beyond.
Making Waves in Media & Entertainment
Now Rare Air Media, producer of Michael Jordan’s visual autobiography For the Love of the Game, is getting into the NFT game, too. The company is working with VSA Partners, the premier creative agency partner to Ripple’s Creator Fund, to design, develop, and market a range of NFTs on the XRPL, including a one-of-a-kind selection of digital assets covering former NBA player Michael Jordan’s life and storied career. The first batch of NFTs is expected to hit the market in Q2 2022 and will include an intimate selection of original, momentous images of Michael Jordan, accompanied by his personal thoughts and observations leading up to the photo.
As additional use cases for programmable, functional NFTs continue to be built out and tested across industries, the media & entertainment space has been among the earliest adopters of the technology: expanding NFT use cases across music, sports, ticketing, access rights, and beyond. From celebrities like Snoop Dogg and Paris Hilton, to professional athletes like LeBron James, and major brands including Disney and the Grammys — it seems there is no shortage of possibilities for NFT applications in the industry.
High-profile brands, celebrities and their agencies have specialized needs when it comes to identity and ownership of digital assets. The unique security and identification attributes of distributed ledger technology have opened up extraordinary opportunities for creators of digital content to not only assign value to their work, but to profit from it and share behind-the-scenes stories with an even wider audience. With more and more collectors coming aboard the blockchain train, both sides of digital asset commerce can be confident in the assets they purchase and create.
Why Create NFTs on the XRPL?
The XRP Ledger has ease of use and native token functionality built-in by design. Released in January, NFT-Devnet — a beta environment built to enhance NFT support on the XRPL — lowers the technical barriers to entry for those looking to get started either creating and minting their own NFTs or on behalf of their customers and their brands.
A couple of the key benefits to using XRPL for NFT creation include:
- Speed: each transaction on the XRPL takes no more than 3-5 seconds to complete.
- Low Cost: at fractions of a penny per transaction, costs are inexpensive enough to enable a wide variety of NFT use cases.
- Sustainable: the XRPL is the first major blockchain to be carbon-neutral — maintaining neutrality since 2020 — and is more efficient than leading proof-of-work blockchains.
- Simplicity: NFT capabilities on the XRP Ledger pre-program all activities that an NFT user may wish to complete, including minting, burning, trading, requiring royalties, and more.
Created for All Creators
Whether you are new to the NFT space or are looking for a new ledger to build on, the XRPL is customizable to meet your NFT needs—large or small. As one contributor to the growing XRPL community, we’re working closely with developers, creators, marketplaces, creative agencies and brands to help define the future of NFTs and the tokenization of assets in a low-cost, sustainable and accessible way.
As the Creator Fund and its supported NFT projects continue to grow and gain momentum, especially across the media & entertainment industry, it’s likely we will continue to see expanded uses and partnerships take shape—not only on the XRPL but across the broader tokenization landscape as a whole.
CBDCs: From the “Hype” to the “How” of Making Financial Inclusion a Reality – Part 2
In our recent survey of over 1,600 financial leaders across 22 countries, we uncovered some pretty astounding insights: A whopping 85% of payment leaders at financial institutions globally think their country will launch a digital currency in the next four years.
If these last two years in a pandemic have taught us anything, it’s that time flies. So this begs the question: What needs to happen between now and four years from now in order to make those launches possible? It turns out there’s quite a bit to consider, not only as central bankers and commercial bankers, but as individuals as well.
In our first post on this topic, we discussed why the term “financial inclusion” has become such a buzzword when talking about Central Bank Digital Currencies (CBDCs), and how we at Ripple succinctly define it (hint: making financial services available to people who don’t have access to them today). While the insight gleaned from our research is promising and the uptick in global CBDC exploration encouraging, there is still much to be addressed in regards to how the implementation of these digital currencies will impact society, and what primary hurdles we need to collectively overcome in order to achieve that vision of a more financially inclusive future.
Key Use Cases: A Quick Recap
As a refresher, in the first post we identified three primary use cases where we see CBDCs having the biggest immediate impact on financial inclusion across the payments and financial landscape: cross-border remittances, access to peer-to-peer (P2P) loans, and the ability to establish credit history.
If properly planned for and implemented, the application of digital currency technology to these use cases has the potential to dramatically change the landscape for the better, making the world a more accessible and inclusive place. Across all of these use cases, however, there is a consistent set of practical hurdles to solve: education, user experience, identity, offline access and security. In the first post, we covered education and user experience, so let’s dive into identity, offline access and security, and how CBDCs can help clear these hurdles.
Key Hurdles to Implementation: Going Beyond the Hype
Developed countries require a national identity to open a bank account, which poses inclusivity problems in and of itself. For citizens who don’t have a family name, a passport, a driver’s license or any other form of identification, this presents a seemingly insurmountable hurdle. We need non-traditional ways of establishing identity for those people to gain access to financial services. With the use of a CBDC, those individuals would have the ability to be associated with a digital wallet, allowing them to meet basic Know Your Customer (KYC) requirements for identity verification. For example, in places where mobile phone usage is high but access to financial services is low, leveraging registered SIM cards and mobile phones as a way of proving identity for payments without a traditional ID number could help create a threshold to meet these requirements.
Even in countries like the US, there is ample opportunity for digital currency-backed solutions to improve current processes related to payments and identity. In the case of the pandemic, governments around the world were challenged to extend stimulus funds to those without bank accounts or because of technology limitations. Funds were delayed, or had to be issued by paper check—or people slipped through the cracks altogether. With a CBDC, stimulus monies could be distributed instantly and directly to every citizen with a mobile phone—regardless of bank account or ID status—via a digital wallet using similar SIM card/mobile methods.
In order to access and use CBDCs, internet access is required. CBDC usage will grow with internet usage through mobile devices, especially given the increasing rate of smartphone penetration throughout the world. However, implementing critical telecommunications infrastructure won’t be enough to match the pace of innovation needed to ensure constantly available internet access on a 24/7 basis. This goes for both developing nations and countries like the US, where currently 7% of all Americans say they don’t use the internet.
CBDC platform design needs to consider offline access. Having internet access as a prerequisite to success may harm CBDC adoption and usage, both for those without regular access to the internet and for instances where unexpected power outages occur or devices run out of battery, for example.
With this in mind, CBDCs that provide alternate solutions—particularly those that don’t require constant charging and can run without a direct power source or internet connection for consecutive days or weeks—and can accommodate offline scenarios will be critical to implementation. One example of how to solve for offline access could be a solution that mirrors the Indian e-Rupi, which leverages digital voucher mechanisms such as QR codes that can be printed offline and scanned to make retail purchases.
This is one idea of many being piloted, and we believe even better solutions will surface. As overall CBDC adoption and usage continues to grow, it will be critical for central banks and governments to proactively think about how to enable offline access, built in by design.
While the use of digital currencies and digital wallets holds a lot of promise for financial inclusion, it also poses potential security risks. With a bigger chunk of the global population making payments, transferring funds, and managing finances on their mobile devices, new vulnerabilities arise.
These security breaches can come in both physical and digital form. For example, simply leaving your phone at a restaurant or other public place, or having it stolen on public transportation. Virtual risks can include anything from phishing scams and social engineering hacks, to Denial-of-Service (DoS) and double-spend attacks. While a lot of people already use financial apps on their mobile devices and are aware of these risks, many do not and this will likely be a barrier to entry for those people.
Luckily there are ways to avoid and mitigate these risks with the use of CBDCs. One such solution is a blockchain-based CBDC that uses a multi-signature (“multi-sig”) wallet. This means at least two other trusted parties would hold credentials to that same wallet to help ensure no unauthorized use or access. These other trusted parties could be the central bank itself and/or family members or other contacts of the mobile device owner. Additionally, by imposing spending limits and methods to track transaction frequency when the CBDC user is offline, the impact of such attacks would be greatly reduced.
Paving a Path Forward
While there is work to be done to pave the way for a CBDC-driven future, the journey ahead is an exciting one and undoubtedly promises a more inclusive, sustainable financial system. Digital currencies offer many additional benefits that are currently unmatched in today’s financial landscape, and we’re confident that central banks, commercial banks, and society as a whole can work together to overcome the hurdles and create a clear path forward as we continue to prove out the technology, pilot projects around the world, and ensure equal and equitable access.
Download our CBDC whitepaper to learn more.
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