Analysis

Breaking Down Ripple’s Products: xCurrent

Ripple has established itself as the market leader in blockchain remittance and money transfer solutions. It has continued to enlist banks and other financial firms onto its platforms which according to the CEO are adding a new bank every week on average. Speed, cost efficiency and scalability are among the qualities of Ripple’s platforms that have attracted these banks.

Unknown to many however, Ripple has a number of different platforms it offers its clients with, each differing from the other in some fundamental ways. The product a firm uses depends on its needs, its size and whether or not it plans on using the XRP token.

xCurrent is one of the solutions Ripple offers financial institutions specifically for processing global payments for the clients.

 

The components

This platform has a number of components which work together harmoniously in a cryptographically secure environment. They include:

1. Messenger

The Messenger is an API that facilitates bidirectional communications between the banks who are members of RippleNet. It collects information such as payment details, expected time of delivery and FX rates from the beneficiary bank and presents it to the originating bank. This gives the client the ability to correct any misrepresented information and add any missing information as well. The Messenger also communicates the completion of a transaction to all the involved parties.

2. Validator

This is a component that confirms the success or failure of a transaction in a cryptographically secure manner. It coordinates the movement of funds and minimizes risk for both parties. It is the single source of truth which the originator and beneficiary can refer to.

3. InterLedger Protocol (ILP)

The ILP ledger is a sub-ledger of the transacting banks’ ledgers which tracks the movement of the funds from the originator to the beneficiary. It enables the instant transfer of funds between two or infinitely more parties.

4. FX Ticker

With Ripple facilitating cross-border transfers, the FX Ticker ensures the exchange is smooth and fast. It provides the exchange rate between any pair of ledgers it’s configured with while keeping track of the account and authentication credentials.

 

How Does xCurrent Work?

When a user initiates a transaction, the translation layer parses the message and collects the necessary information to initiate the transaction via xCurrent. This is done by the Messenger which communicates with the beneficiary and correspondent banks to obtain the costs involved.

Pre-transaction validation is next in which compliance screening and account verification take place. This is important as it decreases the chances of failed transactions, increasing straight-through processing rates.

Ripple uses a cryptographic algorithm to institute a hold on the ledgers of the participating banks. The ILP ledgers in these banks also release a cryptographic signature to indicate that the required funds are committed to the transaction. The funds are then released simultaneously across the ledgers. This process takes place simultaneously to ensure no settlement risk for any of the participants. The payment either fully executes or completely fails. Once completed, Ripple provides a confirmation message to all the participants. All this happens in seconds!

 

xCurrent has become very popular with banks. It lowers transaction costs greatly through the elimination of high SWIFT fees, the lowering of in-flight capital requirements and counter-party risk costs. It increases the speed of funds transfers as well and gives the clients a traceable global payments platform.

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