In an article published by Reuters, representatives from Ripple said that banks are unlikely to use Distributed Ledger Technology. The issues quoted for this are scalability and privacy concerns over the nature of DLT.
Distributed ledger technologies are a solution for databases. It records transactions in multiple places at the same time, and it is under this umbrella that blockchain falls. The blockchain is a prime example of DLT. According to Reuters, Ripple’s David Schwartz stated that distributed ledgers are not scalable or private enough for banks.
Notably, Ripple’s product xCurrent, which is what many banks are using right now, does not function on DLT, as stated by Schwartz. Instead, it is a sort of bi-directional messaging system. It allows banks to communicate with each other to ensure quick settlement and does not share the ledger of its transactions.
xCurrent utilizes the InterLedger Protocol, and this makes it faster and more dependable than its counterparts. It also eliminates a number of the counterparties involved in cross-border transactions. This technology was utilized by Santander UK to build an app known as OnePay FX, which allows users to engage in cross-border transactions with end-to-end tracking and receipts.
Ripple’s most advanced product for cross-border payments, xRapid has not been adopted by many banks as of yet. xRapid uses the XRP token to provide liquidity for cross-border payments as opposed to legacy banking systems which utilize large pools of dormant liquidity overseas.
This technology has begotten positive reactions from pilot results and seems to be a premium offering to solve cross-border payment problems.
On the feedback from banks and the effects of Ripple on the space, Marcus Treacher, Ripple’s VP of Customer Success, said:
“We started out with your classic blockchain, which we love… the feedback from the banks is you can’t put the whole world on a blockchain.”
Even Schwartz said that Ripple “haven’t gotten there yet”. He also said:
“What we hear from many of our customers is that it’s imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable.”
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