![]()
XRP - the most prominent , decentralized, and open-source cross-border payment platforms designed, allowing international money-transferring in the finance world. This energetic crypto project was unveiled by Ripple Labs in the year 2012. The native currency of this evolving blockchain is XRP operates on the XRP Ledger. With unique capabilities and key features, XRP facilitates cross-border payments and enhances liquidity in its payment network. Furthermore, it acts as a tool to bridge the gap between different currencies on the digital payment networks. Hence, investors and institutions are considering XRP as a bridge currency in the finance world.
But how is it bridging the gap? Let's dive in to find why XRP acts as a bridge currency and how XRPs distinctive features set the center stage in the finance world.
XRP: Universal Bridge for Different Currencies
In the cross-border payment networks, XRP or Bridge Currency acts as an intermediary asset, facilitating exchange between two different fiat currencies. In traditional digital payment networks, international transactions involve multiple intermediaries like banks and payment providers to exchange currency. It may consume more time with high transaction fees. But, XRP acts as a liquid intermediary, facilitating seamless conversions between different currencies without the need of pre-funded accounts or banks. Because it utilizes On-Demand Liquid solution.
Speed and Cost
The core reasons why XRP is considered as a bridge currency in the finance world is its speed and cost. Traditional cross-border payment networks are comparatively slower than XRP. For instance, a typical international money transfer can take 1 to 5 business days to process the payment due to multiple intermediaries. But, XRP allows instant transfers from 3 to 5 seconds. On the other end, XRP might charge around $0.0002 per transaction, which is comparatively low.
On-Demand Liquidity
Many Businesses and Financial institutions who plan to transfer their money internationally require liquidity. But in traditional banking, liquidity management is complex and charges high fees. Also, financial institutions need to hold large sums of capital in the pre-funded accounts across different countries, ensuring liquidity. But XRP enables on-demand liquidity. Hence, traditional banking systems and financial institutions don't require any pre-funded accounts.
Enhancing Financial Inclusion
In many developing countries, access to traditional banking payments or services is limited. Individuals and Businesses are not an exception to the structured limitations. In the traditional finance network, high fees and limited access renders difficulties for the users who are actively participating in the global economy. But, XRP can provide cost-effective and efficient solutions for global finance through Ripple's RippleNet. Hence, businesses and individuals who are looking to transfer money internationally without relying on traditional banks and powerful intermediaries.
Interoperability with Traditional Finance Systems
Another top reason why XRP is considered as a bridge currency is its interoperability. In the traditional finance system, many digital payment networks like SWIFT don't support high levels of transactions quickly at low-cost. But, XRP is primarily designed to work with the existing financial infrastructure rather than replacing it entirely. Furthermore, XRP operates in the decentralized XRP ledger, offering seamless integration with XRP existing payments.
What's Next?
XRP is considered as a bridge currency in the financial market as it enables seamless exchange between different fiat currencies. The above-outlined distinct features of XRP might have glimpsed why XRP is considered as a Bridge Currency. Currently, many banks and financial institutions are demanding potential blockchains that support cross-border payments within fraction of second at low-cost efficiency. Then XRP or Bridge Currency could be a good place to kick off.