1. XRP Is Not Needed
Ripple offers two main products for cross border payments: xCurrent and xRapid. The longest available product, and also the most adopted product, is xCurrent.
xCurrent is a global real-time gross settlement system that enables participants to message, clear and settle transactions; and the speed of settlement is disrupting the existing solutions on the market, such as SWIFT with which a payment settles in a few days on average.
This disruption, and the praises from customers, is often interpreted to be “enough”. When settlement can happen in seconds without XRP, why would it be used at all? Because it is cheaper and faster to settle payments with XRP than FIAT/FIAT exchange pairs.
If two banks have made nostro/vostro arrangements, xCurrent can change balances on both ends in seconds. And since xCurrent is built on top of the Interledger protocol, they can exchange FX rates in real time.
According to Ripple, it is expensive and unsustainable for most organisations to maintain nostro accounts:According to a 2016 McKinsey Global Payments report, there is approximately $5 trillion dollars sitting dormant in these (red: nostro) accounts around the world — tying up capital that could be used in more productive ways. They also must be actively managed to ensure balances are commensurate with transaction volume. The cost and complexity of holding these accounts around the world is one reason why only a handful of banks can process global transactions. The burden of maintaining nostro accounts worldwide is simply unsustainable for most organizations. Small-to-mid-size banks and payment providers instead pay a fee to use the international transaction systems of their larger brethren.—Ripple Insights
xRapid is made to eliminate the need for these ac...