New York skyline Wall Street blockchain and finance

Blockchain technology is often referred to as one of the most disruptive developments of the 21st century. From medical records to artificial intelligence, the list of potential use cases is endless. In particular, the finance sector is one of the best fits for this technology.

Blockchain has several key advantages. It is secure, transparent, and immutable (meaning it cannot be edited and transactions cannot be reversed). That makes it the perfect way to store data and funds, and open doors to the world of big money.

With the debut of smart contracts (contracts that execute automatically when certain criteria are met), the blockchain world got a massive step closer towards wider adoption. These features are sending ripples through the financial world in the following ways:

Blockchain and Banking

Banks have been working on blockchain technology for several years. In fact, there are various international blockchain consortia, consisting of institutions like HSBC and Santander. The groups are trying to advance the $17 trillion trade finance industry by adopting blockchain solutions. Meanwhile, J.P. Morgan is building its own blockchain services on the Ethereum network.

blockchain banks consortia - a list of all banks and logos involved in blockchain
Image credit: Business Insider

A decentralized, digital system has the potential to weaken fraud attempts, improve document turnaround times, and streamline accounting for businesses. Moreover, by working with smart contracts, the consortia aims to progress in cross-border trading and to enhance the supply chain industry.

At this point in time, the third-most-valuable cryptocurrency is Ripple’s XRP, which has announced more than 100 partnerships with major banking institutions around the world. Most of the banks are using Ripple’s blockchain solution called xCurrent. However, at least three companies are now using Ripple’s cryptocurrency service, xRapid, to settle cross-border payments.

Initial pilots reveal that blockchain solutions can reduce international payment times from days to minutes (and at a 40-70% discount in fees).

Blockchain and the Stock Market

Wall Street is one of the best places for the implementation of blockchain technology, and the conversation is ramping up around “security tokens.” Security tokens are issued by companies, much like stocks and bonds, but on a blockchain.

It has benefits for shareholders and the company itself.

Shareholders, for example, can take advantage of increased transparency and simplified stock market duties, like dividends and voting. Companies may also add extra features to their security tokens, which might be access to products, discounts or memberships.

For the company, issuing stock on a blockchain improves liquidity, distribution, control and investor relations. Companies that issue security tokens will also benefit from customizable trading settings, automated whitelisting processes and the tracking of their investors.

Wall Street stock exchange

Several big institutions have expressed interest in issuing tokenized securities. The most popular supporters are Overstock’s subsidiary tZero, cryptocurrency exchanges Coinbase, Binance, and OKEx, as well as the main stock exchanges in Switzerland and Malta.

Additionally, there has already been a successful attempt to issue corporate stock on the blockchain.

Blockchain and Real Estate

The real estate sector is one of the most profitable businesses in the world, but there are many ways it can be improved. Real estate agents, as well as private investors, usually face high costs for bureaucracy and notaries. They are also flooded with tremendous waves of paperwork. Blockchain and smart contracts would undoubtedly save time and wealth by cutting out intermediaries. It also provides a secure and reliable place to store data.

The tokenization of assets would drastically reduce the time needed to trade property. And it would allow us to easily divide the ownership of property among multiple investors. As a consequence, investing in property may become available to everyone around the globe, and not just wealthy individuals.

blockchain real estate

Blockchain adoption in real estate is already a real thing. In February this year, the US state Illinois announced an initiative for real estate transfers supported by blockchain technology. The government’s goal was to experiment with blockchain, which could potentially save millions of dollars and provide enormous value.

Blockchain and the Insurance Business

Insurance corporations represent another industry primed for the introduction of blockchain technology. On the one hand, there are lots of people in the world that can’t live without insurance for health or property. But dealing with insurance companies is extremely time-consuming, especially when trying to claim refunds.

Meanwhile, most businesses in this sector are confronted with several issues in terms of verifications, data collection, and auditing policies.

One of the world’s largest insurance companies, People’s Insurance Company of China (PICC), has teamed up with the blockchain startup VeChain to address these problems. According to VeChain, its native blockchain VeChainThor “provides enterprises with the tools, securities, and governance to properly control their assets while collaborating across multiple verticals, industries, and even countries.”

S&P 100 enterprise MetLife is also wading into the blockchain space. With their Singapore based innovation center LumenLab, the insurance company is actively experimenting with smart contracts on a private blockchain.

In their sandbox project Vitana, the customer connects electronic medical records with their smartphone to issue a policy in a matter of minutes. In addition, a smart contract triggers an automatic payout upon diagnosis, without the need to make a claim.

Blockchain and Cross-Border Payments

Everyone who has ever made an international wire transfer has experienced the huge effort and time it requires to do so. Cryptocurrencies and blockchain are perfectly poised to fix this issue. Projects like Ripple and Stellar are already building an ecosystem to transfer value across borders, yet these digital assets still face serious obstacles before a wide adoption is in sight.

cryptocurrency cross-border payments

To become a viable form of money, currencies need to store value fairly well. Most cryptocurrencies do not fulfill these requirements due to their extreme volatility. However, many people depend on a currency with a relatively stable value. Tether’s USDT is probably the most popular stable cryptocurrency at the moment. Unfortunately, this does not solve the problem of fiat currencies, as the token is pegged to the US dollar and controlled by a centralized power.

Consequently, many projects are working on an alternative, more suitable, method of creating a stable coin. One of the main ideas is to back a cryptocurrency with all kinds of assets, including precious metals, stocks, property, and other cryptocurrencies. Stable coins and tokens are still in a very early stage of development, but the potential to substitute all fiat currencies is real if a project eventually succeeds.

A handful of international governments, such as Russia and China, are currently exploring the potentials of having their own cryptocurrency. The South American nation Venezuela announced its official cryptocurrency petro, which was created after the hyperinflation of the bolivar this year. The petro is based on NEM’s blockchain and backed by the country’s oil and mineral reserves. However, many critics denounced the project for its lack of transparency and decentralization, which are originally the fundamentals of a blockchain currency.

Obstacles for Blockchain Adoption in Finance

There are still some hurdles standing in the way of worldwide acceptance. Not least the problems of scalability, speed, and decentralization. Applications that include micro-transactions or high-frequency trading, like decentralized exchanges, are particularly in need of a fast, scalable and secure blockchain architecture.

There are hopes for improvement. New concepts are being developed, like “proof-of-stake”, where block validations are conducted through owning stakes instead of computation power. Sharding is another alternative, where the blockchain history is split into multiple sections and computed in parallel.

A decentralized network is also required to maintain extraordinary security standards. A blockchain is generally referred to as a secure place to store funds and data. Yet, we occasionally observe serious security issues like 51% attacks, which happened at least half a dozen times to prominent cryptocurrencies in the last year.

In other cases, the chains of major cryptocurrencies face problems when consensus nodes go offline all of a sudden. The fear of quantum computer attacks is something every digital currency has to deal with.

Apart from the blockchain itself, there are also many incidents where smart contracts have been reported as wrong. In order to convince massive enterprises to adopt the technology, blockchain constructions are required to provide a predictable and trustless experience.

There’s one more problem. Blockchain and cryptocurrency communities are split as to whether the technology should offer full anonymity or explicit transparency. The dilemma is a stumbling block for convincing big institutions and governmental authorities. The vast majority of governments around the globe are not in high spirits about privacy coins. Tax bureaus and other regulatory entities demand insight into transaction histories.

However, most companies and institutions refuse to use cryptocurrencies as long as the histories of their accounts are public to everyone. In order to find a fitting solution, several international universities are collaborating in the “Accountable Privacy” initiative. With its project Abelian, the initiative is proposing a concept of privacy, where the user determines the transparency level of his transactions.

We are still in the experimental phase of blockchain in the financial world. But as we can see above, there is phenomenal scope for this technology to transform the way we do business. Just don’t expect it to happen overnight.

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Ripple Swell conference logo

This week played host to Ripple’s Swell conference in San Francisco. The event arrived just as ripple’s price shot up more than 100% and briefly overtook ethereum as the number two cryptocurrency. But what did we learn from the conference? Let’s take a look.

1. xRapid Is (Finally) Live

On the first day of the event, CEO Brad Garlinghouse revealed that three companies are now officially using xRapid to process payments.

The three companies involved are Catalyst Corporate Credit Union (a financial firm), MercuryFX, and Cuallix (money transfer services).

xRapid is Ripple’s flagship product for moving money instantly across borders. The crucial thing is that the software actively uses Ripple’s XRP token to make the transaction (learn more about xRapid here).

diagram of xRapid and RippleNet

Although xRapid has been “piloted” by various financial institutions, this is the first real deployment of the technology. Garlinghouse has previously said that “dozens” of banks will use xRapid (and the XRP token) by the end of 2019.

According to MercuryFX, the system helped slash transaction times between Mexico and the UK from days to just minutes.

2. Bill Clinton Can Talk for a Long Time Without Mentioning Blockchain

Bill Clinton was the big-name speaker at Ripple Swell, but he seemed to spend most of his time avoiding cryptocurrency.

According to CoinDesk, he touched on migration, weapons, and the conflict in Israel, but made only a handful of references to blockchain. When he did talk about the technology, he was vague:

“This whole blockchain deal has the potential it does only because it is applicable across national borders [and] income groups. The permutations and possibilities are staggeringly great.”

Clinton did, however, warn about the dangers of heavy-handed regulation which threatened to stifle creativity in the industry.

Ripple Swell Bill Clinton

3. Ripple Is “Very Clearly Decentralized,” According to Its CEO

Ever since it was created, Ripple has been plagued with accusations of centralization. Unlike bitcoin and ethereum, where tokens are mined by its users, XRP was simply created all at once and gifted to Ripple. Ripple holds most of the XRP in existence and slowly distributes it via an escrow system.

Fighting back against the critics, Ripple’s CEO Brad Garlinghouse said:

“It is very clearly decentralized. I, as CEO of the company, can’t control the XRP ledger. I can’t change a transaction… Anybody can participate in the XRP ecosystem, and if Ripple does something that is not in the best interest of the ecosystem, the rest of the ecosystem can ignore us.”

It echoes previous comments by Ripple’s CTO who said XRP is more decentralized than bitcoin and ethereum. He argued that bitcoin and ethereum are dominated by just three-four mining pools, making it more centralized than XRP.

4. The Price of Xrp Dropped 13% During the Event

Coming off the back of 100% weekly rally, the price of XRP stalled despite the xRapid announcement.

It’s a clear case of “buy the rumor, sell the news” – an old stock market saying. The 100% surge took place as Ripple teased the adoption of xRapid in the preceding weeks. When it was finally announced at the conference, the price dipped.

Is this an indication of disappointment among XRP traders? Perhaps. Maybe they expected a higher profile partnership. However, it’s more likely a natural correction after a 100% rise.

5. Ripple Still Has a Long Way to Go

Although three companies are now using xRapid, Ripple has a mountain to climb. One of the panels at the conference was aptly named the “800-pound gorilla,” referring to the difficulty of convincing banks to adopt cryptocurrency.

Risk-management teams at banks are still reluctant to open their arms to XRP and other crypto assets. They’ll first need to see stronger regulations. The good news is that Ripple says that talks with regulators have been encouraging.

So, what did we learn from the Ripple Swell conference? Ripple is making baby-steps with xRapid, but there’s a way to go before the bigger banks come on board.

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a highway at night with speeding cars
  • xRapid makes cross-border money transfers in minutes (and up to 70% cheaper than current systems).
  • xRapid is now live and used commercially by at least three financial companies.
  • xRapid uses Ripple’s cryptocurrency XRP to settle payments.

Updated on October 4th, 2018 to include new xRapid developments.

Ripple’s astonishing price rise was driven by its partnerships with banks like Santander, American Express, and Western Union. However, most people misunderstood one thing:

The banks weren’t actually using the cryptocurrency XRP yet.

That’s set to change with the introduction of xRapid. Announced at the Ripple Swell event in October,  three financial services are now officially using xRapid to settle international payments.

xrapid - how it works

One of those services, MercuryFX, says xRapid improved transfer speeds from the UK to Mexico from days to just two minutes.

Other banks have reported 40%-70% savings when piloting the xRapid service.

But what is xRapid and how does it use cryptocurrency? First, let’s clear up a few terms.

The Difference Between Ripple and XRP

Ripple is a company that aims to speed up cross-border payments. Ripple has partnered with over 100 banks and boasts a range of money transfer services using blockchain and cryptocurrency.

XRP is the cryptocurrency created by Ripple. It is not currently used by most banks, but it’s a big part of their future plans and the xRapid service.

The Current State of Ripple’s Bank Partnerships

Most of Ripple’s 120+ bank partners are using a Ripple service called xCurrent. It uses blockchain technology to help banks make faster payments and communicate better.

A list of Ripple bank partnerships and logos

But it does not use XRP to settle transactions.

Ripple intends to use xCurrent as a way to onboard its banking partners before convincing them to upgrade to xRapid.

What Is xRapid?

xRapid aims to make those transactions even faster and cheaper. Most importantly, it does use XRP to settle the money transfer.

XPR is used as a “bridge currency” in the process.

Here’s how it works…

Let’s say Bob lives in the UK and wants to send £1,000 to Alice in India.

Using xRapid, Bob’s bank instantly transfers the £1,000 into XRP, via a cryptocurrency exchange.

The XRP is then instantly converted into Indian rupees via a partner exchange in India.

The fees are almost zero and the whole process takes a matter of seconds.

Had Bob used the traditional bank system, it would take days and cost him a large fee.

diagram of xRapid and RippleNet

xRapid: An End to Nostro Accounts

The description above is a very quick outline of how xRapid works, but there’s a reason why it’s so powerful:

Banks need liquidity (i.e. lots of available money) to make a foreign exchange. And the current way they source liquidity is wildly inefficient.

Let’s go back to Bob and Alice. To send money to India using the traditional system, Bob’s UK bank needs a “nostro account” in India. The nostro account is pre-funded with millions in local currency. (This is the liquidity).

Banks have pre-funded nostro accounts like this in every country with a different currency to facilitate cross-border transfers. It’s expensive and incredibly inefficient.

By switching the local nostro accounts for a digital cryptocurrency, there’s no need for bank accounts full of foreign currency all over the world. It’s faster, cheaper and more efficient.

Got It. But Are Banks Using xRapid?

Three financial companies are currently using xRapid on a commercial scale. They are Catalyst Corporate Credit Union (a financial firm), Cuallix, and MercuryFX (money transfer services).

The vast majority of Ripple’s other bank partners, like Santander, are using xCurrent, but Ripple is trying to nudge them towards xRapid. Some banks have begun testing the xRapid product and reported 40-70% savings.

Ripple CEO Brad Garlinghouse said that “dozens of banks” will be using xRapid by the end of 2019.

But it’s a big task. As Ripple’s Sagar Sarbhai explained, “a couple of years ago the narrative was: blockchain good, crypto bad.” Banks were open to blockchain technology, but wary of using cryptocurrency to settle payments.

Sarbhai says that’s beginning to change.

“I think that narrative thankfully is now changing because policymakers, regulators are seeing that there is a strong benefit that digital assets, cryptocurrencies bring in.”

xRapid Now Commercially Available

This is the moment that most XRP holders have been waiting for. xRapid is considered Ripple’s silver bullet because it actively uses the XRP token to settle payments.

If more banks adopt xRapid, the volume (and price) of XRP is expected to increase dramatically.

Why? Because banks and (especially) cryptocurrency exchanges will have to hold large sums of XRP in order to make the transfer. The transfer itself will only require XRP for a matter of seconds, but the services still need a pool of cryptocurrency to execute the trade, thus driving up demand.

Let’s look at this way. If xRapid replaced just 1% of the current international bank transfers through SWIFT, the daily volume of XRP would increase 250x.

Ripple is Quietly Building Exchange Partners

To make these instant XRP trades, Ripple is busy partnering with as many crypto exchanges as possible.

For example, the company has partnered with Bittrex to facilitate transfers between US dollars. They’ve partnered with Bitso for exchanges in Mexican pesos and Coins.ph for Philippine pesos.

So don’t be surprised if the banking partners are slow to adopt xRapid. The exchange partners must come first.

Update: Ripple Merges xRapid into One Service, RippleNet

Since we first published this article, Ripple appears to have removed any mention of xRapid and xCurrent on its website.

Instead, it is now just one product: RippleNet.

It looks like Ripple is bundling its services together in one simple package. This will make it much easier to convince banks to ultimately shift to XRP transfers.

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bitcoin ethereum and ripple coins on a black background

The flippening is a hypothetical moment in the future when ethereum, ripple, or another cryptocurrency overtakes bitcoin.

Bitcoin is currently the largest cryptocurrency on the planet, but it’s not impossible to imagine ethereum or ripple catching up.

At the start of 2017, bitcoin had a true monopoly in the world of digital currency. It accounted for 87% of the total crypto market value. By January 2018, that figure had fallen to 33% with ethereum, ripple and others eating into bitcoin’s market share.

Some predict that one of these altcoins (alternative cryptocurrencies to bitcoin) will overtake bitcoin entirely. That future moment is the flippening.

The Rise of Altcoins

While bitcoin dominated the blockchain space for eight years, new cryptocurrency projects were stirring under the surface.

Vitalik Buterin launched Ethereum – a “world computer” which took the concept of blockchain way beyond money transfers. Ethereum became a platform for companies and developers to build anything on the blockchain.

Ripple emerged to revolutionize the way we transfer money between banks and across borders. Ripple’s native cryptocurrency XRP was the fastest growing token in 2017, briefly overtaking ethereum.

These altcoins gained huge media attention through 2017 and rose more than 1,000% in value. The momentum lead many to predict that ethereum and XRP could surpass bitcoin in the coming years.

The Flippening: A Measure of Market Capitalization

It’s worth pointing out that the flippening refers to market capitalization (or market cap), not the price per coin.

For example, XRP is worth just 27c per coin, compared to ethereum’s $195 and bitcoin’s $6,332.

Bitcoin is by far the most expensive coin because there are only 17 million in existence (there are 100 billion XRP tokens and more than 100 million ethers).

Bitcoin, Ethereum and Ripple: Where Do They Stand?

At the time of writing, the top three by market dominance looks like this:

1. Bitcoin – 56%
2. Ethereum -10%
3. Ripple – 6%

chart depicting bitcoin, etheruem and ripple market capitalization
Chart: CoinMarketCap

Through the course of 2018, “the flippening” has moved further away. Bitcoin has re-established its dominance, while altcoins like ethereum and ripple have fallen. This is perhaps because bitcoin is seen as a “safer” haven during the long market downturn.

Could the Flippening Really Happen?

Theoretically, yes. Bitcoin has a number of practical issues that hold it back, not least its transaction speed when compared to other blockchains. There are faster, more efficient projects out there that could, ultimately, become more valuable than bitcoin.

However, bitcoin has one major advantage: reputation. 71% of Americans have heard of it. Could the same be said for XRP?

For most people, bitcoin is the first cryptocurrency they buy. On many of the major exchanges, you have to purchase bitcoin before you can buy an altcoin like ethereum or ripple.

Not only that, but Wall Street is slowly embracing bitcoin. We’ll soon have a bitcoin exchange-traded fund (ETF) and institutional money pouring into the market. That money will go to bitcoin first.

In other words, it’s very difficult to knock bitcoin off the throne, because it’s engrained as the world’s first and largest cryptocurrency.

Ethereum or Ripple?

Let’s say the flippening did happen. Which coin is the most likely to overtake bitcoin?

Ethereum has tremendous practical application. The likes of JP Morgan, MasterCard and Microsoft are all experimenting with the Ethereum system. Others are building dapps, smart contracts and new cryptocurrencies. These projects each require ether as a payment token. As Ethereum grows and develops, the demand for (and the price of) ether may rise higher than bitcoin.

Ripple also has a practical application. Ripple aims to deploy its cryptocurrency, XRP, as a “bridge currency” for banks to transfer money abroad without fees or delays. If the world’s banks opt to use the XRP token, the market cap could soar beyond bitcoin’s. It’s worth pointing out, however, that no bank is yet using XRP beyond a pilot scheme.

Ultimately, Ethereum remains the best candidate if the flipping were to happen, simply because it is easier to buy than ripple. Only a handful of exchanges allow you to purchase ripple with fiat currency (like USD). You can’t buy ripple on Coinbase, for example. Instead, you would have to purchase bitcoin or ethereum before transferring it to another exchange to buy ripple.

The difficulty in buying it means it’s unlikely to overtake bitcoin anytime soon.

Does It Matter?

Ultimately, bitcoin, ethereum and ripple each exist for very different reasons. They are not direct competitors, so comparing them as such doesn’t get us very far.

However, it’s still an important (hypothetical) moment. If another coin overtook bitcoin, it means that particualr coin was being used in a meainstream, day-to-day, practical way. And that’s an exciting prospect for blockchain technology.

woman with bitcoins over her eyes

Welcome to your daily Block Explorer roundup. Crypto prices are back in the green after taking a beating yesterday. Here’s everything you need to know:

Bitcoin is regaining its composure after the rejection of nine bitcoin exchange-traded funds (ETFs). As expected, the crypto market initially crumpled on the news, but bitcoin is now holding above the crucial $6,500 mark.

1. Bitcoin – $6,545 (+ 1.6%)
2. Ethererum – $276 (+ 0.8%)
3. XRP – $0.33 (+ 0.6%)

What’s behind today’s stability? Controversially, the Securities and Exchange Commission (SEC) is taking a second look at Wednesday’s ETF decision.

SEC Commissioner, Hester Peirce said the decision was initially delegated to staffers, but senior officials will now review the rejections themselves.

SEC commissioner Hester Peirce tweet about bitcoin etf

We’re still unlikely to see an approval, but it means the SEC is taking these proposals seriously.

Biggest winner and loser in the top 20

tron logo on black background

Biggest winner – TRON (+5%)
Biggest loserDash (- 14%)

TRON is flying high in the top 20 today thanks to its addition to the CoinPayments platform. That means 2.2 million buyers and sellers can now use TRON as a payment option.

China cracks down on crypto (again)

The Beijing district of Chaoyang has officially banned all cryptocurrency promotional events. Shopping malls, event halls, and public spaces are now off-limits for crypto events and material.

What are their reasons? The authorities cited “prevention of money laundering” and “security and stability of the financial system.”

This comes less than a week after Chinese social media, WeChat, reportedly blocked cryptocurrency and blockchain accounts on its platform. China is also moving to stop overseas exchanges from selling in China.

The news helped to push the market into the red yesterday, but traders have mostly shrugged it off.

Ripple fires up xRapid

ripple logo on blue background

xRapid is Ripple’s silver bullet. It’s a service that instantly converts currencies around the world in the blink of an eye (with low fees). Crucially, for XRP holders, it uses the XRP token to make the exchange.

Let’s say you want to exchange Japanese yen to Mexican pesos. The yen is converted to XRP (through the xRapid system). XRP is then converted to pesos. Ripple says it’s 40-70% cheaper than the current system and takes seconds rather than days.

To make it happen, Ripple has announced a partnership with Bittrex – a US crypto exchange – to facilitate the exchange of US dollars. Ripple has also partnered with Bitso in Mexico and Coins.ph in the Philippines to power the exchange to Mexican and Philippine pesos respectively.

We’re still a long way from seeing xRapid deployed within the banking system, but Ripple is slowly building the architecture behind the scenes.

That’s all for today’s roundup. We’ll see you back here tomorrow for more.

Today’s further reading: What is Ripple? The Bankers’ Network

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