A lot of people are still on the fence about Ripple’s technology. More specifically, they question why banks and other institutions would adopt this technology in the future. A new review of the Ripple network paints a very promising future for this technology. Then again, the level of transparency is also seen as a bit of weakness.
As is to be expected from any form of financial technology, it is not perfect by any means. This also applies to Ripple and their financial network solution. It is a great network to make payments and connections to other users. It creates new trust factors among different users, which is a positive fact. Moreover, Ripple can provide plenty of liquidity for funds to travel. Intermediary parties also have a financial incentive to ensure transactions are completed properly.
Ripple Technology Has Pros and Cons
With lower transaction costs compared to traditional solutions, Ripple is definitely on the right track. Various banks have started testing and integrating this new technology. That is a positive development, which explains Ripple’s surge in market cap these past few months. Moreover, the value of XRP is being kept fairly stable. Right now, no one knows exactly how this is happening, as trading XRP against cryptocurrencies creates volatility at all times. In fiat value, the native Ripple asset holds its own fairly well, though.
However, there are some issues with Ripple, as outlined by researchers at Purdue University. This analysis made use of all network data between 2013 and 2016. While the network has grown by quite a bit, the network structure has remained nearly the same. Moreover, the gateways on the network tend to only connect to users in a specific region. European Ripple gateways will often primarily serve EU customers, for example.
Additionally, if important nodes were removed from the network, wallets would become vulnerable to disruption. It also puts all of the credit associated with these nodes and wallets at risk. It is evident the wallets need to become more connected than before. Right now, the Ripple team is working on making their network more decentralized, which will help quite a bit in this regard. Additionally, deploying more nodes would not be a bad thing right now. Despite these flaws, Ripple still has a very bright future ahead, as these issues can be resolved with relative ease.
Header image courtesy of Shutterstock