DISCLAIMER: You are suggested to do your own research, as the information provided here might be inaccurate. I am a programmer, not an investment banker, so I cannot guarantee that the information provided here is accurate. Any corrections or suggestions are always welcome.

As you might have already seen, Ripple has risen quite significantly over the last one month. To most people out there, ripple is an easy to buy currency that has been giving them huge profits, lately. If you try to take a look around the internet, ripple has suffered quite a lot of criticism, yet people are not hesitant in buying it. In this post, I'll try to explain what it really is, and, what is it actually trying to achieve. To understand this, let us first try to understand the role of banks in transferring money.

What do banks actually do?

Broadly speaking, the role of a bank is to validate a transaction. Let's say that A decides to pay 100 USD to B who stays in London. But, being a resident of London, B wants to have that money in GBP. So, A would likely want to send the money to B via. a bank, which would convert the money for A and also validate the transaction. The bank would take 100 USD from A and try to find some other correspondent bank that provides liquidity (as in, change one currency to another). The money would then travel through a chain of banks and then finally reach a bank, where B has an account. In this process, all the banks would charge their share of money from the 100 USD that is deposited. For making the process smoother, the originator bank, at each step, would likely maintain a significant balance in the bank that provides liquidity. That is basically, dead money, just sitting there for the very purpose of agreement of transfer between banks. In spite of taking such measures, the payment process would still take huge amounts of time, since, there's a lot of human involvement. But, at the end of the transaction, it will be recorded that now A has 100 USD lesser than what he previously had and B has a little less than 100 USD added to his account. This convinience and validation is what the banks charge for.
So, in effect, the banks are taxing poor people, who migrate to other countries in search of work, for their physical labour, while trying to figure out how to earn more profits for themselves. You are indeed funding those people to think upon how to aggregate more money for themselves.
According to me, banking is just another artificial job created by human beings that is not needed now. There are lots of things to ponder upon and do. Banking, now, is nothing more than an inefficient solution to a problem that is now becoming more of a problem than a solution. It is also taking away the people who were supposed to actually contribute to the society by becoming scientist but are now a part of a zero output system.

Enter Ripple

Ripple aims at speeding up such transactions (currently, upto 1500 Transactions per second) by providing a common token, called XRP, for the banks to transact. With ripple's system incorporated in their own system, banks can directly transact amongst themselves, without the need of correspondant. Ripple works in the same manner as a smart contract. The entire transaction will either succeed, or completely fail. In other words, it cannot happen that the transaction proceed upto a certain intermediary bank and then stopped there for a reason like them not maintaining enough researves in beneficiary bank in that particular step. In case of issues with liquidity, very minimal number of correspondants would suffice, because now, the banks don't have to maintain reserves with multiple other banks. Furthermore, it may also result in reducing the fees charged by the banks, because, now the banks don't have to put in much time and effort in finishing up the transaction.

Major Criticisms

So far, so good. It looks like ripple does solve major issues (and it actually does), but, there are a few things that you might want to consider.

1. A Ripple blockchain can be owned by anyone, from banks, to other institutions and Ripple labs itself. This means that the blockchain on which your transaction is recorded is centralised and is much easier to compromise than a de-centralised one, like bitcoin or ethereum. To add to it, it can even be privatised, because it's controlled by a particular institution.
2. Apart from how it helps the banking system, it doesn't quite achieve anything significant. There are other cryptocurrencies that are almost as fast and are also decentralised while also having loads of other features to support the future of technology (from IOT and autonomous gadgets to the internet and how we share content with each other.
3. Ripple doesn't eliminate fees that the banks would charge for exchanging currencies, it is only expected to lower it. There are cryptocurrencies out there that charge no fees (most notably, IOTA and NEO) and also don't require a bank for transferring currencies. So, why pay banks for something that the software can achieve for free and is also more reliable than humans? If the banks go away, and peer to peer transactions become a reality, why would anybody use Ripple when it doesn't offer anything unique?
4. Currently, their team has reserved 61% of all XRP for themselves. This means, in case it becomes the only cryptocurrency out there, that single corporation will have 61% of the money and rest of the world will have only 39%.

Worth Investing?

Well, according to me, ripple would continue to grow, as long as the banks thrive. Once they go away, I can't really justify why people would want to use ripple. One can only hope that they come up with something unique after that. Let me know about your thoughts in the comments down below.

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