The Commonwealth Bank of Australia (CBA) has recently revealed that it is readying itself in performing trials on transferring payments between its subsidiaries using Ripple Labs.
Founded in San Francisco California in 2012, Ripple Lab is a company that focuses on payment protocols which people can use to move real or virtual money. They maintain their own cryptocurrency called XRP II, which can be loosely compared to Bitcoin.
Purging the Leeches
Much as cyrptocurrency is already threatening banks and financial intermediaries, if the CBA likes the path its going and decide to start using Ripple Labs or any other form of cryptocurrency for that matter, a lot of people think that this will purge the leeches in the financial services for good.
These leeches take advantage of the antiquated system that is still being used by a lot of people today. A fine example is occurring in the Philippines.
It’s estimated that Filipinos transfer about $25 billion dollars annually in remittances home each year as the country is among the leading force when it comes to labor supply. Of each of the amount that comprises the whole $25 billion sent from US to the Philippines about 8 percent are being cut for every transaction made. That’s a lot of money.
So it goes without saying that cryptocurrency threatens the existence of these businesses as this new form of technology requires little payment in order for the whole transaction to be completed. The payment required also comes in a flat fee, an appealing idea for a lot people.
With this on the table, let’s go back to CBA and Ripple Labs. Why this company? That’s exactly what a lot people are asking.
Chief executive of cryptocurrency research and development company Interconnected Research, Craig Wright, said that there is a huge difference between Bitcoin’s blockchain and the Ripple protocol.
Ripple Labs uses a set of independent operators, called gateways, which handles the whole business of taking and transferring the fiat cash. This means that the company’s system is centralized, and if one gateway is compromised, a trader, or someone takes over the network, an attacker can perform all the old-fashioned attacks which Bitcoin’s system is designed to stop in the first place.
Wright went on to say that unlike Bitcoin Ripple is protected by math, and not by cryptographic process.
While the CBA may be enticed to the fact the Ripple’s ledger can be altered, there is a risk that they’re taking, one of which is that payment revocation can potentially occur if a single gateway in incorrectly configured.
It can also be noted that Ripple has recently been fined $700,000 dollars by federal regulators for failing to register as a money service business. Furthermore, the company will have to comply with the rules and regulations set by the Financial Crimes Enforcement Network, as well as undergo a review of its transactions for the last three years of suspicious activity.
“So, Ripple is using a lack of awareness of what they really are to fool others into the belief that they are a distributed network and Blockchain-based system,” finished Wright.