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How does XRP facilitate fast settlement?

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I've read elsewhere that RippleNet and ILP allow for faster payments and that XRP allows for faster settlements. I just want to check that my understanding of XRP's role in fast settlements is correct. Say I'm a bank and want to pay $100 to a bank in Japan that only accepts yen. Currently I would use a market maker who handles the currency conversion so I send $100 to the market maker and then the he converts it to yen and sends it to the Japanese bank. The payment is complete and RippleNet/ILP has sped this up, but settlement still has to occur where my $100 to the market maker must settle by traditional (probably?) correspondent banking and the market maker's payment of $100 worth of yen to the Japanese bank must also settle by traditional means. The delays occur from two settlements. If instead I use XRP to pay the market maker, so I pay him $100 worth of XRP and he then pays out yen to the Japanese bank, there is only one "leg" of the settlement that must occur by slower traditional means, the settlement of yen transferring from the market maker to the japanese bank, instead of two. Since XRP is a digital asset and is extremely fast, my payment to the market maker is pretty much settled in real time. Settlement time is expedited by using XRP for one leg of the transaction "journey".

Is this the right way to think about it? 

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I'm the village idiot in this...    but I think that instead of viewing it as your payment to the market maker,  you should consider instead that if the recipients institution is on xrapid then what happens is the USD (you didn't say, but since Americans assume they are the default everything,  it was probably USD ...  :) )  it is converted on Ripplenet to a XRP equivalent sent to the Japanese bank as a XRP transfer where that then converts to Yen.  If there is not a direct corridor then it may have passed through intermediate transfers to other currencies that eventually makes a path to the recipient.  All happened in 4 seconds and actual funds are settled. 

I hope I am not incorrect, and I hope I didn't muddy the waters...  :) 

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On 10/20/2017 at 2:34 AM, Tinyaccount said:

it is converted on Ripplenet to a XRP equivalent sent to the Japanese bank as a XRP transfer where that then converts to Yen.

Hey sorry for the slow follow up, I appreciate the response. In your example does that mean both the US and Japanese banks accept xrp and are willing to convert it in-house? Who is doing the converting from USD to XRP and XRP to JPY and if it isn't done in-house, wouldn't there still be a delay in settlement since wiring of fiat is involved? 

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No worries.  It's done by the institution at each end.  The settlement happens in seconds.  

They could be completely different institutions that don't even trust each other.  They both though are on Xrapid and use XRP as their common settlement currency.  

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Yes and no...   for it to work they will be using Ripples XRapid software.  So that means they are definitely utilising XRP.

They have a number of options though about how they do that.  I'm not an expert and I don't think all the XRapid details are out in public yet, but we can infer that they would be able to either stockpile their own XRP,   'borrow' it from Ripple,  or use the RCL Market Makers to actually do the transfer and trades.  That shadowy last group I don't know much about apart from they will be offering XRP-to-Currency pairs at various prices in competition with one another.

So yes they will use XRP... but no they don't have to hold on to it.  Having said that...     if it pans out as we suspect it will... then holding XRP won't be a burden but rather a gift...

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