I would say most people don't understand how banking works in general.
True, though they understand it well enough to use it, which is most certainly not true for ripple.
What they know is they don't like ATM fees or foreign transaction fees, etc. I see Ripple having more potential as an institutional tool rather than a consumer facing product.
Alright then, since I'm not a bank or in the business of providing banking services, why do I ever (in fact frequently) hear about ripple. Again the targeting of the message and the message itself seems misdirected and confused.
I guess its discussed here because the XRP is a crypto currency and Ripple Labs is trying to promote their business. Ripple makes a lot of sense if you understand balance sheet operations & double entry book keeping. Its how money travels For example: Me --> Chase --> Citibank --> You. As I understand it, this gets replaced by : Me --> Ripple Network --> You
When the money travels from one node to another it is noted as an
asset on one balance sheet & a
liability on the other's balance sheet.
The confusion is that the XRP & BTC are both defined as "crypto currencies" but they are marketed/ promoted from different views. XRP acts a token to make the Ripple transfer possible. In this sense it behaves like a currency should. Think of a casino in an agnostic location where people from all countries come to play. XRP is similar to a poker chip. It only exist to allow different currencies to play. The plastic token itself has no value but it might have numbed printed on it like 5, 10, 100
In contrast bit coin is promoted as thrice; commodity/money/currency. To make matters more confusing, most people don't understand the difference between gold (commodity), gold coins or convertible notes (money), USD (currency denomination). Bitcoin tries to be commodity/money/currency in one entity. If you follow this "Metallism" view. Miners should mine "bits". The currency that is called "BTC" are backed by "bits". And its "money" value should be priced on the supply/demand of these "bits" (as opposed to being priced in USD).
Imagine traveling back in time. Each nation's banks hold reserves of specie (gold or silver). The banks print notes that are convertible to specie. The notes are denominated in local currencies like Dollar, Francs, Pounds, Deustch Marks,etc.. No matter what number is printed on the coin or note, the money derives its value from the commodity that backs it. Currency is the representation of that money. The reason this existed is enable foreign trade. Gold is gold. I can accept your currency because I can covert it to gold and my currency is also backed by gold. The market agrees that gold is top of the money hierarchy in value so there is always a demand for gold. Even within the US during the Free Banking era, each bank printed its own convertible notes back by reserves in specie.
Schumpeter categorize 2 philosophical traditions of money: Chartalism & Metallism. Crypto (especially Bitcoin) be would philosophically in-line with the Metallism tradition. Like Metallism, Bitcoin promoters believes that (1) state issued fiat money has no intrinsic value, (2) state created money devalues money through inflation, (3) money should be priced by
laissez-faire markets as opposed to a central authority
However, there is a BIG contradiction here. Metallism would not define crypto (especially Bitcoin) as money because it not convertible to something of intrinsic value. Metallism would define Bitcoin as "fiat" in the sense that it came to existence out of nothing. The only difference is that instead of being created by the state authority, it was created by an unknown person/ group calling itself Satoshi Nakamoto. But technically each BTC is created from "mining". So technically its intrinsic value is derived from "mining", not a quantified physical asset like an ounce of gold. In other words, BTC's intrinsic value is digital alchemy- zeros & ones. In essence the same way that Central Banks create money - by keystroke.
Ripple seems to recognize this contradictory quality of crypto as a commodity/money/currency. I believe that's why it's "pre-mined". It seems to me Ripple sees the potential in crypto not as a competing currency to existing fiats. Rather, Ripple is exploring the use of crypto as
protocol to transfer fiat. Regardless of denomination; Dollar, Euro, RMB, Bitcoin, Dogecoin, Litecoin, etc.. Ripple doesn't have a philosophical view of money just a banking view of money. Ripple is a privately owned company so that makes XRPs similar to a private bank issued currency. Except Ripple is nothing like a bank so XRPs are to be treated as tokens. You are not supposed to hoard XRPs and store your money in it. If big banks use Ripples system to transfer money then the XRP would be invisible to the end user.
This is what I gather from reading their website. But yes its confusing because they have Ripple wallets that you need to deposit BTC to use so it seems like its a bit coin competitor