The Financial Markets Are Changing

The financial markets are changing. I feel it in the banks, I feel it in the ledgers. The old ways are slow, expensive, and ripe for disruption. Ripple stands at the forefront, challenging the status quo and rethinking how money moves across borders.

The Problem with Traditional Financial Transfers

For nearly half a century, we’ve relied on the same financial transfer system—a process that takes money on a long, bureaucratic journey through multiple banks, each adding time and fees before it finally reaches its destination.

A friend of mine who recently moved to Rwanda shared a frustrating experience. They needed funds for a real estate investment, but the transfer took not just days but weeks, bogged down by banking intermediaries, unpredictable exchange rates, and a pile of hidden fees. How is it that in an era of instant messaging and high-speed internet, sending money across borders still feels like medieval logistics?

Me in Rwanda, predicting a Ripple bull run. (Joking… or am I?)

Why Cutting Out the Middlemen Isn’t So Simple

So, what’s the answer—cut out the middlemen, right? But here’s the problem—traditional financial messaging systems like SWIFT (the system for sending money bank to bank) don’t actually move money. They just send secure payment instructions between banks, which still need direct relationships to process the transfer. That’s why a transaction can bounce through multiple institutions before reaching its final stop.

Modern fintech solutions like Wise and Revolut have disrupted this system by using local bank networks to speed up international transfers. But here’s the catch—while they’re faster and cheaper than traditional banks, they still rely on the existing financial infrastructure. They’re digital middlemen, not a complete overhaul.

Imagine needing to personally know every dairy farmer just to get a glass of milk—hardly practical. Wise and Revolut optimize the old system, but they don’t replace it. That’s where blockchain-based solutions like Ripple come in, offering a way to truly move value instantly, without banks acting as intermediaries.

How Ripple Tackles the Byzantine Generals Problem

Blockchain offers a different approach: decentralized and direct. Instead of relying on layers of intermediaries, blockchain transactions happen peer-to-peer. Among the many competing blockchain solutions, Ripple stands out as one of the more promising players.

One of the biggest challenges in decentralized finance is the Byzantine Generals Problem—how do you get multiple, independent parties to agree on a single truth when some might be dishonest? Ripple tackles this issue using a Federated Consensus Model, where trusted validators verify transactions without the need for mining or staking. Rather than every node competing like in Proof of Work or locking up tokens like in Proof of Stake, Ripple’s validators quickly reach an agreement on whether a transaction is legitimate or not.

How Ripple balances decentralization with security—solving the Byzantine Generals Problem

Ripple vs. Other Blockchain Mechanisms

Ripple’s system balances decentralization with a touch of centralization—what some might call a benevolent dictatorship (or, if you prefer, an oligarchy). Unlike Bitcoin’s Proof of Work, which relies on miners solving cryptographic puzzles, or Ethereum’s Proof of Stake, which selects validators based on asset holdings, Ripple's consensus model allows transactions to clear in seconds.

Trade-Offs: Speed vs. Fraud Protection

Of course, there are trade-offs. No chargebacks, no traditional fraud protection.

I recently had my credit card stolen in Kenya, and some punk decided to buy $70 worth of Dragon Ball-Z passes on PlayStation. Thankfully, my bank’s fraud system reversed the transaction. With Ripple, fraud prevention is still developing, and users may have fewer safety nets in disputes.

Financial Innovation and the Lessons of History

Ripple, however, is gaining traction in another key area: regulatory approval and institutional adoption. Banks and financial institutions are increasingly experimenting with it, seeing its potential as an alternative to legacy systems.

Historically, financial innovation follows a familiar pattern. The Hanseatic League, one of medieval Europe’s dominant trade networks, pioneered bills of exchange—documents that represented debts, allowing merchants to settle transactions without physically transporting gold.

Improvements in finance always bring opportunist with dubious morals. But long term they always get eradicated for benefits of new technologies.

Gold payments might have been more secure, but the logistics were a nightmare. Remind yourself how the Spanish Treasure Fleet transported what some might say was the yearly GDP of entire nations in a single convoy, only to be intercepted by corsairs like Francis Drake and Walter Raleigh hunting for their next fortune.

Trust in paper notes overcame these risks, even though early systems were vulnerable to forgery and defaults.

Ripple and the Future of Finance

Likewise, blockchain-based financial systems face their own hurdles—fraud, adoption, and regulation. But as history has shown, efficiency drives innovation, and security follows where efficiency thrives.

Ripple isn’t a perfect solution, yet, and change won’t happen overnight. But it’s a good thing that it’s challenging the status quo. When new technology forces legacy institutions to adapt, we either see the old guard evolve or the new players take over.

Either way, progress wins.