David Schwartz, the Chief Technology Officer of Ripple, has recently clarified the strategies related to XRP prefunding. His tweet has provided some clear explanations on the issue, which has been a major subject of debates in recent times.

With Ripple's nostro/vostro accounts and prefunding system, customers can prefund in one account and make payments to any destination market in the On-Demand Liquidity service. The inclusion of flexibility in Ripple's system means customers can hold their funds in their chosen asset, whilst paying the payments in a different one. A clear illustration of the difference between parking USD to make USD->MXN payments and prefunding MXN to make USD->MXN payments was provided by Schwartz.

Ripple also offers a line of credit option that involves the prefunding of accounts using their own XRP. The company opts for this method, keeping in mind almost zero cost in the process. However, Schwartz did not fail to mention that Ripple takes on some credit risk which they must charge for, thereby shifting the responsibility (and subscribing to the associated fees) of the prefunding capital to Ripple.

While choosing the line of credit, it is important to understand that the company can be affected by non-zero risks; this could be due to the possibility of customers not paying back for the XRP if their bank fails/goes bankrupt for some reason.

All-in-all, the tweet by David Schwartz, the CTO of Ripple, showed the clarity and high efficiency of the company's prefunding strategies, along with keeping the non-zero risks associated in mind.



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