Users of the currency exchange Ripple Network can now make payments in any currency directly to all Bitcoin users, including 8,500 Bitcoin merchants, through a partnership with BitStamp.net.
BitStamp.net allows the Ripple Network to convert currencies into bitcoins by accepting payments in any currency and paying merchants in bitcoins. The offering, called Bitcoin Bridge, was announced at the Bitcoin London conference July 2.
This is both an important milestone for Ripple and a powerful demonstration of the promise of the Ripple system, says Chris Larsen, CEO of Ripple Network's parent company, OpenCoin, in a July 2 press release. Now, anyone can send Bitcoins without having to use a central exchange. At the same time, any merchant accepting Bitcoins now has the potential to accept any currency in the world.
Larsen's previous work in the financial services industry includes building online peer-to-peer lending companies Prosper and E-Loan. While many Bitcoin startups struggle with the uncertain regulatory environment, Larsen is taking what he learned from the regulatory obstacles he faced in the online peer-to-peer lending space, and applying it to his virtual currency venture.
The Ripple protocol is a distributed global currency exchange for both physical and digital currencies, including its proprietary currency, known as Ripple, or XRP. Ripple is a math-based currency similar to Bitcoin.
The protocol builds pathways for payments to be routed so that users are able to pay with one currency and the merchant can accept the payment in another. For example, a payment by a consumer in Ripple to a merchant who only accepts U.S. dollars is placed by finding an intermediary that accepts Bitcoin and will pay in dollars.
This also opens up wider Bitcoin use by allowing indirect payment in the digital currency. Bitcoin's merchant base has increased quickly through indirect acceptance of the virtual currency. For example, a mobile gift card provider, Gyft began accepting bitcoin, extending the digital currencies reach to more than 50,000 merchant locations, including Nike, American Eagle and Burger King.
The venture has received skepticism from Bitcoin enthusiasts, some worried about its centralized network, while others see it as a possible competitor to the Bitcoin virtual currency.
But Larsen sees the Ripple protocol as complementary to Bitcoin, helping consumers buy from merchants that dont accept the virtual currency.
Like Bitcoin, Ripple touts that its system makes quicker payments than the legacy networks at a considerably lower fee. Plus, the network doesnt offer chargebacks, which looks attractive to merchants at high risk for chargebacks.