Initiator of Ripple CTO David Schwartz Sets the Record Straight on XRP Prefunding Methods Amid Controversy

David Schwartz, CTO of Ripple, has taken to Twitter to figure out the company’s funding strategy for XRP, which has been the subject of recent debates.

In response to a thread discussing Ripple’s nostro/vostro accounts and prefunding, Schwartz explained that consumers can prefund in a single account and make payments to any On-Demand Liquidity (ODL) destination market, as opposed to prefunding in every market.

Schwartz further noted that Ripple’s mechanism allows clients to retain assets in their chosen asset and pay in another.

He highlighted the distinction between depositing USD for USD->MXN payments and prefunding MXN for USD->MXN payments. This allows consumers greater control over their funds and eliminates the need for multiple pre-funded accounts.

Schwartz assured investors that Ripple could prefund accounts with their own XRP for close to $0 cost using the line of credit option. Nonetheless, the company assumes some credit risk and must charge accordingly. In this circumstance, Ripple assumes responsibility for a fee by providing the prefunding capital in XRP.

Schwartz acknowledged that there is a non-zero chance that the customer will not repay the company for the XRP, especially if the customer’s funds are held in a bank that fails or declares bankruptcy.

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