Bridge Currency
Sovereign Assets • Layer 1s • Payment Networks
intermediary exchange asset
A bridge currency is a digital or fiat currency used to facilitate exchanges between two other currencies, especially in international or cross-network transactions. It acts as an intermediary to improve liquidity and reduce conversion costs. In the crypto world, XRP is a well-known example of a bridge currency used to connect different fiat currencies and blockchain networks.
Use Case: A business in Japan needs to send payment to a supplier in Brazil. Instead of converting JPY directly to BRL (which may have limited liquidity and high fees), they use XRP as a bridge currency—converting JPY to XRP instantly, then XRP to BRL, completing the entire transaction in seconds at minimal cost.
Key Concepts:
- $XRP — The most prominent bridge currency in blockchain-based payment systems
- Cross-Border Payments — International transactions that benefit from bridge currency efficiency
- Liquidity Optimization — Bridge currencies solve liquidity problems between less-common currency pairs
- Settlement Finality — Fast confirmation of transactions using bridge currencies
Summary: Bridge currencies solve the inefficiency of direct currency pair conversions by providing a liquid intermediary asset. In blockchain payments, bridge currencies like XRP enable near-instant, low-cost transfers between any two fiat currencies, eliminating the need for pre-funded accounts and reducing reliance on traditional correspondent banking networks.