Paths and Cross-Currency Payments
How the XRP Ledger routes a payment through one or more intermediate currencies to get funds from sender to recipient.
The basic idea
A cross-currency payment lets a sender pay in one currency (or XRP) while the recipient receives a different currency (or XRP), with the conversion happening automatically as part of the transaction, using liquidity available on the built-in DEX or AMM — the same underlying mechanism that powers On-Demand Liquidity.
What a "path" is
A path is a specific route through one or more intermediate steps (trust lines, order-book offers, or AMM pools) that funds can travel to get from the sending currency to the receiving currency. A single payment can potentially use multiple paths simultaneously, splitting the amount across them to get the best overall execution — similar in spirit to how modern trading systems split a large order across multiple venues for better pricing.
Path-finding
Because there can be many possible routes between two currencies (direct order books, multi-hop routes through XRP, routes through a different intermediate issued currency entirely), rippled includes path-finding functionality that searches for viable, competitively-priced routes given the currencies and amounts involved, so that application developers don't need to manually construct payment routes themselves in most cases.
Auto-bridging through XRP
As covered in The Built-in Decentralized Exchange, if no good direct path exists between two issued currencies, the network can automatically route the payment through XRP as an intermediate hop — a direct, practical expression of XRP's original design purpose as a universal bridge asset.
Why this matters for real-world payments
Cross-currency payments with automatic pathing are what make it possible for a sender holding, say, USD-denominated funds to pay a recipient who wants JPY, in a single transaction, without either party needing to manually execute a separate currency conversion step first — this is the core mechanism underlying real-world cross-border remittance use cases built on the XRPL.
Slippage and rate protection
Because a path's exact execution price can depend on available liquidity at the moment of settlement, payment transactions support specifying a maximum source amount (or, from the receiving side, a minimum delivery amount — see Partial Payments for the security implications of that specific field), letting a sender protect themselves against receiving a worse conversion rate than expected due to a thin or fast-moving market.