Ripple – or XRP – is the native cryptocurrency token used on the XRP ledger. The blockchain is an open-source network designed to migrate transactions from centralised financial databases to a cheaper, autonomous alternative.
The cryptocurrency launched in 2012, and has some big goals, with instant, low-cost transfers ideal for international payments that take days to trickle through the sluggishly slow banking system.
It caused a wave because the software behind the XRP Ledger harnesses an innovative way of managing blockchains, customised to facilitate transactions.
XRP Ripple vs Bitcoin
The Bitcoin blockchain is the largest and best-known crypto, but the concept is somewhat different from XRP.
Anyone can contribute computing power to the Bitcoin blockchain, securing the software and validating transactions.
XRP works only with selected network participants – there are over 150 participants currently, called the Unique Node List.
Now, the debate is whether XRP is truly decentralised because:
- Most of the 100 billion XRP coins (about 80 billion) pre-mined at the launch were distributed to predetermined recipients – which means that only a few people and companies control the majority of tokens.
- Ripple is the for-profit company that finances XRP and is a major component of the XRP ecosystem. Ripple maintains the XRP Ledger and is a substantial token owner.
XRP and BTC perform different jobs, so they’re not competitors – Bitcoin is accessible trading crypto, whereas Ripple is a tool for managing cross-border transactions.
Ripple users aren’t so much concerned with the value of a token but with the functionality available and the financial institutions’ network that makes it a viable solution to a global financial sector problem.
The Contrast Between XRP And Ripple
Both terms are used interchangeably – anyone in the crypto space will know XRP refers to Ripple and vice versa. However, they are two different things.
- XRP is a cryptocurrency.
- Ripple is the company that develops the software behind it.
The company fiercely opposes any claim that Ripple and XRP are inseparable and refers to the crypto as a digital asset that is quicker, cheaper and more scalable than any competing solution.
Ripple explains its link with XRP by saying that it builds tech to help expand XRP utilities and reimagine how global payments work.
It was originally called OpenCoin and launched in September 2012, a year after developers started work on the XRP Ledger.
OpenCoin became Ripple Labs in 2013, and then, simply, Ripple in 2015.
The software has also been renamed a few times, first the Ripple Open Payments System, the Ripple Consensus Ledger and finally the XRP Ledger, so it’s fair to assume there has been some identity searching going on behind the scenes.
It’s a bit controversial because when the XRP Ledger was ready to launch, the developers gifted those 80 billion tokens, drawing in stakeholders it knew would form a community to back up the cryptocurrency.
XRP was once the ticker for Ripple credits, but it’s now called XRP as a standalone, which the company is undoubtedly pleased about.
The Story Behind Ripple XRP
Ripple isn’t just unusual in its ownership and structure, but because a few people were involved in developing the tech that makes it work and launching the business that sits within.
OpenCoin was co-founded by Jed McCaleb, Arthur Britto and Chris Larsen. They all have a few other notches on their belts, such as founding crypto exchange Mt Gox (McCaleb), developing the XRP Ledger (Britto) and establishing a clutch of fintech businesses (Larsen).
Other participants include David Schwartz, the co-author of the Ripple whitepaper, who is now the chief technology officer. Stefan Thomas was also involved and previously held Schwartz’s post within the firm.
XRP Applications
So, what can you do with XRP, and is it as efficient and slick as it sounds?
One of the early partners was MoneyGram – a huge international money transfer provider. It used Ripple products to manage cross-border transfers.
That all ended in March 2021 when Ripple CEO Brad Garlinghouse announced that the two businesses were winding down their association – after processing billions of dollars of payments.
Now, all of the XRP-linked products are bundled into the RippleNet service offering, using a service called On-Demand Liquidity to avoid any pre-funding requirements.
Current partners include the Bank of America, American Express and Santander – all using RippleNet to get those payments to their destination rapidly and at a reduced cost.
Ripple also has a sideline in financing the Interledger Protocol, a software platform that handles transactions between bank lenders and crypto-assets. It isn’t reliant on XRP but can integrate with the XRP Ledger.
The final application is RippleX, leveraged by XRP, where developers can build blockchain tech into their dApps with tools built upon the XRP Ledger.
Understanding The XRP Ledger Efficiency
Most XRP transactions cost a minuscule £0.0011, and that’s not a typo.
This figure is significant because it blows standard crypto transaction charges out of the water – average transaction costs on Bitcoin and Ethereum, as the biggest cryptos by market cap, can be as high as £38.
The trick is in the features and the network.
While the XRP Ledger isn’t a Bitcoin blockchain fork, it does use some of the important features, such as public and private keys and a public ledger to record transactions and collate digital signatures.
Our big variance is that XRP doesn’t rely on the clunky proof-of-work mechanism behind Bitcoin, which is one of the factors that can cause verification backlogs.
Rather, the XRP Ledger has a node network, which works efficiently to determine which transactions the network should process.
The consensus mechanism is called a Federated Byzantine Agreement and works with permissioned services that manage the Unique Node List and help transactions keep flowing.
Provided 80 per cent of the nodes are happy with the validity of a transaction, it will be verified quickly. Although that’s great from a user perspective, the design has been criticised for bucking the crypto ‘rules’ around permissionless systems and decentralisation.
Every time a new ledger version is produced, it adds another block to the Bitcoin blockchain, containing all XRP network balances, so the servers synchronise within just a few minutes.
What is XRP Ripple FAQ
How does XRP/Ripple work?
RippleNet is the blockchain infrastructure, and it provides a fast, simple and low-cost service to manage cross-border transactions – as an alternative to the conventional international payment system.
Banks typically use the Society for Worldwide Interbank Financial Telecommunication solution (known as SWIFT), but it is slow and expensive in comparison.
The advantage is that the consensus system operates on several banks’ services, which verify transactions by referring to the up-to-date XRP Ledger.
How do you mine XRP?
XRP is generated through a crypto ledger, like blockchain technology, although federated by banking providers and the node network.
Miners cannot mine XRP, but it’s theoretically possible – for example, you could mine BTC or ETH and trade them for XRP through an exchange, which is the most accessible way to get your hands on XRP tokens.
What is XRP worth?
Ripple premined 100 billion XRP tokens at launch, giving away around 80 billion, and the XRP Ledger sustains that limit, so there won’t ever be more tokens in circulation.
XRP Ledger transactions don’t incur fees but mean the sender must destroy a small amount of XRP.
This deflationary currency model sounds unusual, but it would take about 70,000 years to destroy all XRP tokens, so it’s not a quickly diminishing supply.
Demand from financial institutions may be the main cost driver – supply will keep dropping slowly, and if demand continues to grow, the XRP price will keep climbing.
One XRP is currently worth £0.63 from a peak of £2.71 in 2017, when Ripple restricted 55 billion XRP in its escrow system.
Is it worth investing in XRP?
Any crypto investment is a gamble – XRP is no exception to the rule.
If you’re confident Ripple will keep growing, an XRP investment could be a good bet, although probably less of a sure thing than a traditional stock.
The potential is enormous and could replace the entire international money transfer framework, supported by relationships with respected banks.
But, a lot depends on any forthcoming regulation changes and an appetite for risk in a crypto world that never stands still.
How is the Ripple network secured?
The easiest way to compare the XRP and Bitcoin networks is that one is a company, whereas the other is an economy.
Bitcoin assets are issued through mining, with speeds dictated by a mathematical algorithm. In addition, mining is decentralised, so anyone with knowledge and computing power can contribute.
In contrast, at rates decided by the executives, the company controls the supply of XRP and approved stakeholders in the node network process transactions.
Therefore, it’s not genuinely decentralised but does resolve many inherent issues with traditional banking processes.
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