Ripple – or XRP – is the native cryptocurrency token used on the XRP Ledger. Blockchain is an open-source network designed to migrate transactions from centralized financial databases to a cheaper, standalone alternative.

The cryptocurrency was launched in 2012 and has big goals, with instant and low-cost transfers ideal for international payments that take days to get through the sluggish and slow banking system.

This caused a stir because the software behind the XRP Ledger leverages an innovative way of managing blockchains, customized to facilitate transactions.

Ripple XRP vs. Bitcoin

the Bitcoin blockchain is the biggest and most well-known crypto, but the concept is somewhat different from XRP.

Anyone can contribute to the computing power of the Bitcoin blockchain, securing the software and validating transactions.

XRP only works with selected network participants – there are currently over 150 participants, called the unique node list.

Now the debate is whether XRP is truly decentralized because:

  • Most of the 100 billion XRP coins (about 80 billion) pre-mined at launch were distributed to pre-determined recipients – meaning only a few people and companies control the majority of the tokens.
  • Ripple is the for-profit company that funds XRP and is a major part of the XRP ecosystem. Ripple maintains the XRP Ledger and is a major token owner.

XRP and BTC perform different tasks, so they are not competitors – Bitcoin is an accessible cryptocurrency, while Ripple is a tool for managing cross-border transactions.

Ripple users are not so much concerned with the value of a token, but with the features available and the network of financial institutions that make it a viable solution to a global problem in the financial industry.

The contrast between XRP and Ripple

The two terms are used interchangeably – anyone in the crypto space will know that XRP refers to Ripple and vice versa. However, these 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 crypto as a faster, cheaper and more scalable digital asset than any competing solution.

Ripple explains its connection to XRP by saying that it is building technology to help extend XRP utilities and reinvent how global payments work.

It was originally called OpenCoin and launched in September 2012, a year after developers started working on the XRP Ledger.

OpenCoin became Ripple Labs in 2013, then simply Ripple in 2015.

The software has also been renamed several times, first the Ripple Open Payments System, the Ripple Consensus Ledger and finally the XRP Ledger, so it is fair to assume that there has been an ongoing search for identity in the backstage.

It’s a bit controversial because when the XRP Ledger was ready to launch, the developers offered those 80 billion tokens, attracting stakeholders they knew would form a community to back the cryptocurrency.

XRP used to be Ripple’s credits ticker, but now it’s called XRP as a standalone product, which the company is no doubt thrilled about.

The story behind Ripple XRP

Ripple is not just unusual in its ownership and structure, but because a few people have been involved in developing the technology that powers it and in launching the business within it.

OpenCoin was co-founded by Jed McCaleb, Arthur Britto and Chris Larsen. They all have a few other notches to their name, such as founding the crypto exchange Mt Gox (McCaleb), developing the XRP Ledger (Britto) and creating a group of fintech companies (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 position with the company.

XRP Apps

So what can you do with XRP, and is it as efficient and smooth as it sounds?

One of the first partners was MoneyGram – a huge international money transfer provider. He used Ripple products to manage cross-border transfers.

This all ended in March 2021 when Ripple CEO Brad Garlinghouse announced that the two companies were ending their association – after processing billions of dollars in payments.

Now, all XRP-related products are grouped together in the RippleNet service offering, using a service called On-Demand Liquidity to avoid any pre-funding requirements.

Current partners include Bank of America, American Express, and Santander, all of which use RippleNet to get these payments to their destination quickly and affordably.

Ripple also has a side business in funding the Interledger protocol, a software platform that manages transactions between bank lenders and crypto-assets. It does not depend on XRP but can integrate with the XRP Ledger.

The final application is RippleX, operated by XRP, where developers can integrate blockchain technology into their dApps with tools based on the XRP Ledger.

Understanding the Effectiveness of the XRP Ledger

Most XRP transactions cost a tiny £0.0011, and that’s not a typo.

This figure is significant because it blows standard crypto transaction fees – 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.

Although the XRP Ledger is not a Bitcoin blockchain fork, it uses some of the important features, such as public and private keys and a public ledger to record transactions and gather digital signatures.

Our big difference is that XRP does not rely on the clumsy proof-of-work mechanism behind Bitcoin, which is one of the factors that can lead to verification backlogs.

Instead, the XRP Ledger has a network of nodes, which works efficiently to determine which transactions the network should process.

The consensus mechanism is called a Federated Byzantine Agreement and works with authorized services that manage the list of unique nodes and help transactions continue.

If 80% of the nodes are satisfied with the validity of a transaction, it will be verified quickly. While great from a user perspective, the design has been criticized for breaking cryptographic “rules” regarding permissionless systems and decentralization.

Each time a new version of the ledger is produced, it adds another block to the Bitcoin blockchain, containing all the balances on the XRP network, so that the servers sync up in just a few minutes.

What is XRP Ripple FAQ

How does XRP/Ripple work?

RippleNet is the blockchain infrastructure and provides a fast, simple and inexpensive 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 (known as SWIFT) solution, but it is slow and expensive by comparison.

The advantage is that the consensus system works across multiple banking services, which verify transactions against 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 network of nodes.

Miners cannot mine XRP, but it is theoretically possible – for example, you can mine BTC or ETH and exchange them for XRP through an exchange, which is the most accessible way to get your hands on XRP tokens.

What is XRP worth?

Ripple pre-mined 100 billion XRP tokens at launch, giving away around 80 billion, and the XRP Ledger maintains that limit, so there will never be more tokens in circulation.

XRP Ledger transactions do not incur any fees, but mean that the sender has to destroy a small amount of XRP.

This deflationary monetary pattern seems unusual, but it would take around 70,000 years to destroy all of the XRP tokens, so it’s not a rapidly diminishing supply.

Demand from financial institutions may be the main cost driver – supply will continue to slowly decline, and if demand continues to grow, the price of XRP will continue to rise.

One XRP is currently worth £0.63 compared to a peak of £2.71 in 2017, when Ripple limited 55 billion XRP in its escrow system.

Is it worth investing in XRP?

Any crypto investment is a gamble – XRP is no exception.

If you are convinced that Ripple will continue to grow, an XRP investment could be a good bet, although probably less safe than a traditional stock.

The potential is huge and could replace the entire international money transfer framework, backed by relationships with respected banks.

But a lot hinges on upcoming regulatory changes and risk appetite in a never-ending crypto world.

How is the Ripple network secure?

The easiest way to compare XRP and Bitcoin networks is that one is a business, while the other is an economy.

Bitcoin assets are mined, with speeds dictated by a mathematical algorithm. Additionally, mining is decentralized, so anyone with knowledge and computing power can contribute.

In contrast, at executive-decided rates, the company controls the supply of XRP and approved stakeholders in the node network process transactions.

Therefore, it is not truly decentralized, but solves many problems inherent in traditional banking processes.

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