Launched in 2012, XRP is now one of the largest cryptocurrencies by market capitalization and aims to offer fast, affordable and reliable cross-border payments. Both XRP and the associated XRP Ledger are used by US technology company Ripple. Ripple develops a range of solutions focused on transforming the global payment industry.
XRP is the native cryptocurrency of the XRP blockchain, more formally known as the XRP Ledger (XRPL). XRP and the XRP Ledger are utilized by a company called Ripple. Although Ripple and XRP are strongly interlinked, the two claim to be independent of one another.
Ripple utilizes the XRP blockchain to facilitate cross-border payments. The company is looking to rival the likes of Visa and Western Union by overhauling international payments using blockchain technology. This guide will explain how XRP works, how Ripple uses XRP and show you how to buy, trade and store XRP coins.
Ripple is based in San Francisco and now works with more than 500 employees. The company's main aim is to create a global settlement network that offers more efficient transactions in comparison to traditional solutions.
Ripple products are designed to allow users – primarily financial institutions – to transfer money from any currency to any other currency in a matter of seconds, anywhere in the world. This is an ambitious goal meant to eliminate the need for older systems like SWIFT.
Before going any further, we should point out that the term "Ripple" is often used incorrectly. The term is often used to refer to Ripple, the company; to XRP, the cryptocurrency; and to RippleNet, the network of payment providers. Here are the correct definitions:
| Ticker symbol | XRP |
|---|---|
| Use | Cross-border Payments |
| Year released | 2012 |
| Origin | United States |
| Maximum supply | 100,000,000,000 |
| Consensus algorithm | Proof of Correctness |
| Notable team members | Brad Garlinghouse, David Schwartz, Stefan Thomas |
| Notable partnerships | Accenture, American Express, Deloitte, Royal Bank of Canada, MoneyGram, National Australia Bank, Western Union, Westpac |
| Mineable? | No |
US District Judge Analisa Torres ruled that "Ripple Labs Inc did not violate federal securities law by selling its XRP token on public exchanges," according to Reuters.
This ruling is a landmark legal victory for the cryptocurrency industry, as it will likely set a precedent for a number of other crypto coins and tokens being labeled commodities and not securities.
This decision also marks an end to the legal battle that Ripple Labs Inc has been in with the Securities and Exchange Commission (SEC) since late 2020, when the SEC alleged that Ripple raised more than $1 billion through the sale of XRP in an unregistered security offering.
Centralized crypto exchanges in the US may now fall under the purview of the Commodity Futures Trading Commission (CFTC) and not the Securities and Exchange Commission (SEC), which has been hostile to crypto exchanges.
Centralized cryptocurrency exchanges like Coinbase and Gemini had to stop offering XRP to customers, but Gemini is now considering relisting the token in the wake of this ruling.
Current methods of sending money internationally are outdated and slow. This is best summed up in this excerpt from Ripple's cost model paper:
"Today's global payments infrastructure moves money from one payment system to another through a series of internal book transfers. Because book transfers occur across different systems with a low level of coordination, fund settlement is slow (often 3-5 days, trapping liquidity), error-prone (error rates run upwards of 12.7%), and costly ($1.6 trillion in system-wide costs for global cross-border transactions)."
Despite the fact that the global remittances industry is huge, there's currently no streamlined and well-organized international network to handle cross-border payments. This is the problem Ripple aims to solve.
However, rather than going toe-to-toe in competition with the banking Goliaths that currently control this sector, Ripple's plan is to partner with major financials around the world to offer a blockchain-based solution.
By joining Ripple's global network, Ripple says that financial institutions can process their customers' payments anywhere in the world instantly, reliably and cost-effectively.
The XRP coin works in conjunction with the XRP Ledger, which is a type of blockchain. It is similar to Bitcoin or Ethereum. XRP and the XRP Ledger form the backbone of the Ripple ecosystem.
However, unlike Bitcoin, which uses proof of work, and the upcoming Ethereum 2.0, which uses proof of stake, the XRP Ledger uses a different technique to verify transactions. To secure and validate transactions, a protocol called the XRP Ledger Consensus is used.
The XRP Ledger runs thanks to a network of participants (or validators). These validators need to agree (form a consensus) to approve all transactions. However, unlike other blockchains, these validators are not rewarded. They are not rewarded so that their performance isn't distorted. Instead, the XRP Ledger relies on the fact that if a company needs to use the blockchain, it is in the interest of that company to participate in the consensus mechanism and participate honestly.
Each new "ledger" (or block) in the chain must be agreed upon by 80% of validators. This system means that a new ledger is created every 3-5 seconds. This translates to 1,500 transactions per second (tps). Bitcoin processes approximately 4.6 tps.
The XRP coin is required for every transaction that takes place on the XRP Ledger. After each transaction, XRP is destroyed.
The maximum supply of XRP is capped at 100 billion. All coins were created when XRP first launched. As of September 2021, the circulating supply is approximately 46.5 billion.
Upon creation of XRP, Ripple placed a set amount of coins into escrow accounts to be released at set intervals. This was completed so that market supply could be predictable. Ripple began with 55% of the total supply. Although Ripple began with 55 billion XRP, 1 billion new XRP are now released per month.
Of the 1 billion XRP released each month, any unused amounts are put back into escrow and are re-released in the first month that there are no new XRP releases. Essentially, the unused amounts are sent to the back of the queue.
XRP is also deflationary in nature. While the total XRP supply started off at 100 billion, at the time of writing the supply is now down to 99.99 billion.
Every transaction that takes place on the XRP Ledger incurs a small fee (to prevent spam attacks). This is destroyed during the transaction.
The minimum fee for each XRP transaction is 0.00001 XRP (also known as 10 drops, or a fraction of a cent). Certain movements, such as multi-signature transactions or escrow transactions, will incur higher fees.
The fees and, therefore, the burn rate can be modified by consensus at any time. Although deflationary by design, in reality, the circulating supply of XRP will continue to increase as Ripple releases XRP from its escrow accounts.
The biggest obstacle to Ripple's quest for optimizing global payments is adoption. RippleNet, the XRP Ledger and XRP need to be adopted by the banks and financial institutions that facilitate transactions worldwide. If more banks join the network, this should encourage demand for XRP and also entice other banks to join the platform.
However, Ripple is not the only organization looking to innovate the global payment system and capture market share. Ripple faces stiff competition from other cryptocurrency competitors, such as Stellar, and in-house blockchain creations being trialed by financial institutions, such as SWIFT.
SWIFT currently connects more than 11,000 of the world's financial institutions through its own network and has been working on its own trials of blockchain technology. Credit card giant Visa is also exploring its own blockchain-based cross-border payment options.
Alongside competition, there is also a constant shadow over how XRP is used within the Ripple ecosystem. Usage and network effects might drive price actions to a large extent, but this may not translate into higher prices as directly as expected. Trillions of dollars are crossing borders each year, but it's still not clear how much market cap XRP needs to adequately service the industry.
Activity within the Ripple ecosystem was most recently highlighted by the Security and Exchange Commission (SEC). A formal complaint was made that XRP was sold to investors in the US as part of an unregistered securities sale. The sale in question generated $1.3 billion.
As a result of the complaint, the SEC brought a lawsuit against Ripple in December 2020. Unlike Bitcoin and Ethereum, which have been marked as commodities, XRP is still viewed as a security, which would place it under the SEC's jurisdiction. However, the legal battle is ongoing with Ripple arguing that other official government agencies have not and would not classify XRP as a security. The outcome of the case will be a key moment in XRP's future.
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Hi there guys. I would really like to invest in Ripple,XRP. I am from South Africa. Presently, what is the cost of 1 XRP?
Hi Eugene,
Thanks for reaching out to finder.
The live price of XRP to ZAR as of this writing, is 3.98. You can also see the live price of XRP to other currencies if you click on the “XRP price” tab above, on this page.
I hope this helps.
Cheers,
Charisse
How much can one invest with ripple?
How does one’s investment with ripple multiply?
If i initially invest $100 with ripple, what are the expected returns after one year?
Hi Ethan,
Thanks for getting in touch with finder. I hope all is well with you. :)
There’s no limit to how much you can invest in Ripple. However, you need to make sure you buy at least 20 XRPs to activate your wallet.
How much you will earn will depend on how Ripple’s value increases. If you bought Ripple while the price is low, there’s a tendency that you will earn more provided that Ripple’s value also increases. Moreover, you can also use Ripple as a cash. You can find people who sell stuff or provide services in exchange for Ripple. You can then sell those stuff at a higher price to earn a profit.
Regarding your last question, there’s no definite answer. Again, it will depend on Ripple’s value. In the past, people who have invested in Ripple with $100 have earned them tens to thousands of dollars in return. However, past performance is not a sure indication of what lies ahead for Ripple.
For this reason, it would be a good idea to first obtain as much information as possible before making a decision. Read the guide on this page and see if Ripple is the right cryptocurrency for you.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
How can I partner with your company, what do I stand to benefit. Thanks
Hi Victor,
Thank you for reaching out to us.
Please complete our partnership request form to start the process. Once you are on the link, please scroll down to the very bottom of the page and fill in your details in the form provided. Once submitted, our client services team will contact you and discuss your proposal as well as the benefits of joining finder today. Hope this helps!
Cheers,
Reggie
Dear Sirs,
I bought some ripple and had my account activated by Bithomp. I want to transfer some of the coins to an exchange. How do I go about it? The Bithomp website says it is just an explorer and there is no link on how to transfer the coins. I am new to this and am really stuck
Thanks for your answer.
Hi Fadi,
Thanks for getting in touch with finder.
The Bithomp is a Ripple Explorer. It isn’t a wallet nor an exchange. It only allows you to explore Ripple accounts for balances, transaction, history and other info.
In case you want to find the right exchange, please use this page. Take advantage of our comparison table above to obtain an overview of what each exchange has to offer. An exchange will allow you to transfer digital coins such as Ripple.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
Can you store ripple xrp in electrum wallet?
Hi Steph,
Thank you for visiting finder, we are a financial comparison website and general information service.
The wallets where you can store ripple is listed in the electrum bitcoin wallet review and currently the it supports only Bitcoin
Cheers,
Joanne