What is ripple bitcoin

What is XRP?

Anna Koutras

You’ve probably heard the buzz about XRP, the newest member of our cryptocurrency offering. In true crypto style, there’s plenty of excitement surrounding the currency – but there’s a lot of confusion too. So, what is XRP? And how does it differ from other currencies?

If you’re struggling to navigate between Bitcoin, Litecoin, Ether and the other cryptocurrencies, don’t worry. In this article, we’ll be telling you all you need to know about XRP – and its relation to Ripple.

Well grab your life vest, because we’re going to dive right into XRP! 🏊🏻‍♂️

XRP vs Ripple — Are XRP and Ripple the same thing? 🧐

It’s okay if you are a little confused about XRP – and how it relates to things like RippleNet and Ripple. It doesn’t help that three different elements – a currency, an interbank network, and a company that runs it – are often each referred to by the single name: Ripple.

However, they are different things – and it’s worth knowing what’s what.

What is Ripple?

Let’s start with Ripple itself. This is actually a payment platform – or a real-time gross settlement (RTGS) system – run by a company of the same name; Ripple. It was designed to allow seamless transfers of money in any form, be it USD, Litecoin, Yen or others.

The idea behind the creation of this platform was to enable almost instant global transactions at low costs. This drew the attention of some of the world’s biggest financial players, who were interested because through RippleNet – its international network – they could send money worldwide without the fees and wait times traditionally associated with international payment systems such as SWIFT.

So, What is XRP

RippleNet is a system, connecting banks and firms, through which money can be sent seamlessly. Ripple, meanwhile, is the company that runs it. What then is XRP?

XRP is the cryptocurrency associated with that system. It is the digital asset promoted by Ripple that allows payments to be facilitated through the platform. However, it is not necessary to use XRP to use its payment platform.

So no, Ripple and XRP are not the same thing. Although, as many people refer to XRP as Ripple, it’s not surprising that there’s some confusion.

And What Does XRP Stand For?

XRP is the abbreviation of the currency, like USD or GBP. Its proper name is actually Ripple, however it is referred to as XRP these days to avoid confusion.

So how is XRP different from other cryptocurrencies? 🤷‍

With so many currencies on the cryptocurrency scene though, a legitimate question to ask is what makes XRP special? Why would you choose to use XRP over something like Bitcoin Cash, or Bitcoin?

There are four aspects of the currency that you should know:

1. Volume 💰

In a similar fashion to a company releasing stocks, Ripple released 100 billion XRP tokens at the get go — and this is the maximum amount of tokens there will ever be.

This is in contrast to other cryptocurrencies such as Ether which essentially has no limit to the amount of tokens it can release, or Bitcoin which has to be ‘mined’ and will eventually reach a maximum amount of coins.

To dive a little deeper — Bitcoins are released as rewards for for the ‘miners’ in order to incentivise the continuation of the network, whereas XRP tokens have already been created and are released when Ripple chooses to do so.

If all that sounds like crazy talk to you, to put it simply, we don’t know exactly when Bitcoin will reach its supposed limit, but we do know exactly how many XRP are in existence.

2. Ownership 👑

One of the key elements of other cryptocurrencies is the fact that they are totally decentralised and not owned by any one authority or individual. Bitcoin for example is reliant on its huge number of global miners for it to function, grow and develop — which effectively means that no one person has full control over the currency.

In contrast Ripple owns 61 billion of the 100 billion XRP that were created and the rest of the currency is traded freely on the open market. It’s claimed that Ripple holds nearly 50 billion in an escrow account, systematically releasing the tokens to clients.

Other cryptocurrencies are based firmly on the idea of separating themselves from financial institutions and authorities, whereas Ripple and XRP actively welcome them.

Some crypto fans aren’t keen on the fact that this currency is owned by a company with centralised control and is therefore more regulated, whereas others see this as a sign of security and the potential longevity of XRP.

3. Speed 🏎

Another defining difference between XRP and other cryptocurrencies is the speed at which payments can be processed. A transaction made with XRP is settled in just 4 seconds. For Bitcoin, meanwhile, transaction times can vary depending on how congested the network is – ranging anywhere from 10 minutes to extreme cases of 16 hours.

4. Purpose: What is XRP used for? 💵

Cryptocurrencies like Bitcoin were created as a peer-to-peer payment system, with the purpose of cutting out banks and government control.

XRP was actually intended as a ‘bridge currency’ for financial institutions, to allow them to make simple, fast, cross-border payments, without the need for multiple middlemen, or the huge fees usually associated with these types of transactions.

Although XRP isn’t necessary to use the Ripple platform to make payments, it’s thought that various companies are looking to adopt it. The company’s CEO Brad Garlinghouse tweeted that banks and payment providers are “indeed planning to use XRP in a serious way.”

Conclusion

So that’s our lowdown on XRP, the Ripple cryptocurrency. We hope that we’ve shed some light on one of the more talked-about tokens and helped you to understand how and why it differs from the other cryptocurrencies out there!

A lot of cryptocurrencies are trying to disrupt the way we use and circulate money. Yet, XRP could potentially change inter-bank transactions – and the monetary system as we know it. Only time will tell how we adapt to the challenges thrown down by this technology.

Did we answer your question “what is XRP?” If you have other crypto questions, check out these links:

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What Is Ripple?

Formerly known as OpenCoin, Ripple is a privately held company that is building a payment and exchange network (RippleNet) on top of a distributed ledger database (XRP Ledger). The main goal of Ripple is to connect banks, payment providers and digital asset exchanges, enabling faster and cost-efficient global payments.

History

Ripple was first idealized in 2004 by Ryan Fugger, who developed the first prototype of Ripple as a decentralized digital monetary system (RipplePay). The system went live in 2005 and was meant to provide secure payment solutions within a global network.

In 2012, Fugger handed over the project to Jed McCaleb and Chris Larsen and together they founded the US-based technology company OpenCoin. From that point on, Ripple started to be built as a protocol focused on payment solutions for banks and other financial institutions. In 2013, OpenCoin was rebranded to Ripple Labs, which was later rebranded to Ripple, in 2015.

The XRP Ledger (XRPL)

The XRPL works as a distributed economic system that not only stores all the accounting information of the network participants but also provides exchange services across multiple currency pairs. Ripple presents the XRPL as an open-source distributed ledger that allows for real-time financial transactions. These transactions are secured and verified by the participants of the network through a consensus mechanism.

The XRPL is managed by a network of independent validating nodes that constantly compare their transaction records. Anyone is able to not only set up and run a Ripple validator node but also to choose which nodes to trust as validators. However, Ripple recommends its clients to use a list of identified, trusted participants to validate their transactions. This list is known as the Unique Node List (UNL).

The UNL nodes exchange transaction data between each other until all of them agree on the current state of the ledger. In other words, transactions that are agreed upon by a supermajority of UNL nodes are considered valid and the consensus is achieved when all these nodes apply the same set of transactions to the ledger.

According to Ripple’s official website, Ripple is a privately held company that founded the development of the XRPL as an open-source distributed ledger. This means that anyone can contribute to the code and that the XRPL is able to continue even if the company ceases to exist.

RippleNet

In contrast to XRPL, the RippleNet is exclusive to the Ripple company and was built on top of the XRPL as a payment and exchange network.

The RippleNet currently offers a 3-product suite that is designed as a payment solution system for banks and other financial institutions. Currently, RippleNet has three major products: xRapid, xCurrent, and xVia.

xRapid

Let’s take a simple example. Bob from Australia wants to send $100 to Alice who is based in India. Bob transfers the money via a financial institution called FIN. In order to perform the transaction, FIN uses the xRapid solution to create a connection with asset exchanges in both the originating and destination country. This way, the company is able to convert Bob’s $100 to XRP, which provides the necessary liquidity for the final payment. In a matter of seconds, the XRP is converted to Indian Rupees and Alice is able to withdraw the money from the asset exchange located in India.

xCurrent

xCurrent is a solution designed to provide instant settlement and tracking of cross-border payments between RippleNet members. Unlike xRapid, the xCurrent solution is not based on the XRP Ledger and does not use the XRP cryptocurrency by default. The xCurrent is built around the Interledger Protocol (ILP), which was designed by Ripple as a protocol for connecting different ledgers or payment networks.

The four basic components of xCurrent are:

1. Messenger — The xCurrent messenger provides peer-to-peer communication between connected RippleNet financial institutions. It is used to exchange information regarding risk and compliance, fees, FX rates, payment details and expected time of funds delivery.
2. Validator — Validator is used to cryptographically confirm the success or failure of a transaction and also to coordinate moving of funds across the Interledger. Financial institutions can run their own validator or can rely on a third-party validator.
3. ILP Ledger — The Interledger Protocol is implemented into existing banking ledgers, which creates the ILP Ledger. The ILP Ledger functions as a sub-ledger and is used to track credits, debits, and liquidity across transacting parties. Funds are settled atomically, meaning that they are either settled instantly or not at all.
4. FX Ticker — FX ticker is used to define exchange rates between transacting parties. It tracks the current state of each configured ILP Ledger.

Although xCurrent is primarily designed for fiat currencies, it also supports cryptocurrency transactions.

xVia is an API-based standardized interface that allows banks and other financial service providers to interact within a single framework — without having to rely on multiple payment network integrations. xVia allow banks to create payments through other banking partners that are connected to RippleNet and also enables them to attach invoices or other information to their transactions.

Closing thoughts

RippleNet may be implemented on top of the existing banking infrastructure as a way to complement and improve the traditional payment system. xCurrent allows for cost-efficient real-time payments across financial institutions, xRapid uses XRP as a bridge borderless currency to provide on-demand liquidity pools, and xVia facilitates the integration and communication of all RippleNet participants.

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Bitcoin vs. Ripple: What’s the Difference?

From the outside, the cryptocurrency investing universe seems limited to Bitcoin. As the most well-known cryptocurrency, Bitcoin is the leader in market capitalization and overall traction with investors.

But there are several other options for those interested in diversifying their portfolio and experimenting with coins that offer a different take on the concept of digital currencies. Ripple’s XRP is one of them. In March 2021, the cryptocurrency ranked fourth, behind Bitcoin, Ether, and Binance coin, in terms of total market capitalization.

Let’s take a closer look at what distinguishes XRP from Bitcoin and other top digital tokens.

Key Takeaways

• Ripple is the company that is behind XRP, the cryptocurrency.
• Bitcoin transaction confirmations may take many minutes with high transaction costs, while XRP transactions are confirmed in seconds with little cost.
• XRP is a technology that is mainly known for its digital payment network and protocol.
• Many major banks use the XRP payment system.

What is Ripple?

Any discussion of XRP must include a brief introduction to Ripple. In news reports, XRP and Ripple are often used interchangeably. Both are actually different.

Ripple is the name of the company and network behind the XRP cryptocurrency. The company was founded as a peer-to-peer trust network that leveraged social media. Users within a network could bypass banks and make loans and open credit lines with each other. But the network failed to take off.

In 2012, three years after Bitcoin ushered in the cryptocurrency era, Ripple changed tracks and became OpenCoin –a network for money transfers where large businesses and financial services firms acted as counterparties to transactions. XRP, its cryptocurrency, was launched in the same year and the founders, who coded it into existence, gifted 80 billion XRP to as initial corpus. The purpose of XRP was to serve as an intermediate mechanism of exchange between two currencies or networks. OpenCoin became Ripple Labs in September 2013.

On its website , Ripple describes itself as a global payments network and counts major banks and financial services amongst its customers. XRP is used in its products to facilitate quick conversion between different currencies.

Bitcoin vs. XRP

Bitcoin operates on a public blockchain ledger that supports a digital currency used to facilitate payments for goods and services. The bitcoin network is based on the blockchain concept, a public ledger of verified transactions and record keeping. Miners verify transactions on an ongoing basis and add them to the Bitcoin blockchain. In exchange for their time and the computing power necessary to validate the ledger in this way, miners are rewarded with BTC upon successfully validating transactions .

XRP is the native cryptocurrency for products developed by Ripple Labs. Its products are used for payment settlement, asset exchange, and remittance systems that work more like SWIFT, a service for international money and security transfers used by a network of banks and financial intermediaries . XRP is pre-mined and uses a less complicated method of mining as compared to Bitcoin.

What are the main differences between Bitcoin and XRP?

The main differences between Bitcoin and XRP are as follows:

Both have different methods to validate transactions

Instead of using the blockchain mining concept, the Ripple network uses a unique distributed consensus mechanism to validate transactions in which participating nodes verify the authenticity of a transaction by conducting a poll. This enables almost instant confirmations without a central authority. The end result is that XRP remains decentralized and is faster and more reliable than many of its competitors. It also means that the XRP consensus system consumes negligible amounts of energy as compared to Bitcoin, which is considered an energy hog.

XRP is cheaper and faster than Bitcoin

Due to the complicated and intensive nature of mining used in the cryptocurrency, Bitcoin transaction confirmations may take many minutes and are associated with high transaction costs. XRP transactions are confirmed within seconds and generally occur at very low costs.

Similar to the bitcoin transaction processing fee, XRP transactions are charged. Each time a transaction is performed on the Ripple network, a small amount of XRP is charged to the user (individual or organization)

XRP has more coins in the market

About 1 billion XRP were pre-mined at launch and have been released gradually into the market by its main investors. In contrast, Bitcoin’s supply is capped at 21 million, meaning there will only ever be 21 million Bitcoin in existence. BTC’s artificial scarcity has helped generate investor interest in its potential as a store of value.

XRP and Bitcoin Have Different Circulation Mechanisms

Bitcoins are released and added to the network as and when miners find them. They do not adhere to a release schedule and their supply depends mostly on network speeds and difficulty of the algorithm used to mine coins.

A smart contract controls the release of XRP. Ripple planned to release a maximum of 1 billion XRP tokens each month as governed by an in-built smart contract; the current circulation is over 50 billion.

Any unused portion of the XRP in a particular month will be shifted back to an escrow account. This mechanism ensures that there will be no possibility of misuse due to an oversupply of XRP cryptocoins, and it will take many years before all the cryptocoins will be available.

Overall, XRP is better for lower processing times and lower transaction charges than bitcoin.   

Bitcoin vs. Ripple Example

To understand both with real-world comparisons, below are some analogies.

Peter, living in America, visits Walmart and pays for his purchases in US dollars. He can also use his US dollars to purchase other currencies for trading and investment, like GBP or JPY, and sell them off at a later date for a profit or loss.

Bitcoin is an equivalent digital currency—an alternative to real-world US dollars, for example.   Peter can make a purchase and pay for it in bitcoins, or he can purchase bitcoins for trading and investments and sell them off at a later date for profit or loss, just like trading any other fiat currency like the GBP or JPY.

If Peter in America wants to send $100 to Paul in Italy, he can do so by instructing his American bank to execute the transaction. After taking necessary charges, Peter’s American bank will issue instructions using the present-day SWIFT system that will credit Paul’s Italian bank account with the equivalent euros (or USD). This process may involve high charges at both ends and takes a certain number of days for processing.

Enter Ripple, the payment and settlement system that also has a currency, the XRP. 

Ripple’s payment system uses XRP tokens for the transfer of assets on the Ripple network.   The same $100 can be converted instantly by Peter to equivalent XRP tokens, which can be instantly transferred to Paul’s account over the Ripple network.

Upon suitable verification and authentication of the transaction by the decentralized Ripple network, Paul will receive the XRP tokens. He will have the option to convert it back to USD’s or any other currency of his choice, or even retain it as XRP tokens. The verification process is faster than those of bitcoin and traditional money transfer systems. 

The Bottom Line

While Ripple works in a bit more complicated way, the above example explains its basic workings. The Ripple system scores better than the bitcoin network for its lower processing times and lower transaction charges.     On the other hand, BTC is generally more widespread and better known than XRP, giving it the advantage in other ways. 

Bitcoin remains a truly public system that is not owned by any single individual, authority, or government.   The Ripple network, although decentralized, is owned and operated by a private company with the same name.   Despite both having their unique cryptocurrency tokens, the two popular virtual systems cater to different uses.

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