What is ripple control

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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Meet Ripple & XRP, Cryptocurrency For Banks

Ripple is a money transfer network designed to serve the needs of the financial services industry. XRP, a cryptocurrency tailored to work on the Ripple network, is consistently listed among the top five cryptocurrencies by market capitalisation.

What Is Ripple?

Ripple is a payments settlement system and currency exchange network that can process transactions around the world. The idea is that Ripple serves as a trusted agent in between two parties in a transaction as the network can quickly confirm that the exchange went through properly. Ripple can facilitate exchanges for a variety of fiat currencies, cryptocurrencies like Bitcoin and even commodities like gold.

“Ripple was designed from the very beginning to essentially be a replacement for SWIFT (a leading money-transfer network) or to otherwise replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.

Whenever users make a transaction using the network, the network deducts a small amount of XRP as a fee.

“The standard fee to conduct transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the large fees charged by banks for conducting cross-border payments,” says El Lee, board member of Onchain Custodian. As of late April 2021, the XRP price was £0.97 per token, meaning the transaction fee works out to be just £0.0000097.

What Is XRP?

XRP is cryptocurrency that runs on the XRP Ledger, a blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto would go on to found Ripple and use XRP to facilitate transactions on the network. You can buy XRP as an investment, as a coin to exchange for other cryptocurrencies or as a way to finance transactions on the Ripple network.

Notably, XRP’s blockchain operates a little differently than most other cryptos’. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can solve complex equations quickly, but transactions are secure as the majority of ledger holders must agree with the verification for them to be added.

Instead, the XRP’s Ripple network somewhat centralises things: While anyone can download its validation software, it maintains what it calls unique node lists that users can select to verify their transactions based on which participants they think are least likely to defraud them. Its default list currently contains 35 trusted validators. Ripple decides which validators to approve for this list and also makes up six of these validation nodes. However, users can opt out of this default list and hypothetically remove Ripple-backed validators from their transactions entirely, instead constructing their own lists of trusted validators. This would allow the network to continue to approve transactions even without Ripple the company remaining involved or even continuing to exist.

As new transactions come in, the validators update their ledgers every three to five seconds and make sure they match the other ledgers. If there’s a mismatch, they stop to figure out what went wrong. This allows Ripple to securely and efficiently validate transactions, which gives it an edge over other cryptocurrencies, like Bitcoin.

“Bitcoin transaction confirmations may take many minutes or hours and are typically associated with high transaction costs,” says Lee. “XRP transactions are confirmed around four to five seconds at much lower cost.”

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How to Mine XRP

“Mining” is the distributed verification system used by most blockchain-based cryptocurrencies. It both facilitates transactions and provides the mechanism by which new currency is introduced into a cryptocurrency system—typically as a reward to verifiers for their work supporting the network. For example, Bitcoin has a total supply limit of 21 million tokens that are steadily released as more and more transactions are verified.

XRP, in contrast, was “pre-mined,” meaning the XRP Ledger created 100 billion tokens that are then periodically released publicly. Ripple owns about 6% of that as an incentive for it to help the cryptocurrency grow and be successful over time. Another approximately 48% are held in a reserve for regular release into the market through sales.

Understandably, this has led to concerns that a lot of XRP could be released at once, diluting the value of other XRP already in circulation because part of what gives any currency its value is its comparative scarcity.

“The company has tried to reduce the uncertainty by implementing several mechanisms (trust, predictable release, etc.),” says Tim Enneking, principal of Digital Capital Management.

Ripple Advantages

• Fast settlement. Transaction confirmations are incredibly fast. They generally take four to five seconds, compared to the days it may take banks to complete a wire transfer or the minutes or potentially hours it takes for Bitcoin transactions to be verified.
• Very low fees. The cost to complete a transaction on the Ripple network is just 0.0001 XRP, a small fraction of a penny at current rates.
• Versatile exchange network. The Ripple network not only processes transactions using XRP, but it can also be used for other fiat currencies, cryptocurrencies and commodities.
• Used by large financial institutions. Large enterprises can also use Ripple as a transaction platform. Santandar, Axis Bank and Yes Bank are a few using this network, demonstrating it already has larger institutional market adoption than most cryptocurrencies.

Ripple Disadvantages

• Highly centralised. One of the reasons that cryptocurrencies became popular is that they were decentralised, taking control away from large banks and governments. The Ripple system is centralised and goes against this philosophy.
• Ripple Labs controls the XRP supply. Ripple Labs decides when to release coins, giving it control versus other cryptos where coins are slowly and steadily released by mining. This means Ripple Labs has more power to influence the value of XRP by deciding when and how many tokens to release.
• Recent regulatory action against XRP. In the States last year, the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, saying that since it can decide when to release XRP, the company should have registered it as a security. Until this gets resolved, it could slow down institutional use of this system. Several exchanges have also stopped listing XRP as a result, such as Coinbase.

How You Can Use Ripple and XRP

You can use XRP like any other digital currency, either for transactions or as a potential investment. You could also use the Ripple network to process other types of transactions, like exchanging currencies.

For example, if you are looking to swap Sterling for Euros, you could first exchange your GBP for XRP on the Ripple network, and then use those to buy Euros, rather than handling the currency exchange directly through a bank or money-changing exchange. This can be a much faster and cheaper approach versus paying the high fees banks and money remittance organizations may charge.

Should You Buy XRP?

While some might find the vision and benefits for XRP compelling, White is worried the SEC lawsuit could create trouble for those looking to buy into it.

“They are positioning themselves as a settlement layer for regulated companies, but they’re also deep in a dispute with the SEC. None of the customers they would love to be onboarding can really start to use XRP until Ripple has gotten their legal woes figured out,” he said.

With all this uncertainty, Enneking warns that XRP can be a gamble not for the faint hearted. Though it has since more than recovered, “the SEC announcement caused the price of XRP to plunge,” he notes, making this crypto a particularly volatile investment until things are sorted out with the SEC.

That said, if you believe that Ripple will emerge victorious against the SEC and continue taking over as a payment system, then it could be worth buying XRP. Just make sure it’s with money you can afford to lose.

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