What is ripple xrp

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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XRP: The Best Digital Asset for Global Payments

XRP offers financial institutions the fastest, most reliable option for sourcing liquidity on demand.

What Is XRP?

XRP is a digital asset built for payments. It is the native digital asset on the XRP Ledger—an open-source, permissionless and decentralized blockchain technology that can settle transactions in 3-5 seconds.

XRP can be sent directly without needing a central intermediary, making it a convenient instrument in bridging two different currencies quickly and efficiently.

How Is XRP Used?

Faster, less costly and more scalable than any other digital asset, XRP and the XRP Ledger are used to power innovative technology across the payments space.

Ripple is focused on building technology to help unleash new utility for XRP and transform global payments. Third parties are also pursuing other XRP-related use cases.

RippleNet

RippleNet customers can use XRP for sourcing liquidity in cross-border transactions, instead of pre-funding—ensuring instant settlement, lower exchange fees and more efficient use of working capital.

RippleX

RippleX is Ripple’s open developer platform for money. Through RippleX projects, developers leverage XRP and its underlying technology in use cases from micropayments, to e-commerce to exchanges and peer-to-peer services.

XRP and the XRP Ledger are open-source technology that anyone can build on. To get started, learn more at XRPL.org.

How Does the XRP Ledger Work?

The ledger is maintained by independent participants of a global “XRP Community,” of which Ripple is an active member.

Independent validator nodes come to an agreement on the order and validity of XRP transactions. This agreement, called consensus, serves as final and irreversible settlement. The ledger reaches consensus on all outstanding transactions every 3-5 seconds, at which point a new ledger is issued. Anyone can be a validator, and active validators on the ledger today include universities, exchanges and financial institutions. There are currently 36 validators, and Ripple runs 6 of them—16%.

Interested in running a validator? Learn how to get started here.

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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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