Many people get mixed up between XRP, the token, and the company Ripple that created XRP cryptocurrency. Think of it this way: XRP is a digital asset, while Ripple is the name of the company that created it. Imagine Ripple’s XRP token as the fruit and Ripple as the tree that grows it. This company was founded by Chris Larsen, Jed McCaleb, Arthur Britto, and David Schwartz back in 2012. But why they started developing the XRP? To make money transfers around the world faster and smoother using an innovative new technology.
What is XRP? – How Does Ripple Works?
XRP is a token based on the XRP Ledger (XRPL), a special distributed ledger technology. While Bitcoin and other traditional cryptocurrencies are based on complex calculations by miners, XRP doesn’t rely on this method and offers a greener alternative: instead of mining, Ripple network uses validators to verify the transactions.. The goal was to make a solution for the bank industry that provide faster and more efficient transactions, but over time it has also become a store of value.
History of Ripple and Its Cryptocurrency XRP & Some Words about Ripple Founders
From inception to its present stature, Ripple and XRP’s story is both intriguing and multifaceted. We’ll explore the visions of Ripple’s founders, track XRP’s price evolution, and highlight key legal confrontations faced by Ripple. Journey with us through the defining milestones of this notable digital asset.
Founders and Vision in the Cryptocurrency Industry
Ripple’s journey began with a vision shared among its key founders,crypto enthusiasts: Chris Larsen, Jed McCaleb, and Arthur Britto. In 2012, their paths converged, resulting in the creation of OpenCoin, which later rebranded to Ripple Labs. The vision was clear: to enable secure, instant, and nearly free global financial transactions of any size with no chargebacks.
While many new digital currencies popped up trying to follow Bitcoin’s footsteps, the creators of Ripple had a different idea in mind. They dreamed of a system that would help out banks, payment services, and other money-related businesses. Their goal was not to replace FIAT currencies but to act as a bridge between them, to use Ripple to provide liquidity and facilitate real-time money transfers across borders. Today, they continues to innovate and expand, holding true to the founders’ initial vision.
Lawsuit Against Ripple: A Legal Overview
Just like any other digital currency, Ripple Labs has had its fair share of attention from the big regulatory bodies. One of the biggest moments in its story? A legal tussle started when the U.S. organization called the Securities and Exchange Commission, or SEC for short filed a lawsuit against Ripple for selling XRP.
Back in December 2020, the SEC claimed that Ripple Labs made sales of XRP in a way that they shouldn’t have, worth a whopping $1.3 billion. This lawsuit raised foundational questions about how cryptocurrencies are classified and regulated. Is the cryptocurrency called XRP a security, as the SEC argued, or is it a currency or a medium of exchange?
Following the case, many crypto exchanges removed XRP from their listings or stopped trading it, causing its market capitalisation to fall dramatically. The wider crypto community followed the case closely, given the potential impacts on the classification and regulation of other digital assets.
In their defence, they said that XRP is not a security but a medium of exchange, pointing to its utility within the RippleNet system. They also highlighted the regulatory clarity offered by other countries, and the potential for the US to fall behind in the global digital finance race if strong regulations slowed innovation.
As the case has proceeded, it has brought to the discussions about the need for clear, complete and flexible cryptocurrency regulation. This ongoing legal battle, while specific to Ripple, has wider implications for the crypto world and highlights the difficulties and challenges of regulating a fast evolving digital asset industry.
On 13 July 2023, the judge ruled that Ripple Labs Inc. didn’t break the federal securities law by selling its XRP tokens on public exchanges.
A huge win for Ripple but more importantly for the industry overall in the U.S.
– Ripple CEO, Brad Garlinghouse commented after the ruling.
XRP vs. Other Cryptos: Bitcoin and Beyond
XRP has many features that separate it from Bitcoin and even other top cryptocurrencies. One is the validation of transactions on the Ripple network. Think of the Bitcoin system as a big puzzle. It uses a method called proof-of-work, where computers solve difficult mathematical problems to confirm transactions. Well, XRP does things differently. Instead of puzzles, it uses validators to verify and approve transactions, just like the Proof-of-Stake consensus method does. The bonus? It’s faster and more eco friendly.
In terms of speed, transactions running on the XRP Ledger can reach up to 1500 transactions per second, which are completed in 3-5 seconds. In contrast, Bitcoin can do 7 and a transaction takes about 10 minutes depending on the current traffic (interestingly, VISA can do 24,000 per second).
Is Ripple Decentralized like Bitcoin?
The journey of the XRP’s Ripple network has been between two end points: from centralisation to decentralisation. Initially, the infrastructure created by the company was more centralised, with transactions and network operations under the central control of the founding company. However, criticism from the community and the realisation of the benefits of distributed ledger technologies prompted the company to decentralise the system.
Ripple and XRP: Distinct Yet Intertwined
The connection between XRP and Ripple seems complex, but don’t worry we make it clear.
- Ripple Labs: It developed a specific protocol, XRP Ledger (XRPL), which is based on a digital payment protocol. The company also offers products and services such as RippleNet, which enables banks and financial institutions to conduct fast and low-cost transactions between themselves.
- XRP: XRP is the native cryptocurrency itself, a digital asset based on the XRP Ledger technology. It makes possible instant transactions on the network with minimal transaction costs.
The link between the two entities cannot be completely severed. The company still owns a significant amount of XRP and is actively involved in the development and promotion of the token and the ledger. In this sense, XRP and Ripple are closely intertwined, while still being two separate entities.
Technological Overview: How Ripple and XRP Works
Another interesting difference is that while the supply cap of Bitcoin is 21 million and is constantly being sampled as it is mined, the subject of this article has 100 billion XRP which was already set and made available at the time of its launch. So the Ripple token is finite and is used to cover transaction fees. It is true that the tokens will run out sooner or later and it is difficult to predict when, we can expect the supply to last a few centuries.
Blockchain vs. Ripple’s Decentralized Ledger
The terms blockchain technology and ledger are frequently used interchangeably in the world of cryptocurrencies. Here’s a legit statement good to know: every blockchain is a ledger, but not every ledger is a blockchain.
- Traditional Blockchains: Imagine traditional blockchains like a never-ending chain of digital boxes. Each box has a special code from the previous one, a time stamp, and details about a transaction. Once information goes into a box, it can’t be changed. Think of Bitcoin as the poster child for this.
- Decentralized Ledger (XRPL): While the XRP Ledger also consists of cryptographic data structures and a consensus mechanism, it diverges from traditional blockchains in several ways. XRPL employs the Ripple Protocol Consensus Algorithm (RPCA).
Validators and Consensus Protocol
Navigating further into the mechanics of the XRPL, the roles of validators and the consensus protocol become paramount. They collectively ensure the seamless, fast, and secure operation of the network.
- Validators:
- Role and Function: Validators are responsible for reaching agreement (or consensus) on the order and validity of transactions.
- Diversity & Decentralization: Anyone can run a validator, and it’s important to have a large variety of validators to keep the decentralized nature of the XRPL. Over time, the XRPL has seen an increasing number of independent validators.
- Unique Node List (UNL): Ripple recommends a list of trusted validators known as the Unique Node List (UNL). However, anyone on the network can choose who to trust, creating a democratised system.
- Ripple Protocol Consensus Algorithm (RPCA):
- How it Differs: XRPL uses the Ripple Protocol Consensus Algorithm instead of Bitcoin’s Proof-of-Work. This allows for fast, scalable and efficient transaction confirmation while still being decentralised.
- The Process: Validators always communicate with each other to compare transaction records. They try to agree on the validity and order of the transactions. If a majority of validators (usually 80% or more) agree on a certain set of transactions, a consensus is reached and those transactions are validated.
- Benefits: This consensus mechanism makes double spending impossible without the majority of validators acting in bad faith. It also guarantees fast transaction confirmations, typically within 3-5 seconds.
- Security Implications:
- Robust Against Attacks: Validators and consensus mechanism make the XRPL immune to single points of failure and hacking. For this to happen, validators would have to take a similar ratio of offensive action.
Together, these features create one of the most efficient, scalable and secure distributed ledger technologies in crypto. Their synergy helps underpin the stability and speed for which Ripple and XRP have become well-known.
RippleNet: Cryptocurrency Designed for Bridging FIAT and Digital Assets
Ripple’s primary goal has always been to bridge the gap between traditional banks and other financial organisations and the digital assets. But how exactly does it manage this?
- RippleNet – The Network: Ripple’s RippleNet is a decentralized global network of banks and payment providers using its distributed ledger technology. The Ripple transaction protocol makes instant cross-border transactions possible in any currency, including XRP, and provides a single experience for sending and receiving money globally.
- XRP – The Digital Asset: XRP acts as a bridge currency in the RippleNet. When two institutions that may not have a direct currency pairing need to transact, XRP can act as an agent, providing liquidity and speeding up the transaction.
- On-Demand Liquidity (ODL): Previously known as xRapid, ODL uses XRP as a real-time bridge between the sending and receiving currencies. This solution allows financial institutions to remove pre-funding, reduce operational costs and open up new markets.
- Interoperability: The systems are designed to work with existing financial infrastructure, such as SWIFT, allowing for easy adoption and implementation. This interoperability guarantees that RippleNet members can transact with each other, regardless of the different technologies or currencies they use.
- Security and Compliance: Ripple is committed to making sure that transactions on its network are safe and meet global financial regulations. Through advanced encryption and decentralized validation, Ripple guarantees the integrity of transactions while providing institutions with the tools to meet regulatory requirements.
XRP in Decentralized Finance (DeFi)
Decentralized Finance (DeFi) is transforming traditional financial structures by providing universally accessible products or financial services without intermediaries, and XRP is often used in this space. Known for its speed and efficiency, XRP serves as a bridge currency in DeFi protocols, offering fast and cheap conversions between assets.
It’s also popular for liquidity arrangements such as staking and pooling on certain platforms. Its interoperable nature makes it suitable for cross-chain integrations, and the creation of Wrapped XRP widens its use. In addition, XRP is accepted as a security on DeFi lending platforms, and its fast transaction capabilities make it a popular choice for decentralized cryptocurrency exchanges.
Investing in Ripple (XRP)
If you’re considering investing in Ripple XRP, we strongly recommend that you not only understand how XRP works, but also check out the current market trends and price history.
How to Buy XRP
So you’re thinking about getting some XRP? It’s simpler than it sounds! Just follow these steps:
- Pick a Crypto Wallet: This is like your digital purse or wallet where you’ll keep your XRP safe. (Storing XRP is similar to Bitcoin, so we recommend our article about wallets before choose one!)
- Choose a Crypto Currency Exchange: Think of this as a digital marketplace where you can buy XRP. CEXes like Coinbase or Binance are popular choices.
- Buy XRP: Once you’re set up on an exchange, you can buy XRP using your local currency or other digital currencies.
- Transfer to Your Wallet: For extra safety, move your XRP from the exchange to your personal crypto wallet. And that’s it! You’re now an XRP owner.
How to Sell XRP?
Ready to cash out on your XRP? Here’s a quick guide:
- Log Into Your Crypto Exchange: This is where you bought your XRP. If you’ve stored your XRP in a personal wallet, transfer it back to the exchange first.
- Find the ‘Sell’ Option: Most exchanges have a clear button or tab labeled ‘Sell.’ Click on that.
- Choose the Amount: Decide how much XRP you want to sell. Maybe you want to sell it all, or just a bit.
- Sell & Withdraw: After selling, you can withdraw your money in your local currency to your bank or choose another digital currency. And voila! You’ve successfully sold your XRP.
