What is XRP? A beginner’s guide to Ripple’s cryptocurrency

Learn more about one of the world’s largest cryptocurrencies, including its price history and predictions for the future.

Bitcoin (BTC) is the largest cryptocurrency in the world, followed by Ethereum (ETH). But here’s a question: can you name any of the other 5,100 currencies that exist, or explain what they do?

This article is about Ripple (XRP), one of the largest digital currencies by market capitalization. If you’re wondering what XRP is and where it fits in the increasingly fragmented crypto landscape, you’ve come to the right place.

What is XRP?

Ripple is a real-time cryptocurrency gross settlement system, currency exchange and funds transfer network created by Ripple Labs Inc, a US-based technology company. The company then created the XRP coin, which it describes as a “digital asset built for global payments.” In short, it can be said that Ripple has its sights set on the international currency transfer market.

Currently, it is often very expensive to send money around the world, with banks charging astronomical fees. To add insult to injury, banks’ outdated systems can also mean that payments can take several days to reach the recipient’s bank account.

The XRP coin is designed to remedy this problem by allowing large sums of money to be sent safely and quickly, at a very low cost. The potential of this system is not limited to helping ordinary consumers: financial institutions themselves are also eager to get in on the action.

It is therefore telling that Ripple has already attracted an impressive list of banks and payment service providers that use its network, including American Express, Bank of America, HSBC, Barclays, Royal Bank of Scotland, Santander, UniCredit and the Japanese company SBI Holdings.

According to the team behind the cryptocurrency Ripple, XRP also offers clear advantages over other established digital currencies. While it sometimes takes over an hour for BTC transactions to clear, and around two minutes for an ETH payment to clear, Ripple claims that its XRP payments clear in just under four seconds.

It’s a breath of fresh air for cryptocurrency advocates who worry about scalability issues, including that blockchain networks will be unable to cope with a huge spike in demand.

How does Ripple work?

Before explaining it, it is first necessary to distinguish between Ripple and XRP.

Ripple is the technology company that provides the infrastructure to facilitate these faster payments. The company describes the XRP coin it produces as an “independent digital asset”. She insists the part is used in her product line, but she does not control the technology.

See also  The cryptocurrency dictionary: EToro (crypto platform)

The maximum supply is 100 billion XRP tokens and the company controls around 60%.

It is quite confusing that Ripple is not involved in physically sending money from one place to another. Rather, it allows the transfer of a promise to pay.

A trust system

Imagine that Katie lives in London and her friend David lives in France. She owes him money for a vacation they are going to spend together. Both want to avoid penalizing exchange rates and delays. Ripple offers a solution.

As a payment platform, Ripple can be compared to the ancient hawala money transfer system, which is believed to have originated in South Asia in the 8th century CE and was quickly adopted by much of the world. Arab.

According to Investopedia, the hawala system is “  an informal method of transferring money without any physical money actually being moved. It is described as a “transfer of money without movement of money”. Other definition is simply ‘trust’ . »

Here’s how it works in practice: Katie goes to an agent in London with $2,000 in cash and hands it over. In return, the agent gives him a special code. Then the London agent calls his counterpart in Paris and tells him how much money he has received. Meanwhile, Katie calls David to let him know the special code she received. David can then go see the Parisian agent, reveal the code to him and recover the money.

It’s strange to think that a medieval-era trust system could have a place in today’s crypto world, but that’s essentially what Ripple and XRP offer. The only difference is that its validators and gateways take the place of agents, which is much harder to explain in a simple example.

As a coin, XRP is a neutral asset that can represent anything. Katie can convert her pounds to XRP, and David can take those XRPs and convert them to euros. But an even better example of XRP’s usefulness is in currencies that aren’t commonly traded with each other.

To convert, for example, a Ugandan shilling to an Icelandic krona, it is often necessary to change the shillings into dollars, and then the dollars into kroner. Each step of this process gives rise to high commissions, which gradually erode the value of the funds sent. The stated goal of the Ripple currency is to tackle this problem.

should you invest in ripple's XRP

XRP Price History and Course

So… who created Ripple? Well, it was initiated by a man called Jeb McCaleb, who first had the idea. He then asked developers David Schwartz and Arthur Britto to help bring it to life, and they started creating the XRP Ledger (XRPL). Their idea was to create a digital asset that was more durable than bitcoin and specifically designed to process payments.

See also  How to earn cryptocurrency: 5 safe and easy ways to implement

According to Ripple’s version of the story, the XRPL was launched in June 2012. Soon after, they were joined by Chris Larsen, and the group launched the company NewCoin in September 2012, which was soon renamed OpenCoin , then renamed Ripple. XRPL’s founders donated 80 billion XRP, the platform’s native currency, to the company. Ripple has since placed the majority of these funds in escrow.

At the time of Ripple’s launch, BTC coins were trading at around $12 or $13. Given the large number of XRP coins (100 billion, compared to 21 million for BTC), it is understandable that the valuation of this cryptocurrency is done in cents rather than dollars. Like other digital assets, XRP reached an all-time high in early 2018 – hitting $3.84 on January 4 of that year.

Since then, the value of the XRP crypto has steadily cooled. Part of this fall could be due to Ripple’s own actions.

Indeed, Ripple owns more than half of the XRP supply, and most of it is in escrow, as mentioned above. From time to time, the company releases some of these tokens, an action that can suppress its value and has angered some investors.

Legal battle with the SEC

Other than that, what affects the price of Ripple? Well, the good news is that banks continue to adopt the technology that underpins Ripple. Listings on major exchanges also help, and like other cryptocurrencies, it has received a nice boost each time it has been made available to a wider range of consumers.

One cloud on the horizon that could drive down the price of XRP is the rumble of a rather nasty lawsuit. The United States Securities and Exchange Commission (SEC) has accused the company, its co-founder Chris Larsen and its CEO, Brad Garlinghouse, of violating US laws by selling XRP as an unregistered security.

To compound the problem, allegations swirled about false advertising that exchanges were paid to list XRP early on.

The SEC has successfully filed lawsuits or investigated cryptocurrency projects such as BitConnect and Binance Holdings, often resulting in punitive financial or regulatory penalties. This was often followed by dramatic declines in a token’s valuation. However, in this case, Ripple’s legal team argued that the SEC itself is at fault for issuing confusing crypto guidance.

See also  How to train before investing in cryptocurrencies?

Although Ripple hasn’t been able to get the lawsuit dismissed so far, and it could result in massive headaches for the company if it continues to move forward, the company has a few aces in his Ripple vs. SEC case.

In fact, this lawsuit (which seems to be going on for a long time) is now considered by some to be the “trial of the century” in cryptocurrencies – or certainly a very relevant test for the future of cryptocurrencies, or perhaps for the future of cryptocurrency. authority or ability of the SEC to regulate them.

What will be the future of Ripple and XRP?

But where will Ripple be in five years? How far can Ripple go? And how will the above scenario with the SEC affect its price? It is difficult to know the answers to these questions.

Usually, the fate of a major coin such as XRP is tied to the performance of the crypto industry as a whole. Ripple CEO Garlinghouse maintains that the company continues to attract new customers, and says he’s on a quest to rub shoulders with senior bank executives and show them that “crypto isn’t a big deal. word “.

All eyes are on Ripple, which is battling the SEC in court.

Former Goldman Sachs analyst Andrew Lokenauth is so optimistic about the future of XRP that he suggests it could be the heir to SWIFT, currently the global interbank transfer standard.

According to Lokenauth, “  Ripple will redefine online payments, and I think Ripple will likely go public once the SEC lawsuit is resolved. The main advantages of using the Ripple protocol are speed and reduced risk. XRP is a replacement for SWIFT, which is expensive and slow. ” 

How to trade XRP?

To conclude our guide to Ripple’s cryptocurrency, let’s see where and how to trade XRP, and where to store it.

XRP is actually available on most major exchanges, like Coinbase for example, and can be stored in a wallet.

To be honest, there aren’t many places that accept this coin for everyday purchases – mostly because that’s not the main purpose of this cryptocurrency. While BTC and ETH try to compete with the US dollar and other fiat currencies, the Ripple coin focuses on a whole different segment of the market.

If you liked this article, please subscribe to our reddit community to discuss it. You can also find us on Twitter and Facebook.

5/5 - (2 votes)

Newsletter Updates

Enter your email address below to subscribe to our newsletter

Leave a Reply