Ripple is a money transfer network designed to meet the needs of the financial services industry. XRP is a digital currency designed to operate on the Ripple network. It is consistently listed among the top five cryptocurrencies by market capitalization.
Despite its ambitions, Ripple is currently involved in legal problems with the Securities and Exchange Commission (SEC). Although this hardly prevents XRP from rising in value with other cryptocurrencies.
What is ripple?
Ripple is a payment settlement system and currency exchange network that can process transactions around the world. The idea is that Ripple acts as a trusted proxy between two parties to a transaction where the network can quickly confirm that the exchange took place correctly. Ripple can facilitate exchanges for a variety of fiat currencies, digital currencies such as bitcoin, and even commodities such as gold.
“Ripple was designed from the start as an alternative platform to SWIFT (the leading money transfer network) or to replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.
When users make a transaction using the network, the network deducts a small amount of XRP, a digital currency that is charged as a fee.
“The standard fee for transacting on Ripple has been set at 0.00001 XRP which is the minimum,” says El Lee, Onchain Custodian Board Member. Compared to the hefty fees banks charge to make cross-border payments.” As of late April 2021, the price of XRP is $1.38 per token. Which means that the transaction fee is only $0.00000138.
What is XRP?
XRP is a digital currency that runs on the Ripple network. McCaleb and Brito went 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 digital currencies, or as a way to fund transactions on the Ripple network.
Notably, the XRP blockchain works a little differently than most other cryptocurrencies. Other cryptocurrencies open their transaction books and verifications to anyone who can quickly solve complex equations, but transactions are secure because the majority of public record holders must agree to a verification in order to be added.
Instead, XRP’s Ripple network centralizes things a bit as anyone can download their verification software. It keeps what it calls lists of unique nodes that users can select to verify their transactions based on which participants they think are least likely to be defrauded. Its default list currently contains 35 trusted validators. Ripple decides which auditors will approve this list and also make up six validation nodes. However, users can opt out of this default list and remove Ripple-supported validators by default from their transactions entirely. Instead of creating their own lists of trusted auditors. This will allow the network to continue approving transactions even without Ripple remaining with the company or even its continued existence.
As new transactions emerge, auditors update their ledgers every three to five seconds and make sure they match other ledgers. If there is a mismatch they stop to see what went wrong. This allows Ripple to securely and efficiently validate transactions which gives it an advantage over other digital currencies such as Bitcoin.
“Bitcoin transaction confirmations can take several minutes or hours and are usually associated with high transaction costs,” Lee says. On Ripple, XRP transactions are confirmed in about four to five seconds at a lower cost.
What is the difference between Bitcoin and Ripple?
There is a lot of hype and confusion in the blockchain, distributed public ledger, and cryptocurrency world, and one name that continues to appear increasingly in this space is Ripple. Often asked about the difference between Bitcoin (still the most popular digital currency based on the Blockchain) and Ripple. So I will explain exactly what Ripple is and what makes it different from Bitcoin.
Ripple and Bitcoin
While Bitcoin is a digital currency designated as a means of payment for goods and services, Ripple is a payment settlement system, currency exchange, and transfers intended for banks and payment networks. The idea is to provide a system of direct transfer of assets (such as money, gold, etc.) that settles in almost real time and is a cheaper, more transparent and secure alternative to the transfer systems used by banks today such as the Swift payment system.
Bitcoin is based on blockchain technology while Ripple does not use a blockchain but uses a public ledger distributed using a network of validation servers and cryptographic tokens called XRP (sometimes referred to as Ripple).
XRP . coin
XRP is the actual digital currency for Ripple and is a code that is used on the Ripple network to facilitate the transfer of funds between different currencies. The current settlement systems generally use the US dollar as the common currency for conversion between other currencies. This incurs currency exchange fees and takes time which is why bank transfers. Between accounts in different countries often takes up to three days to process.
XRP differs from Bitcoin in that new (higher level) coins are created. As rewards for participants who provide computing power to maintain the blockchain network.
Ripple recently added a new feature where the company, through its smart contract system (escrows), releases 1 billion of its XRP to themselves every month to help fund business operations, incentivize customers and sell to accredited investors. Any unused codes will be placed in the escrow account. According to internal sources, in the last month (which was the first month of the escrow) Ripple only used about 100 million and returned 900 million to the escrow account.
Can XRP be mined?
“Mining” is the distributed verification system used by most blockchain-based digital currencies. It facilitates transactions and provides the mechanism through which a new currency is introduced into the digital currency system. Usually as a reward to investigators for their work in support of the network. For example, Bitcoin has a total supply limit of 21 million tokens. It is being released steadily as more and more transactions are being verified.
Understandably, this has led to concerns that too much XRP could be released simultaneously reducing the value of other XRPs already in circulation because part of what gives any coin its value is its relative scarcity.
Ripple Features
Fast transactions. Incredibly fast transaction confirmations. It usually takes four to five seconds. Compared to the days it would take for banks to complete a wire transfer or the minutes or hours it could potentially take for bitcoin transactions to be verified.
Very low fees. The cost of completing a transaction on the Ripple network is only 0.0001 XRP which is a small fraction at current rates.
A multi-use network. The Ripple network not only processes transactions with XRP, but it can also be used for fiat currencies, digital currencies, and commodities.
Used by large financial institutions. Large companies can also use Ripple as a transaction platform. Which shows that it already has more institutional adoption in the market than most cryptocurrencies.
Should you buy XRP?
Ripple has definitely gained a lot of fame and the list of organizations that use it. It implies that the tokens themselves will become valuable commodities in their own right. In the past year, the increase in the value of XRP has outperformed Bitcoin or any other digital currency. At the beginning of 2017, the value of XRP was $0.006. It peaked at the beginning of this year at 3.87. Before quickly dropping to its current value of around $1 per XRP.
As for the question “Should you buy?”, since Arabium is not a financial advisor we will not provide investment advice but it is fair to say that the uptake of Ripple by major financial institutions is generally considered a strong indicator of the future value of XRP. However before investing in any digital currency you should do a thorough research on it first and decide whether or not it is likely to be a valuable asset in the future. As we have seen, the value of all digital currencies is highly volatile and can fall as quickly as it rises. A strong tip is to never invest more than you can comfortably afford to lose.
While some may find the vision and benefits of XRP compelling. However, there is concern that the US Securities and Exchange Commission (SEC) lawsuit may create problems for those looking to buy. “They position themselves as a settlement class for regulated companies, but they are also in deep conflict with the Securities and Exchange Commission. None of the customers who want to join them can really start using XRP until Ripple finds out their legal issues.”
However, if you believe that Ripple will emerge victorious against the SEC and continue to take over as a payment system, it may be worth buying XRP. Just make sure you have money you can afford to lose.
