Since 2013, Ripple has been among the top cryptocurrencies after bitcoin, momentarily displacing Ethereum as the second-largest cryptocurrency by market value. Does Ripple has the potential to unseat Bitcoin? Is it a wise investment for the long term?
These questions have no clear solutions, and the argument continues. You will learn about Ripple (XRP) in this post, along with a comprehensive guide to this new cryptocurrency.
What is Ripple (XRP)?
Ripple was established in its present version in 2012 by Jed McCaleb, Ryan Fugger, and Chris Larsen. The creator of the Mt. Gox bitcoin exchange, which formerly handled the majority of the world’s bitcoin trading activity, McCaleb has a lengthy history in the realm of digital currency.
The business was first known as OpenCoin. Major venture capital firms, including Andresen Horowitz, Google Ventures, and Lightspeed Venture Partners, made investments in OpenCoin around the beginning of 2013. Additionally, they changed the company’s name to Ripple Labs and released the XRP cryptocurrency.
Beyond merely being a digital currency, Ripple is meant to provide practically instantaneous, safe international transactions to banks, organizations, and people. This is because it is planned to be a real-time gross settlement system. Ripple wants to compete with the Society for Worldwide Interbank Financial Telecommunication, while bitcoin competes with gold as a store of value and with central banks like the Federal Reserve as an inflation-proof asset (SWIFT).
The Ripple Protocol aims to make it possible for transactions in many currency combinations to move immediately between two parties anywhere in the globe. As an example, if you sent money to someone in Japan, it would instantaneously convert from dollars to XRP and then to yen.
How does Ripple work?
The goal of RippleNet, the blockchain infrastructure built by the company, is to provide banks access to speedy, affordable, and straightforward cross-border transactions. As a consequence, it offers an effective substitute for the Society for Worldwide Interbank Financial Telecommunication, the predominant international payments system now in use by banks.
The XRP cryptocurrency uses a consensus approach employing several servers owned by banks to validate transactions. By comparing proposed transactions to the most current version of the XRP Ledger, validators ensure that they are legitimate. To be validated, a transaction must be approved by the vast majority of validators.
Difference between Ripple and XRP
It’s critical to realize that they are distinct from one another: XRP is a cryptocurrency, and Ripple is a for-profit organization that supports and advances XRP, the software that powers it (the XRP Ledger), and various other projects with a transactional emphasis. The business is insistent that the two organizations are distinct.
On its website, Ripple claims that XRP is “faster, less expensive, and more scalable” than any other digital currency. It “powers breakthrough innovations throughout the payments arena” using the XRP Ledger. According to the company, their connection with XRP is as follows.
“Ripple is focused on developing technologies to help unlock additional usefulness for XRP and change global payments,” the company’s website states. Other XRP-related use cases are also being pursued by third parties.
One year after the XRP Ledger project had begun, Ripple was established in September 2012 under the moniker OpenCoin. Before settling on Ripple in 2015, OpenCoin changed its name in 2013 to Ripple Labs. Prior to changing its name to the XRP Ledger, the Ripple Open Payments System was known as the Ripple Consensus Ledger.
The creators of the XRP Ledger chose to provide 80 billion tokens to a private business that would cooperate with the community to promote the coin when the XRP Ledger was operational. In order to “incentivize market maker activity to improve XRP liquidity and strengthen the general health of XRP markets,” this business, Ripple, claimed to have been systematically selling XRP.
Pros and cons of Ripple
The good side of Ripple
Compared to bitcoin, ripple is much quicker and has a greater volume capacity. Ripple potentially could manage transaction volume on the size of the Visa network or more since transactions are also far less expensive than those of bitcoin.
Because of its strong connections in the financial sector, Ripple Labs has forged a number of alliances with significant businesses including Western Union and MoneyGram. Additionally, they have agreements in place with major financial organizations all around the globe, including Banco Santander, Standard Chartered, Barclays, and National Australia Bank.
Banks who migrate to Ripple, according to Ripple, will have quicker settlement times and cheaper operating expenses than those that stick with older networks. According to the notion, banks who adopt Ripple should see larger profits. Other banks will quickly copy Ripple’s strategy if they learn their partners are benefiting financially.
The XRP token is required by financial institutions and other parties in order to profit from the network, hence demand will increase and the price of XRP will rise. Ripple will benefit, as well as everyone else who has XRP.
The bad side of Ripple
Decentralization purists, and advocates of bitcoin in particular, have harshly criticized Ripple. Decentralization is sacrificed in favor of scalability and fast transaction times. This implies that utilizing XRP requires some level of faith in Ripple Labs.
Many proponents of cryptocurrencies believe that this represents a return to the problems that cryptocurrencies were created to address in the first place. Because of its relationships with large banks, some people mock XRP as a “banker currency.” It is also attacked for being prone to censorship. Bitcoin, in contrast, is seen to be a blessing for free expression under oppressive governments.
However, it also implies that XRP is less likely to be used by criminals. While this may be beneficial for the public’s perception, there is no disputing that demand from illegal or questionable legal transactions drives up the price of bitcoin.
The quantity of XRP on the market is primarily within the control of Ripple Labs since, unlike bitcoin, the whole amount was produced when the network went live. The concern is that Ripple Labs or its founders, who hold the majority of XRP, may suddenly dump all of it on the market, driving down the price.
Though they are obviously unlikely to do so since it would reduce the value of their own shares, the argument still calls for XRP holders to have faith in Ripple Labs. It’s understandable that many cryptocurrency enthusiasts regard Ripple with distrust given that many of them have a deep-seated dislike of bankers and that Ripple Labs has strong ties to the financial sector.
Fair enough, Ripple Labs can regulate the price by limiting the supply of XRP, just as central banks do with the dollar. Given that the network is far more centralized than bitcoin, some worry that Ripple Labs may attempt to artificially increase the amount of XRP. Ripple supporters dispute this notion.
Applications of Ripple
In order to expand the XRP community’s use cases, Ripple was developed. Over time, it developed a variety of services that made it possible to utilize cryptocurrencies for international transfers. Before their collaboration broke up, remittance behemoths like MoneyGram employed Ripple’s products.
In order to make transferring money quicker, less expensive, and more dependable, the business has now combined all of its XRP-related products under the RippleNet service. RippleNet “offers connectivity to hundreds of financial institutions across the globe through a single API.”
RippleNet removes the need to pre-fund accounts using a service called On-Demand Liquidity, which sources liquidity for cross-border transactions using XRP. RippleNet is used by major participants in remittances and banking, including Santander, Bank of America, SBI Remit, American Express, and Banco Rendimento.
The XRP-powered solution from Ripple, in brief, enables network users to conduct payments with real-time settlement and boosts payment efficiency and certainty. It is possible to conduct international payments with less money in nostro accounts by using XRP itself as a source of liquidity on demand.
A software framework called Interledger Protocol, which is funded in part by Ripple, intends to make it easier to conduct transactions between cryptocurrencies and bank ledgers. Although it may be linked to the XRP Ledger, the Interledger Protocol does not need the usage of XRP.
Additionally, XRP uses RippleX, which gives programmers and business owners access to tools and services developed on top of the XRP Ledger so they may incorporate blockchain technology into their applications. As with other cryptocurrencies, XRP itself may be used on-chain.
How to mine Ripple (XRP)
The cryptocurrency Ripple (XRP), which is federated by financial institutions and payment processor networks, is created using a digital ledger akin to blockchain technology.
Although it is true that Ripple (XRP) cannot be mined by miners, it is theoretically feasible to do it using other cryptocurrencies. One of the most practical methods of mining XRP is to mine other cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), and then trade the mined cryptocurrencies for Ripple (XRP) via exchanges.
Bitcoin vs Ripple
Bitcoin and Ripple (XRP) are not direct competitors since they were developed for distinct purposes. The most widely used cryptocurrency is bitcoin since it is legal to exchange or carry bitcoin everywhere in the world. With XRP, cross-border transactions may be settled at lower costs and quicker rates than with traditional fiat currencies.
The ability of Bitcoin to be freely exchanged as a genuine store of value gives the general people greater control over any arbitrary regulations and market forecasts. The use case for XRP is not predicated on pricing, but rather on Ripple’s partnership with financial institutions.
How to buy Ripple (XRP)?
The asset must be purchased or received in order to use XRP. Interested parties may buy XRP using a variety of platforms, including controlled exchanges, decentralized exchanges, and peer-to-peer (P2P) investments (DEXs).
It is common practice to deposit fiat currency (USD, EUR, JPY, etc.) to a centralized cryptocurrency exchange by bank transfer before using those funds to buy XRP on that exchange. On a few of cryptocurrency exchanges, customers may also use their credit cards to purchase digital assets. Additionally, depending on the exchange, you may be able to purchase XRP using crypto-to-crypto pairings (such as XRP-BTC).
A P2P transaction entails physically meeting a relative or an XRP owner to acquire the item. Make careful to confirm whether the individual really possesses XRP.
Due to the fact that XRP is a token created on its own distributed ledger, it is crucial to note that it cannot be acquired on DEXs like SushiSwap, Uniswap, or 1inch (called XRPL). Users may swap issued currencies for XRP or with one another on the fully operational exchange that is part of the XRP Ledger.
Is Ripple a good investment?
The idea that cryptocurrencies are erratic in price does not apply to XRP. A little XRP investment may be profitable if you think Ripple’s growth will continue. Although it’s not as secure as investing in equities, if Ripple is successful, you may earn a lot of money. Invest at your own risk as usual!
Ripple’s potential is also plain to observe at the same moment. It may take the place of an antiquated and ineffective global money transfer system. It is positive that it has connections to banks. And if its legal situation were to improve, the price may rise, bringing gains to investors. So stop asking, “Should I purchase XRP?” Make sure you’ve done your study before acting.
Final thoughts
There is no doubt that Ripple has a lot of potential given its high level of traction. There is a risk that as more individuals join the cryptocurrency market, the proportion of “regular” people may rise and that these newcomers may not be as hostile to the established financial system as the early bitcoin adopters. If so, market share may move away from bitcoin and toward Ripple.
However, if bitcoin does truly cause financial system disruption and large banks go extinct, Ripple’s connections to the banking sector may turn out to be a liability rather than a strength.
There are a thousand different analysts, each with a thousand different predictions for the future. Time will only tell. However, there will undoubtedly be a lot of demand in the meantime from investors and traders trying to diversify their holdings as the bitcoin arms race continues.