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What is XRP? A 101 guide to Ripple and XRP

See how the Ripple blockchain platform aims to transform the global payments industry.

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XRP coin

XRP is a cryptocurrency used by Ripple, which is a cross-border payments company looking to rival the likes of Visa, Western Union and overhaul international payments using blockchain technology. This guide will explain how XRP works, how Ripple uses XRP and show you how to buy, trade and store XRP coins.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

In this guide:

XRP

Live XRP (XRP) price

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Data sourced from Binance

XRP at a glance

Ticker symbolXRP
UseCross-border Payments
Year released2012
OriginUnited States
Maximum supply100,000,000,000
Consensus algorithmProof of Correctness
Notable team membersBrad Garlinghouse, David Schwartz, Stefan Thomas
Notable partnershipsAccenture, American Express, Deloitte, Royal Bank of Canada, MoneyGram, National Australia Bank, Western Union, Westpac
Mineable?No
Learn more about XRP

SEC Lawsuit

On 22/12/2020 the Securities and Exchanges Commission (SEC) filed a lawsuit against Ripple and two of its executives.

According to the SEC press release “The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide.”

Ripple filed a 93-page response to the lawsuit on 01/29/2021, stating that “XRP performs a number of functions that are distinct from the functions of “securities” as the law has understood that term for decades. For example, XRP functions as a medium of exchange — a virtual currency used today in international and domestic transactions — moving value between jurisdictions and facilitating transactions.”

What are Ripple and XRP?

Launched in 2012, XRP is now one of the world’s largest cryptocurrencies. It aims to offer fast, affordable and reliable cross-border payments. Both XRP and the XRP Ledger are used by US technology company Ripple, which develops a range of solutions designed to transform the global payment industry.

“The revolution of blockchain is not going to happen from outside the system; it’s going to happen from within the system.”
– Brad Garlinghouse, Ripple CEO

Ripple is a San Francisco-based technology company with more than 300 employees, focused on providing cross-border payment solutions.

Ripple’s main aim is to create a global settlement network that ensures more efficient transactions between the world’s financial institutions.

The platform is designed to allow users – primarily financial institutions – to transfer money from any currency to any other currency in a matter of seconds, anywhere in the world. This is an ambitious goal meant to eliminate the need for older systems like SWIFT.

Before going any further, we should point out that the term “Ripple” is often used interchangeably, and often incorrectly, to refer to a few different things.

XRP

XRP is the name of the digital currency that facilitates transactions on the Ripple network. It effectively acts as a bridge between the two currencies being transferred, and also serves as a source of liquidity when necessary. XRP is the native asset of the XRP Ledger, an open-source blockchain that runs on a network of peer-to-peer servers.

Ripple

This is the American technology company that develops the Ripple payment protocol and network. Originally known as OpenCoin, it later traded as Ripple Labs before rebranding to Ripple in 2015.

RippleNet

This is Ripple’s network of payment providers around the world. It connects the different payment networks of banks, payment providers, digital asset exchanges and corporate entities, and can accept both fiat and cryptocurrencies.

XRP vs Ripple: What’s the difference?

The term “Ripple” is often used to describe the XRP cryptocurrency, but this is in fact incorrect.

Ripple is the California-based tech company that aims to make it faster, easier and more affordable to send cross-border payments.

XRP (XRP) is the independent digital asset that facilitates transactions on the Ripple network, acting as a bridge between different fiat currencies and as a source of liquidity.

[INFOGRAPHIC] An in-depth comparison of XRP and Ripple.

Where to buy XRP

Name Product Deposit methods Fiat Currencies Cryptocurrencies
Binance Cryptocurrency Exchange
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Cryptocurrency
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How XRP works: The technology behind Ripple

Current methods of sending money internationally are outdated and slow. This is best summed up in this excerpt from Ripple’s cost model paper:

“Today’s global payments infrastructure moves money from one payment system to another through a series of internal book transfers across financial institutions. Because these book transfers occur across different systems with a low level of coordination, funds settlement is slow (often 3-5 days, trapping liquidity), error-prone (error rates run upwards of 12.7%), and costly ($1.6 trillion in system-wide costs for global cross-border transactions).”

Despite the fact that the global remittances industry is huge, there’s currently no streamlined and well-organised international network to handle cross-border payments. This is the problem Ripple aims to solve. However, rather than going toe-to-toe in competition with the banking Goliaths that currently control this sector, Ripple’s plan is to partner with major financials around the world to offer a blockchain-based solution.

By joining Ripple’s global network, Ripple says that financial institutions can process their customers’ payments anywhere in the world instantly, reliably and cost-effectively.

How long do XRP payments take to settle?

Let’s say Bank A in Hong Kong wants to send HK$10 million to Bank B in Bangladesh. Rather than converting Hong Kong dollars to Bangladeshi taka, battling exchange rate margins, paying processing fees and facing slow transaction times along the way, Bank A can transfer HK$10 million worth of XRP to Bank B’s Ripple wallet, which can then be converted to the local currency.

Payments using XRP settle in four seconds, and the current minimum transaction cost required by the network for a standard transaction is 0.00001 XRP. The network is also currently capable of consistently handling 1,500 transactions per second.

XRP settlement Image: Finder

Payment settlement times of XRP vs other platforms Source: Ripple

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xCurrent vs xRapid vs xVia: What’s the difference?

Ripple offers three products to banks and payment providers around the world:

XRP supply and tokenomics

The maximum supply of 100 billion XRP has already been created. However, as of December 2018, the circulating supply sits at about 41 billion.

Escrow release

This is because Ripple, the company behind the cryptocurrency, owns some 60% of the total supply of XRP. At the time of writing (May 2018) most of Ripple’s holdings (around 55 billion XRP) are locked in an escrow account, with up to 1 billion XRP to be released every month for a period of 55 months.

Of the 1 billion XRP released each month, any unused amounts are put back into escrow and will be re-released in the first month that there are no other XRP releases. Essentially, the unused amounts are sent to the back of the queue.

Deflation

XRP is also deflationary. While the total XRP supply started off at 100 billion (100,000,000,000), by the end of 2018 it was down to only 99.99 billion (99,991,757,426 according to CoinMarketCap).

That’s because XRP is a deflationary currency, with every transaction incurring a small fee (to prevent spam attacks) which is destroyed during the transaction.

The minimum fee for each XRP transaction is 0.00001 XRP (also known as 10 drops, or a fraction of a cent), although certain movements such as multisignature transactions, or escrow transactions, will incur higher fees.

So, in about 6 years of its life, around 8 million XRP has been destroyed by deflation. Even with generous predictions of XRP uptake it’s estimated that it would take thousands of years for circulating numbers to get low enough to start being a concern. Plus, XRP can be divided into individual drops (0.000001 XRP) if needed.

The fees and therefore the burn rate can also be modified by consensus at a later date.

In the immediate future, the real circulating supply of XRP will actually be increasing much more quickly than it’s decreasing as Ripple releases XRP from its escrow account.

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Is XRP centralised or decentralised?

Picture not describedQuestions you might have
The XRP blockchain works differently to Bitcoin, Ethereum and most others, and has often been criticised as being not truly decentralised.

The point of decentralisation in this context is primarily to ensure that it’s impossible to interfere with the network by blocking or reversing transactions, sending money you don’t have and similar.

If one entity manages to take control of a large enough part of the network, or if a sufficient number of participants collude to attack the network, they might be able to interfere with the network in these kinds of ways.

  • Public ledgers like Bitcoin: Theoretically anyone can participate in the mining process, and be rewarded with cryptocurrency for processing transactions and maintaining the ledger. Network security depends on having a diverse range of independent miners, it assumes that miners are motivated by profits and it aims to ensure that attacking the network is less profitable than doing the right thing.
  • XRP Ledger: There are no direct rewards for node operators. Rather, running a node is its own reward because it helps maintain the XRP Ledger which should be providing a valuable service. There are two kinds of nodes, but only the “trusted” ones will actually have a say in whether transactions are processed. The untrusted ones are mostly just along for the ride.

One of the reasons XRP Ledger is so fast compared to Bitcoin and other public blockchains is essentially because it depends on that tighter and faster set of “trusted nodes” to do the heavy lifting. These nodes can be found on Ripple’s Unique Node List. Getting a spot on that list means publicly identifying and verifying oneself to the world.

Storing your XRP safely

Vector of cryptocurrency wallet

While you can store your XRP on an exchange if you wish, for security reasons it’s recommended that you store them in a private wallet.

There are many popular wallets that support XRP, including the Ledger Nano S hardware wallet and Toast Wallet for desktop.

Learn about cryptocurrency wallets

Ripple team

Ripple, the San Francisco-based fintech company behind XRP, was founded in 2012. Though the project has roots dating back to 2004, it wasn’t until Jed McCaleb and Chris Larsen joined forces in August 2012 that the Ripple we know today truly began to take shape.

Today, Ripple is led by CEO Brad Garlinghouse and notable team members like chief cryptographer David Schwartz and CTO Stefan Thomas.

Notable partnerships

The list of financial institutions and organisations that have partnered with Ripple is an impressive one and stretches to more than 100 customers. Some of the highlights of 2018 include:

  • December 2018: Coinone Transfer launches Cross, South Korea’s first blockchain remittance service, powered by Ripple.
  • November 2018: CIMB Group, ASEAN’s fifth largest bank, entered into a strategic collaboration with Ripple to enable instant cross-border payments across its markets.
  • October 2018: Ripple announced that xRapid (which uses the XRP token) was commercially available, and was already moving into production with customers including MercuryFX and Cuallix.
  • September 2018: PNC Financial Services, a top ten bank in the United States, joined RippleNet as a user to offer customers real-time cross-border payments.
  • August 2018: Ripple brings on Bittrex, Bitso and Coins.ph as its preferred digital asset exchange partners.
  • May 2018: Ripple announced that RationalFX (UK), FairFX (UK), Exchange4Free (UK), MoneyMatch (Malaysia) and UniPAY (Georgia) were joining xVia.
  • April 2018: Santander launched a blockchain-based foreign exchange service, called Santander One Pay FX, using Ripple’s technology.
  • February 2018: Two banks, Itaú Unibanco (Brazil) and IndusInd (India), and three remittance providers – InstaReM (Singapore), Beetech (Brazil) and Zip Remit (Canada) – announced that they were joining RippleNet.
  • February 2018: It was announced that Western Union was trialling transactions using Ripple technology.
  • January 2018: MoneyGram announced that it would pilot the use of XRP in its payment flows through xRapid.
  • June 2019: Ripple announced the purchase of MoneyGram stock, agreeing to purchase a ~10% stake in the company for US$50 million. MoneyGram agreed to use Ripple products for cross-border settlements.
  • March 2020: The National Bank of Fujairah PJSC (NBF), a partially state-owned bank in the UAE partners with Ripple and announces it will use RippleNet for remittances to India.
  • September 2020: Ripple acquired Logos and it’s team of Engineers who will work on Ripple’s Xpring product as well as create a DeFi ecosystem that operates on the XRP blockchain. A week later Ripple purchases Icelandic crypto trading firm Algrim in order to strengthen its European footprint, in particular, it’s On-Demand Liquidity service.
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  • What to watch out for

The biggest obstacle to Ripple’s quest for global domination is the adoption (or lack thereof) of XRP by banks and financial institutions around the world, and that’s where the focus of the people behind Ripple might be.

If more banks join the network, this could encourage demand for XRP and entice other banks to join the platform, but Ripple may also face stiff competition from Stellar.

And that’s before we even get to the established players in this space. Ripple needs to not only outperform other blockchain payment solutions, but also needs to be an improvement on the in-house blockchain creations being trialled by financial institutions around the world.

SWIFT currently connects more than 11,000 of the world’s financial institutions through its own network, and has been working on its own trials of blockchain technology. Credit card giant Visa is exploring its own blockchain-based cross-border payment options, so Ripple won’t be able to just waltz in and take a big chunk of market share without a fight.

Another key challenge that could hamper the price growth of XRP is its inability to gain listings on popular US exchanges like Coinbase and Gemini. The Coinbase listing was heavily rumoured in early 2018 but never eventuated, and reports from April 2018 suggest that XRP is unlikely to feature on either of these platforms any time soon.

There are also ongoing questions about the role of XRP within the Ripple ecosystem. Usage and network effects might drive price actions to a large extent, but this may not translate into higher prices as directly as one might expect. Trillions of dollars are crossing borders each year, but it’s still not clear how much market cap XRP needs to adequately service the industry.

The XRP Ledger’s construction and design choices have also attracted some criticism.

Bottom line

With partnerships galore and strong financial backing, Ripple is a major player in the crypto world. It’s designed with a focus on bridging the gap between the traditional banking industry and the new age of digital currencies, and as anyone who’s ever been gouged while sending an international money transfer will agree, it’s targeting a market sector that’s crying out for disruption.

But whether or not Ripple has the product to challenge the old guard of the world’s financial industry remains to be seen, so research the project thoroughly before deciding whether or not you should buy any XRP.

Ripple frequently asked questions about Ripple

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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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