What is Ripple? The ultimate guide to XRP
Ripple is a fast money transfer network and cryptocurrency. Read why it has enjoyed steady growth, and how to buy.
Updated
The Ripple network has been accepted by several banks as a legitimate money transfer system, and the currency (XRP) offers a range of useful features. It’s a bit more complicated than most cryptocurrencies, though.
Image sources: Shutterstock, CoinMarketCap
This guide goes through what Ripple is, how XRP works, what to consider before trading and where to buy.
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.
What is Ripple?
| Icon | Symbol | Initial release date | Algorithm type | Max. supply |
|---|---|---|---|---|
 | XRP | 2012 | Ripple Protocol Consensus Algorithm (RPCA) | 100 billion XRP |
The goal of Ripple is to be a global settlement network, a platform to allow anyone to transfer money in any currency to any currency in a matter of seconds. This is an ambitious goal meant to eliminate the use of older systems like Western Union or SWIFT.
How does Ripple work?
Consider this scenario: Alice and Bob need to send some money to each other. Alice uses Jamaican dollars (JMD) to conduct her business, while Bob operates in Bangladeshi taka (BDT).
While it might not be evident to end users, the process behind Alice sending Bob money involves converting the JMD to a common currency like USD, then transferring the money between Alice’s bank and Bob’s. Finally, the USD in Bob’s bank is converted back to BDT.
This incurs a lot of fees at every exchange and wastes a lot of time. The Ripple network and currency aim to fix this problem.
The alternative Ripple proposes is the use of XRP as a common currency underlying all money transfers between different currencies (USD is currently the most common currency). Not only are transaction fees much lower to convert from one currency to XRP and back, but transfers take a maximum of 4 seconds to execute and verify.
Quite a few global banks have already started embracing Ripple as it saves them a lot of money in the long run by avoiding exchange fees.
How to buy Ripple
You might consider the following Ripple brokers and Ripple exchanges. All of the following let you buy, sell or trade XRP, although their value for money and convenience might vary.
How is Ripple different from bitcoin?
The Ripple coin and the Ripple Network have been built with slightly different purposes in mind, and it’s worth considering whether they provide advantages over bitcoin.
Fast and cheap
Ripple transaction processing only takes four seconds since it’s significantly less active compared to bitcoin. This has the added bonus of cheaper transaction fees, whereas the price for bitcoin transactions has been on the rise lately as more people adopt the platform.
Mining-free
All the 100 billion XRP that it’s possible to use on the platform already exist. While they’re not all on the market – a few are released into the market every month to avoid flooding – there is no use mining as there is nothing of value to be added, unlike in more traditional cryptocurrencies.
XRP in escrow
In May 2017, Ripple pledged to lock up 55 billion XRP in 55 different smart contracts, essentially putting billions of dollars in escrow. Each month, a contract then releases 1 billion XRP into the market.
The primary motivator for this move was the fear that Ripple would suddenly reduce the price of the coin by releasing the billions of XRP that it’s holding onto the market.
The move to lock up XRP will mimic the effect of mining as seen in other currencies like bitcoin, with the goal of keeping XRP steadily growing.
Bank acceptance
The Ripple platform and coin being accepted by banks gives the process legitimacy and, at least from an investor’s standpoint, can be a little more reassuring. This is not the case with bitcoin and other currencies as they are seen as competition by the banks.
Today’s Ripple price
Where can I use Ripple?
XRP is still a long way from being as widely accepted as coins such as bitcoin, Litecoin or Ethereum. It was never the goal to use Ripple as a payment method. Instead the aim has always been to use XRP to grease the wheels, in order to make fiat money transfers easier, faster and more secure.
However, there are still some merchants that accept Ripple. You can find a list here on the XRP forums.
Using Ripple to transfer money
Transferring money with Ripple works like any other cryptocurrency:
- Have some XRP available in your wallet. XRP wallets are the same as, for example, bitcoin wallets. Buy XRP on an exchange and then transfer them to your wallet.
- Scan or enter the recipient’s address. Whether they provide you with the hashed wallet address or a QR code, just follow the simple instructions on your wallet of choice and you’ll be done in no time.
- Enter the amount and send. The transaction should be verified in a few seconds and you’re done.
Other ways to get Ripple
Unless you’re a bank willing to invest into the Ripple platform, and because there is no mining allowed on Ripple, there are only two major ways to make money from it.
Get paid in Ripple
Anyone who decides to get paid in XRP will see the coin sitting in their wallets, but will also be helping the currency gain legitimacy and wider use. Ripple will benefit from any merchant accepting the currency.
Purchase Ripple
While the Ripple platform might not be easily accessible to traders, anyone can find a way to buy XRP. As more and more merchants and banks adopt the platform, it’s possible its price will increase too.
What to watch out for
As much as some people love Ripple and see it as the next generation of cryptocurrencies, there are also some who have concerns over privacy and centralization.
Privacy concerns
Cryptocurrency has always been considered the poster child of privacy and anonymity. Ripple’s decision to market their platform exclusively to banks has been a cause of concern for some users who worry about big brother keeping an eye on their transactions.
Centralization
Ripple’s platform is extremely centralized whereas most cryptocurrencies aim to be as decentralized as possible. The reason for this is that Ripple owns the vast majority of the coins available on the platform while currencies like bitcoin allow anyone to mine and acquire coins. The move to lock coins inside smart contracts was a step in the right direction to fix this issue, but every time the coins are released they first go to Ripple to do with them as it pleases.
What’s next for Ripple?
The company behind Ripple plans, as a priority, to improve the lack of decentralization from which the platform is currently suffering. By adding more trusted validator nodes, the company plans to shake off the image that it’s just another central bank controlling the Ripple currency.
With that said, the future of Ripple appears to depend entirely on the adoption of the platform by banks and that’s where the focus of the people behind Ripple probably needs to be. As more banks join the network, the price of XRP will no doubt continue to rise, driving more people to the coin and enticing banks to join the platform.
Frequently asked questions
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.
Ask an Expert