What Is Ripple?
Ripple is a blockchain-based digital payment network and protocol with its own cryptocurrency, XRP. Ripple's main process is a payment settlement asset exchange and remittance system, similar to theSWIFT system for international money and security transfers, which is used by banks and financial middlemen dealing across currencies.
The token used for the cryptocurrency is premined and uses the ticker symbol XRP. Rippleis the name of the company and the network, andXRPis the cryptocurrency token.The purpose of XRP is to serve as an intermediate mechanism of exchange between two currencies or networks—as a sort of temporary settlement layer denomination. Ripple was first released in 2012 and was co-founded by Chris Larsen and Jed McCaleb.
Key Takeaways
- Ripple is a blockchain-based digital payment network and protocol with its own cryptocurrency, XRP.
- Rather than use blockchain mining, Ripple uses a consensus mechanism, via a group of bank-owned servers, to confirm transactions.
- Ripple transactions use less energy than bitcoin, are confirmed in seconds, and cost very little, whereas bitcoin transactions use more energy, take longer to confirm, and include higher transaction costs.
- Ripple (XRP) ranks among the most valuable blockchain-based tokens by market capitalization.
- The Ripple payment system is intended to be used primarily by banks but individual investors can speculate on the price of XRP.
Understanding Ripple
Ripple operates on an open-source and peer-to-peer decentralized platform that allows for a seamless transfer of money in any form, whether it's dollars, yen, euros, or cryptocurrencies, like litecoin or bitcoin. Ripple is a global payments network and counts major banks and financial services institutions among its customers. XRP is used in its products to facilitate quick conversion between different currencies.
Ripple as a Digital Hawala Network
To understand how the system works, consider a money transfer structure where the two parties on either end of the transaction use their preferred middlemen to receive the money. In effect, Ripple functions as a digital hawala service. Hawala is an informal method of transferring money, usually across borders, without any physical money actually moving.
Say that Lawrence needs to send $100 to River, who lives in a different city. Lawrence provides the funds to be sent to River to Lawrence's local agent, Kate. Lawrence also provides a secret password that River is required to answer correctly to receive the funds in their city. Kate alerts River’s agent, Asuka, of the transaction details—recipient, funds to be reimbursed, and the password. If River gives Asuka the right password, Asuka gives them $100.
However, the money comes from Asuka’s account, which means that Kate owes Asuka $100 (which will be settled at a later date). Asuka can either record a journal of all Kate’s debt, which Kate would pay on an agreed day, or make countertransactions that would balance the debt. For example, if Asuka was also Martin’s agent and Martin needed to transfer $100 to Etios, whose agent is Kate, this would balance out the $100 owed to Asuka, because Etios will be paid from Kate’s account.
Although the Ripple network is a little more complex than this example, it demonstrates the basics of how the Ripple system works. From the example above, one can see that trust is required to initiate a transaction—trust between Lawrence and Kate, Kate and Asuka, and River and Asuka.
Ripple uses a medium, known as a gateway, as the link in the trust chain between two parties wanting to make a transaction. The gateway acts as the credit intermediary that receives and sends currencies to public addresses over the Ripple network. Any person or any business can register and open a gateway, which authorizes the registrant to act as the intermediary for exchanging currencies, maintaining liquidity, and transferring payments on the network.
Ripple's Digital Currency XRP
Ripple's digital currency, XRP, acts as a bridge currency to other currencies. It does not discriminate between any fiat/cryptocurrency, which makes it easy for any currency to be exchanged for another. Each currency on the ecosystem has its own gateway—for example, CADBluzelle, BTCbitstamp, and USDsnapswap. If River wanted bitcoins as payment for the services rendered to Lawrence, Lawrence does not necessarily have to be in possession of any bitcoins. He can send the payment to his gateway in Canadian dollars (CAD), and River can receive bitcoins from his gateway. One gateway is not needed to initiate a complete transaction; multiple gateways can be used, forming a chain of trust rippling across the users.
Holding balances with a gateway exposes the user to counterparty risk, a risk that is also present in the traditional banking system. If the gateway does not honor its liability, the user could lose the value of their money held at that gateway. Users that don’t trust a gateway can, therefore, transact with a trusted gateway that in turn deals with the "untrusted" gateway. This way the IOU will be transacted through the trusted, or creditworthy-certified, gateway. Counterparty risk does not apply to bitcoins (and most altcoins) because a user’s bitcoin is not another user’s IOU or liability.
Investors and potential users of Ripple should be aware that it is the target of an ongoing Securities and Exchange Commission (SEC) lawsuit that started in December 2020. The agency is suing the company and two of its top executives for allegedly issuing and selling $1.3 billion in unlicensed securities in the form of the XRP cryptocurrency. The SEC contends that XRP counts as a security and, as such, the SEC is allowed to regulate it. Ripple says that’s not the case, as XRP is instead a medium of exchange, a virtual coin used in order to conduct both international and domestic transactions. The SEC case against Ripple could end in 2023.
How Ripple Works
The Ripple network does not run with aproof-of-work(PoW) system like bitcoin or aproof-of-stake(PoS) system like Nxt. Instead, transactions rely on a consensus protocol in order to validate account balances and transactions on the system. The consensus works to improve the integrity of the system by preventing double-spending.
A Ripple user that initiates a transaction with multiple gateways but attempts to send the same $100 to the gateway systems will have all but the first transaction deleted. Individual distributed nodes decide by consensus which transaction was made first. The confirmations are instant and take roughly five seconds. Because there’s no central authority that decides who can set up a node and confirm transactions, the Ripple platform is described as decentralized.
Ripple keeps track of all IOUs in a given currency for any user or gateway. IOU credits and transaction flows that occur between Ripple wallets are publicly available on the Ripple consensus ledger. But even though financial transaction history is publicly recorded and made available on a blockchain, the data is not linked to the ID or account of any individual or business. However, the public record of all dealings (i.e., the blockchain) makes the information susceptible to de-anonymization measures.
The Ripple payment system is mainly intended to be used by banks, although individual investors may speculate on the price of XRP.
Special Considerations
Ripple improves on some of the drawbacks attributed to traditional banks. Transactions are settled within seconds on the Ripple network (even though the platform handles millions of transactions frequently). This is unlike banks, which could take days or weeks to complete a wire transfer. The fee to conduct transactions on Ripple is also minimal, with the minimum transaction cost required for a standard transaction set at 0.00001 XRP, compared with the large fees charged by banks for conducting cross-border payments.
As of late August 2022, one XRP is worth around $33.75 cents, and Ripple was the seventh-largest cryptocurrency with a market cap of more than $16.6 billion.
Is Ripple Better Than Bitcoin?
Ripple transactions use less energy than bitcoin, are confirmed in seconds, and cost very little, whereas bitcoin transactions use more energy, take longer to confirm, and include higher transaction costs.
How Does Ripple's Network Function?
Ripple network transactions rely on a consensus protocol to validate account balances and transactions on the system. It does not run with aPoW system like bitcoin or aPoS system such as Nxt. Ripple's consensus aims to improve the integrity of the system by preventing double-spending.
How Is Ripple Different from XRP?
Ripple is a global payments network with major banks and financial services providers as its customers. XRP is a cryptocurrency developed by Ripple that is used in Ripple products to facilitate quick conversion between different currencies.
FAQs
XRP has gained the trust of both financial institutions and investors, which could make it a more reliable, stable investment than some other alt-coins. Additionally, XRP has a finite number of coins, unlike some other cryptocurrencies, where tokens are constantly being created and mined.
Why is XRP so valuable? ›
XRP's main selling point has always been its speed. Unlike bitcoin, which often requires extended periods of time to complete a transaction, XRP transactions settle in seconds. That's because XRP does not utilize the “proof of work” algorithm used by other cryptocurrencies — like bitcoin — for validating payments.
How does Ripple make money? ›
How Does Ripple Make Money? Although the XRP cryptocurrency is decentralized, it's still tied to a private company in Ripple, and Ripple makes money by selling XRP, payment fees, profits from investments, as well as interest fees on loans.
What is XRP for dummies? ›
XRP is a cryptocurrency running on the XRP ledger. It is a blockchain designed by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto later founded Ripple and used XRP to promote online transactions.
Can Ripple reach $100? ›
Can Ripple (XRP) Hit $100 or $1000? Yes, it is possible for Ripple to hit $100, but it is unlikely. And it's even more unlikely for the token to reach $1,000. This is because for XRP to reach $1,000 per coin, its market cap would have to reach at least $100 trillion, which we're very unlikely to see any time soon.
Will Ripple reach $50? ›
The cryptocurrency known as Ripple, officially called XRP, is one of the crypto assets that is aiming to shake up an entire industry – namely, the cross-border payments industry.
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Conclusion: Is Ripple a Good Investment and What is the Future of Ripple?
| Year | Potential High | Potential Low |
|---|
| 2024-2025 | $50 | $8 |
3 more rowsDespite many challenges posed by adopting blockchain technology for international banking, XRP holds a strong position in this industry. There are many use cases for the blockchain, and it is used by many banks due to its operational benefits.
Is XRP going to be used by banks? ›
Currently, the Ripple payment network works with worldwide financial institutions from over 55 countries. Their On-Demand Liquidity (ODL) service uses the digital asset XRP “to source liquidity during cross-border transactions, as an alternative to traditional systems.”
What happens if Ripple loses? ›
CEO Brad Garlinghouse said a few countries have reached out to Ripple about relocating. Ripple CEO Brad Garlinghouse said the crypto company will move to another country if it loses in its legal battle with the SEC.
Who owns the most Ripple? ›
Brad Garlinghouse, the current CEO of Ripple, also owned a significant amount of XRP. However, Forbes did not specify how much. Garlinghouse also held 6.3% of Ripple's stock.
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Who owns the most Ripple (XRP)?
| Long position overnight fee | -0.0500% |
|---|
| Spread | 0.0012208 |
2 more rows14 Aug 2022
Trading Education, which is bullish on XRP's long-term future growth, likens the platform to a Visa competitor by the end of the decade. The site predicts that XRP could reach a high of $31.81 by the end of 2030.
Can I get rich with Ripple? ›
Many have made fortunes through Ripple trading. There is an abundance of proof that investing in Ripple can make people rich.
Why not to invest in Ripple? ›
Top 2 Reasons Not to Buy Ripple (XRP)
There are many reasons why you may choose not to buy Ripple in 2022. It could be the tight monetary policy of the Fed, negative crypto market conditions, or that the price may still fall, according to some forecasts.
Is XRP a good investment 2022? ›
Yes. Along with a strong bullish sentiment, it is likely that Ripple will breach past $1.00 again this year. This could go all the way up to $1.50 to $1.80 should it follow last year's trading trajectory. Failing to hit $2.00 in 2022 does not mean it will never make it.
How many banks use XRP? ›
Ripple collaborates with financial institutions worldwide; more than 100 financial institutions have joined RippleNet, including: Santander (USA)
Will XRP explode in 2022? ›
With her strong support and XRP's latest win against the SEC, crypto enthusiasts predict that XRP will likely explode in 2022.
Does Ripple burn coins? ›
Interestingly, XRP has a kind of token-burning mechanism built in. With every XRP that is being transacted, a small amount is put up by the sender and is destroyed in the process, reducing this amount from the total supply.
How high can XRP go in 2022? ›
According to the technical analysis of XRP prices expected in 2022, the minimum cost of XRP will be $0.369963. The maximum level that the XRP price can reach is $0.419958.
Can Ripple reach $1000? ›
This is because its total circulation is less than 100 billion, which means it would need to have a market cap of $100 trillion for XRP to hit a price of $1,000.
Why is Ripple dropping? ›
A combination of technical, fundamental and social sentiment indicators spell downside risks for XRP after its price rises over 8% week-to-date. Ripple's XRP price risks dropping by more than 25% in the coming weeks due to a multi-month bearish setup and fears surrounding excessive XRP supply.
Ripple Price Prediction 2029
According to our XRP price forecast, the maximum XRP value is expected to be $0.92, while the potential low may be around $0.84.
Did XRP get sued? ›
Ripple's founders created XRP in 2012. The SEC sued the San Francisco-based company and its current and former chief executives in December 2020, alleging they have been conducting a $1.3 billion unregistered securities offering since the token's creation.
Who are the people behind XRP? ›
In September 2012, Chris Larsen and Jed McCaleb co-founded the corporation OpenCoin. OpenCoin began development of the ripple protocol (RTXP) and the Ripple payment and exchange network.
What problem does Ripple solve? ›
In short, Ripple's XRP-powered solution helps network members process payments with real-time settlement and improve payment efficiency and certainty.
Why is XRP being sued? ›
The SEC claims Ripple was selling XRP as an unregistered security. They point to its role in funding Ripple and claim Ripple's platform is not decentralized. Ripple claims the SEC is making classifications based on bias rather than actual merit (or even well-defined rules).
Can Ripple work without XRP? ›
Only xRapid requires the use of XRP. The Ripple Consensus Protocol cannot exist without XRP, although it could still endure should Ripple, the company, fail. The RCL supports transactions of fiat currency, cryptocurrency, commodities or any other unit of value such as frequent flier miles or mobile minutes.
What is the main use case of XRP? ›
XRP is a cryptocurrency token designed to migrate transactions from central databases controlled by financial institutions to a more open infrastructure while significantly cutting costs. XRP transactions are trustless, instant and cheap, putting them at an advantage for cross-border movements.
How many Ripple coins are left? ›
There are currently 43,299,885,509 XRP coins circulating out of a max supply of 100,000,000,000.
Is it too late to invest in Ripple? ›
Investors would do better to keep a close eye on how the token develops to see if there is potential for the asset in 2023. If all goes well, it is not too late to buy XRP, but one can never be sure in the crypto market.
How many Ripple are left? ›
How Many XRP Coins Are There In Circulation? XRP currently has 45,404 billion tokens in circulation, while its total supply counts 100 billion XRP tokens.
Ripple is a blockchain-based digital payment network and protocol with its own cryptocurrency, XRP.
How many ethereum are left? ›
Ethereum Supply is at a current level of 120.52M, down from 120.52M yesterday and up from 117.91M one year ago. This is a change of -0.00% from yesterday and 2.22% from one year ago.
Why does the SEC think XRP is a security? ›
According to the arguments, the SEC claims that buying XRP is an investment in a common enterprise. This includes Ripple and its token holders. To the commission, the purchase remains an investment in the common enterprise through vertical or horizontal commonality.
Will XRP survive long term? ›
Ripple's low prices compared to other top crypto assets make it a perfect entry point for beginners and mid-level investors who have been priced out of Bitcoin and Ethereum. Because Ripple price predictions expect the value of XRP to rise, even if adoption is slow, XRP could be a good long-term investment.
How much will Ripple be worth in 10 years? ›
If the Ripple business performs well, in 10 years, XRP can theoretically exceed new heights. Based on current projections, most experts have agreed that Ripple's price can go up to the $250-$300 range in ten years.
What will happen to Ripple 2022? ›
XRP price prediction 2022
Finder's panel expects the XRP price to trade as high as $0.90 by the end of December 2022 from the current price of $0.53. However, should XRP lose its case with the SEC the panel expects its value to drop to $0.24.
Who are Ripple's biggest investors? ›
The 50 hottest U.S. companies 2019
| Date | Investors | Amount |
|---|
| May 2015 | Route 66 Ventures RRE Ventures Core Innovation Capital IDG Capital Seagate Technology AME Cloud Ventures ChinaRock Capital Management (CRCM) Nurzhas Makishev CME Ventures Blockchain Capital Digital Currency Group Avant Global | $28m |
7 more rowsThe Ripple system scores better than the bitcoin network for its lower processing times and lower transaction charges.
Why is Ripple so cheap? ›
XRP is a cryptocurrency that works on the Ripple network. The primary reason behind its low price is because the US Security and Exchange Commission (SEC) is suing Ripple for $1.3 billion.
Why is XRP so hard to buy? ›
XRP Is Under Investigation by the SEC
Most crypto exchanges have withdrawn their U.S. support for XRP and no longer allow trading. However, if you want to purchase or already had XRP before the investigation, you should still be able to deposit, hold or withdraw your crypto assets.
XRP has amazing potential over the next few years as acceptance for cryptocurrency increases. Our market forecast indicates that by 2030, XRP could reach a new all-time high of $3.67.
How high will Shiba Inu go in 2025? ›
By 2025, our price prediction forecasts that Shiba Inu (SHIB) could be worth $0.000043.
Did Amazon partner with Ripple? ›
Inter & Co., a Ripple ODL Client, has announced a partnership with Amazon's PSP program. Ripple's ODL service has been seeing massive adoption globally.
Is Ripple a good investment 2022? ›
Yes. Along with a strong bullish sentiment, it is likely that Ripple will breach past $1.00 again this year. This could go all the way up to $1.50 to $1.80 should it follow last year's trading trajectory. Failing to hit $2.00 in 2022 does not mean it will never make it.
Is it worth investing in Ripple 2022? ›
According to them, the average value of XRP in 2022 will reach 1.22 USD in 2022 and reach 3.63 USD in 2025.
Does Ripple crypto have a future? ›
If both the crypto market and Ripple's commercial venture are strong, we could see Ripple's value rise to several dollars per token and perhaps even reach $5 in a few years. A $10 price prediction for XRP still seems optimistic, but anything is possible if you're looking to 2025 or 2030.
Will banks use XRP? ›
Many international banks are integrated into RippleNet. Any bank joining the network can access several other banks to trade with. Therefore, XRP offers market access to participating banks and their customers.
Can a Ripple reach 3$? ›
As a long-term investment, it is projected that Ripple could perform very well. According to predictions, the value of the Ripple XRP token could rise to $1 by the end of 2022, $3.70 in 2023, and achieve a mean price of $6.55 by 2025.
Can XRP reach $5? ›
Their forecast about Ripple's price has the crypto asset reaching $5 by 2027.
Which billionaires are invested in XRP? ›
Two of the newest billionaires who have enjoyed massive windfalls from the success of XRP are Ripple's current and former CEOs Chris Larsen and Brad Garlinghouse. Larsen is the co-founder and former CEO of the company.
