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101 Guide: Ripple XRP

Many people interested in blockchain technology and cryptocurrencies have watched the price of Ripple coins (XRP) quickly explode around the new year as it became one of the top cryptocurrencies behind Bitcoin and Ethereum.

The drive behind Ripple is to break down the walls created by major financial networks, like banks, credit cards, and payment processors, that restrict the flow of money with high fees, currency exchange charges and processing delays. However, instead of a ‘stick-it-to-the-man’ attitude held by many Bitcoin enthusiasts, Ripple is attempting to integrate blockchain technology with the existing financial network.

If you’re new to the game and a little confused about Ripple and XRP, no need to worry, this guide will give you the basics to understand Ripple, the underlying blockchain technology, how the XRP coin fits in with the Ripple wallet, and if Ripple is a good investment for you.

What is Ripple?

So what is Ripple? Well, the term Ripple here can refer to several different things when related to the blockchain project. Ripple can refer to:

  • The digital cryptocurrency XRP
  • The tokens payment network supported by Ripple blockchain
  • The company behind the blockchain project

The objective of Ripple is to create a blockchain infrastructure to serve the financial services industry and cut down on transaction costs and processing times, especially in banking. With the current state of global monetary transactions, it can cost tremendously high fees and days of processing delays for organizations to transfer money back and forth across national borders. Ripple is designed to eliminate these issues that have traditionally plagued the banking industry.

The transactional messaging system currently in place for the financial services sector is the SWIFT network, which has its own security flaws that have been exposed in recent years. Ripple aims to replace the need for this secure messaging system by incorporating the immutability of blockchain ledgers, enabling secure transactions to happen immediately.

Furthermore, transactions that occur on the Ripple network are designed to comply with banking risk, compliance, and privacy requirements by incorporating anti-money laundering (AML) and know-your-customer (KYC) standards into each transaction.

How is the Coin XRP used?

Ripple as a cryptocurrency, the XRP coin, doesn’t actually have much application to the everyday user. Rather, it’s used as a transactional coin to support the Ripple blockchain network. The main intended users of XRP are the bank and other financial institutions using the Ripple blockchain to transfer funds through digital assets. So let’s get into how Ripple partners blockchain technology with the XRP coin to make this financial transfer process quick, easy and cheap.

Ripple’s blockchain leverages a type of private blockchain called ‘gateways’ to connect to their global blockchain ledger. Each gateway is basically a private blockchain that governments, financial institutions, or other entities can use to join the Ripple blockchain. This process is known as the Ripple Transaction Protocol (RTXP).

After a government, bank, or other entity joins the RTXP, it can perform transactions with other gateways on the network at lightning speed for pennies on the dollar. Essentially, anyone looking to move large amounts of money transfers across national borders can use the Ripple blockchain to transfer at faster speeds and lower cost.

Part of Ripple’s service is to perform currency exchanges between any two types of fiat, or different crypto assets. The key behind their ability to deliver this service is liquidity, and that’s where the XRP coin comes into play by providing source liquidity to banks and other payment providers.

This has all led to Ripple being able to demonstrate their ability to handle more transactions per second than other cryptocurrencies at 50,000 transactions per second. Bitcoin has traditionally been able to handle seven transactions per second, giving Ripple the edge as far as adoption on a wide scale for financial transactions of virtual currency.

Is Ripple Too Centralized?


Ripple coin is sort of an odd duck among the list of cryptocurrencies that promote decentralization of their network and distribution of assets, the fundamental values for Bitcoin and others. However, Ripple doesn’t have a public blockchain with a distributed ledger. Like mentioned above, Ripple has a global ‘enterprise blockchain’ ledger that doesn’t use a proof-of-work system. Actually, not much is known about their core blockchain.

The original Ripple service was simply to provide a digital asset transfer system, so network participants could send fiat, cryptocurrencies, loyalty points, or even mobile credits through cross-border payments. The digital currency XRP coin was a later development to serve the system as a mechanism for verifying trades on the Ripple network.

People point to Ripple as a centralized system because they are managed by a holding company rather than the typical decentralized community style of most blockchains nowadays. Early on, Ripple received angel funding to develop the blockchain protocol. Early investors included Google Ventures, IDG Capital Partners, Santander InnoVentures, and Andreessen Horowitz.

Is Ripple a Good Investment?

Ripple is a unique project in the blockchain world and has several pros and cons when looking at it as a potential investment. Ripple is one of the elders among blockchain projects, starting in 2012. Ripple currently has a market cap of $32 billion, securing its spot as 3rd among all cryptocurrencies. There is a lot of financial backing behind Ripple, its blockchain, and the XRP coin.

To buy Ripple, you can easily search XRP on most of the major cryptocurrency exchanges, and there were rumors around the new year that Ripple would be added to Coinbase, which would give the coin huge upward momentum. However, that never panned out, yet Ripple still saw its price balloon, along with many other cryptocurrencies, over the past number of months.

The total maximum supply of XRP coins is 100 billion. All Ripple coins have already been created by the network, however, only around 39 million are currently circulating in the markets today. The remaining coins are held by Ripple Labs to be released over time.

There are many folks that don’t view Ripple as a good long-term investment for cryptocurrency holders. They point to the coin’s limited applicability within the banking and financial services sector. The flip side is that if Ripple’s blockchain gains significant adoption within the industry, the coin could see another upward trajectory. Ripple is aiming to disrupt the way banks and payment processors digitally send fund transfers to make it more secure, faster, and cheaper.

The main problem though is the adoption aspect. Ripple has run into obstacles in gaining adoption from major players in the banking and financial services sector. Many banks are publicly stating they have no interest in using XRP for their transactions. Several large bank executives have also said there is little chance they will trust the payments of their large corporate clients to a cryptocurrency.

We’ll see if that holds true. If so, the coin is otherwise useless. Its function is to serve the transactional process on Ripple’s blockchain. However, Ripple’s main product, RippleNet, does not rely on the XRP coin. Instead, RippleNet is the messaging service that’s aimed at replacing the SWIFT network mentioned above, which serves the core function of telling banks where to send money.

Final Thoughts

Ripple is an interesting application for blockchain technology, and they have set out with a huge task of disrupting and innovating the financial services industry and the way money is transferred across borders. Before buying XRP coins, it’s important to understand how the coin fits into Ripple’s blockchain ecosystem and what purpose it serves. When digging deeper, you might find that it has limited applicability in the grand scheme of Ripple’s overall plans.

Nevertheless, as cryptocurrencies become adopted on a wider scale around the world, financial institutions might come around on their negative comments. Either way, it will be interesting to watch and keep an eye on future developments as Ripple integrated blockchain technology into one of the key industries affecting our world today.


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