What Is Ripple (XRP)?
Ripple is a digital payment platform that uses blockchain technology and a native cryptocurrency to facilitate faster and cheaper global transactions. It can be purchased on several international cryptocurrency exchanges or given as a reward for staking XRP on the blockchain; however, exchanges in the U.S. do not list Ripple. XRP is the native token for the Ripple XRP ledger and is used to enhance currency conversion and international financial transfers.
Ripple's XRP Ledger platform additionally acts as a decentralized exchange that enables XRP trading directly with peers. XRP is primarily meant to serve as a settlement layer—the payment method—for international banking transactions, but it is also treated as a cryptocurrency by the community. XRP functions as a sort of informal money transfer network based on blockchain technology.
The XRP consensus algorithm relies on trusted sub-networks—networks that are part of a larger validator node spread across geographies—to reach a consensus on transactions. Each node in a Ripple network trusts selected nodes that comprise its Unique Node List (UNL). This design aims to produce a consensus mechanism that a limited group of bank-owned servers can operate to confirm XRP transactions.
- XRP is the native token for the XRP ledger and the Ripple payment platform.
- The Ripple payment platform enables fast and cheap cross-border transactions.
- You can purchase XRP on several exchanges, such as eToro, Kraken, and Huobi Global.
- You can purchase XRP on international exchanges; however, U.S. exchanges have delisted or temporarily halted XRP trading.
The History of Ripple (XRP)
The people that founded and developed XRP are familiar faces in the cryptocurrency arena; Jed McCaleb, the founder of Mt. Gox; Chris Larsen, the founder of eLoans and several fintech businesses; Arthur Britto, Stefan Thomas, and David Schwartz.
Ripple is the company behind the blockchain technology that powers XRP payments. In 2012, the XRP Ledger (originally called the Ripple Open Payments System) was created by crypto enthusiasts and entrepreneurs who had a vision of a faster international payment system.
When the ledger was developed in 2012, the developers placed a cap of 100 billion XRP on the token and gave 80 billion to a company now known as Ripple. The company then locked 55 billion XRP in escrow accounts to ensure XRP's supply remained stable.
Initially, the ledger used digital assets called "ripples" and had the same currency code it does today, XRP. The network consisted of the Ripple Consensus Ledger, The Ripple Transaction Protocol, the Ripple Network, and the cryptocurrency used in the ledger, XRP.
Today, Ripple (the payment system) has evolved into RippleNet, a union of all of its products and services that facilitates global transactions and reportedly reduces the cost of payments. The network is still powered by its utility token, XRP.
How to Invest in XRP
While XRP wasn't originally designed to be a security, derivative, or currency, it can be used as an investment because it is traded on several exchanges. One of the current cryptocurrency strategies investors use is buying and holding it as a long-term investment while waiting for it to increase in value.
You can also use it as a short-term investment or for day trading, where you'd buy and sell it the way traders buy and sell stocks quickly to take advantage of small price changes throughout the day. Cryptocurrency exchanges are open 24 hours a day, seven days a week, so if you prefer to trade this way, you can do it at any time.
If you're interested in buying or trading XRP, you can find it on various exchanges.
Ripple states that its XRP Ledger platform can settle transactions in three to five seconds.
How to Get XRP
XRP cannot be mined the way bitcoin can. You can stake your XRP and receive transaction fees, receive it as payment for services, purchase it from an exchange, or mine other cryptocurrencies and exchange them for it.
Most exchanges that list XRP are not allowed to operate in the United States. The cryptocurrency exchanges that are allowed in the U.S. do not list XRP in response to an ongoing investigation by the Securities and Exchange Commission (SEC).
Here are some of the exchanges that allow XRP to be bought or traded:
Concerns About Ripple
Ripple Labs and XRP have proven to be controversial in that the SEC believes the coin was launched as an unregistered security.
The SEC filed its case against Ripple in December 2020, asserting that the distribution of $1.3 billion worth of XRP to stakeholders violated securities laws. While the legal proceedings of the case are ongoing, many cryptocurrency exchanges have responded by restricting or withdrawing support for XRP.
The outcome of the Ripple case is being closely watched by the investing and cryptocurrency communities.
Future of Ripple
In December 2022, Ripple posted its quarterly markets report and discussed the ongoing fight with the SEC in addition to developments over the year. Much of Ripple's future success depends on the outcome of the SEC ruling—but it remains unclear how much longer the case will continue. Ripple calls it a "...campaign of regulation by enforcement without providing clarity to the market."
In the fourth quarter, the company launched On-Demand Liquidity in France, Sweden, and Africa, which eliminates the requirement to have pre-paid accounts at payment destinations; Peersyst, a blockchain solutions developer, released its side chain for Ethereum that allows defi apps to launch on the XRP Ledger.
Ripple has remained focused on its overarching goal of providing a fast global payment system through a pandemic and the following economic turmoil. It is tough to say how Ripple and XRP will turn out; however, if the company continues to churn out solutions to problematic systems, it is likely to continue its current course unless the outcome of the SEC ruling is extensive enough to cause the company to collapse.
What Is XRP?
XRP is the cryptocurrency native to Ripple’s open-source blockchain platform.
How Is XRP Used?
XRP is used as a settlement layer for financial institutions to make cross-border transactions faster and less expensive. It is also used by investors to store value and hope for gains.
Is XRP a Good Cryptocurrency?
XRP is designed as a utility token for use within the Ripple blockchain and payment platform. It isn't intended to be used as a cryptocurrency, but the investing and cryptocurrency communities use it for trading, holding, and exchanging. However, it's not as popular as Bitcoin (BTC) or Ethereum (ETH) in this regard.
The Bottom Line
Ripple (XRP) is a blockchain payment solutions company and cryptocurrency intended to speed up global payments at a time when clearing payments can take days. Ripple is the company behind the blockchain, network, and ledger, and XRP is the native cryptocurrency of that blockchain.
You can't mine XRP, but you can be rewarded for participating in the blockchain, buy it, or receive it as payment. You can hold your XRP and hope for gains, or use it in a purchase or exchange it for other crypto or fiat currency.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own XRP.