Ripple has a long, extensive history, but there are still some misunderstandings about the XRP Ledger, which was built for cross-border payments. Discover more about Ripple and the problems it is solving within the traditional financial system, and learn about how this might impact the price of XRP.
How does Ripple (XRP) work?
Ripple is a cryptocurrency-focused company that looks to utilise blockchain technology to facilitate fast and low-cost cross-border payments, using its native cryptocurrency XRP. Ripple created the XRP Ledger (XRPL), a decentralised public blockchain, to enable financial institutions, businesses and governments to quickly and easily send money internationally.
Unlike most other cryptocurrencies, the XRPL does not rely on miners or stakers to validate blockchain transactions. Instead, it uses a network of trusted validators, following a unique consensus protocol, to ensure transactions are legitimate. The XRPL claims to be more environmentally friendly than Proof of Work (PoW) blockchains, consuming less energy and producing no carbon emissions.
So, what is Ripple, how does XRPL work, and what does the future look like for XRP?
What makes Ripple (XRP) different?
Ripple’s focus on enabling fast and low-cost international money transfers is one of the elements that helps the company to stand out. While traditional cross-border transactions have historically been slow and costly, Ripple’s payment protocol aims to revolutionise this process.
By utilising the XRPL’s blockchain technology, Ripple provides a platform for banks, payment providers and other financial institutions to send money globally in a secure and efficient manner.
The XRP Ledger employs a unique consensus mechanism called the Ripple Protocol Consensus Algorithm (RPCA). Other blockchains rely on an energy-intensive mining process to create new coins or tokens, whereas the RPCA consensus algorithm uses a network of trusted validators to process and validate transactions. This approach significantly reduces the network’s environmental impact, while ensuring that the XRPL is fast and scalable.
Ripple’s native digital asset, XRP, is another of the protocol’s distinguishing features. Unlike other cryptocurrencies, XRP was not designed as a decentralised currency for individuals to hold or mine. Instead, it acts as a bridge currency within the Ripple ecosystem.
When using Ripple’s payment protocol for cross-border transactions, XRP serves as a liquidity intermediary, facilitating the instant transfer of value between different fiat currencies.
What is the Ripple (XRP) price and forecast for the future?
XRP’s price history has broadly followed the movements of the wider crypto market over the years. In 2017, the popularity of initial coin offerings (ICOs), alongside a market-wide crypto bull market, saw XRP’s price increase from $0.007 on January 4, 2017, to $3.84 exactly a year later. This was a percentage gain of 54,757%.
| Year | Start Price | Mid-Year Price | End Price | Percentage Change |
|---|---|---|---|---|
| 2015 | – | $0.011 | $0.005 | – |
| 2016 | $0.005 | $0.007 | $0.007 | 40% |
| 2017 | $0.007 | $0.247 | $1.980 | 28,186% |
| 2018 | $1.980 | $0.465 | $0.351 | -82% |
| 2019 | $0.351 | $0.397 | $0.193 | -45% |
| 2020 | $0.193 | $0.241 | $0.220 | 14% |
| 2021 | $0.220 | $0.705 | $0.830 | 277% |
| 2022 | $0.830 | $0.332 | $0.339 | -59% |
Past performance is not an indication of future results
Source: Investing.com
XRP’s primary use case revolves around fixing various inefficiencies within global banking and payment systems. If Ripple is able to position itself as a true competitor to traditional money transfer services, such as SWIFT, XRP could potentially witness significant price appreciation.
It is difficult to compare XRP to traditional cryptocurrencies such as bitcoin (BTC). Some XRP investors believe that it will become the primary currency within the remittance industry, with the value of the cryptoasset increasing accordingly. However, others are more dubious. Regardless, it is important that investors do considerable research before choosing to buy XRP.
“XRP can settle transactions on the ledger in 3-5 seconds. It was built to be a better Bitcoin — faster, cheaper and greener than any other digital asset.”
XRPL.org
Who created Ripple?
In 2011, David Schwartz, Jed McCaleb and Arthur Britto began developing the XRP Ledger. In 2012, the developers, alongside Chris Larsen, founded NewCoin, which was soon renamed OpenCoin, and then rebranded again as Ripple Labs in 2013.
The XRP Ledger was launched in 2012, followed by the completion and release of its native cryptocurrency, XRP. However, McCaleb left the company that year to create a rival network called Stellar (XLM).
Over time, Ripple has made significant enhancements to the XRP protocol to comply with regulations. In 2016, Ripple Labs obtained a BitLicense from the State of New York, a business license for companies completing activities with virtual currencies, thus boosting its integration into the traditional financial system.
In 2020, the XRPL Foundation, an independent non-profit entity, designed to help accelerate the wider adoption of the XRP Ledger, was launched.
Tip: In 2019, Ripple Labs purchased a 10% stake in international remittances company MoneyGram for $50 million.
Final thoughts on investing in Ripple (XRP)
Overall, Ripple’s emphasis on fast, low-cost international transactions, its unique consensus algorithm, and the specialised role of XRP as a bridge currency help to set it apart from other cryptocurrencies.
These features position Ripple as a promising solution for the challenges faced by traditional financial systems, and by leveraging blockchain technology, Ripple strives to make global money transfers more accessible, efficient and secure, ultimately transforming the way we send and receive funds across borders.
FAQ
- What is XRP used for?
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XRP is not intended to act as a medium of exchange, store of value or currency. Instead, XRP acts as a bridge currency that can be exchanged for any other currency on Ripple’s XRP Ledger. In addition , XRP is used as a spam prevention mechanism on the XRP Ledger.
- What is Ripple Labs?
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Ripple Labs is a technology company that develops crypto solutions for businesses, financial institutions, governments and developers. It uses blockchain technology, including XRPL, to enable the fast, transparent and cost-effective movement of value around the world. It also helps customers to access crypto liquidity, tokenise value and implement Central Bank Digital Currencies (CBDCs).
- Is the XRP Ledger owned and operated by Ripple Labs?
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No, the XRPL is not operated by Ripple. Each user of the XRP Ledger can choose their own validator list, and anyone can run their own validator node.
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