What is Ripple (XRP)?
Ripple XRP was launched in 2012 and since then has earned a place as one of the top ten cryptocurrencies, making it a popular investment choice for many. Ripple is widely praised not just for being a cryptocurrency but also for its distinct characteristics as a payment token.
Ripple has retained its status as a leading crypto token and has spearheaded various projects that have positioned it as a bridge between the traditional financial system and the cryptocurrency ecosystem.
A brief history of Ripple
- In 2004, Ryan Fugger launched Ripplepay, a secure payment service that led to the creation of the XRP token.
- In 2011 developers Arthur Britto, Jed McCaleb, and David Schwartz also began to work on a cryptocurrency inspired by Bitcoin.
- In 2012, Fuggar collaborated with Britto, McCaleb, Schwartx, and Chris Larsen to launch Opencoin, which is now known as Ripple Labs.
- In 2013, OpenCoin was officially rebranded as Ripple Labs and Ripple by 2015.
- By the end of 2017, Ripple had earned a position among the top five cryptocurrencies with a valuation of $73 billion.
What is Ripple?
Ripple focuses on connecting banks and financial institutions across the globe to enable faster and inexpensive global payments. However, Ripple XRP does not function as BTC or ETH as it cannot be exchanged for goods and services directly.
In fact, unlike BTC and other cryptocurrencies, all its tokens were minted at once and did not require energy-intensive mining to create new currencies. At its launch, 100 billion XRP tokens were minted and will be released gradually to the public. The smallest unit of XRP is called a “Jed”, named after one of its developers.
Ripple is also not a blockchain like Bitcoin or Ethereum; instead, it is a payment firm with a token XRP that fuels its cross-border payment protocol that allows for cheaper and faster international payments. Ripple uses blockchain technology to run its cross-border payments.
How does Ripple Work?
Ripple is the bridge that connects other currencies to allow easier global payments. Its protocol doesn’t allow it to differentiate between local currencies such as euros, dollars, or cryptocurrencies. This feature allows easy cross-border transactions and swapping currencies. However, each currency has its unique gateway of the Ripple gateway, e.g. USDsnapswap, BTCbitstamp, etc.
For instance, if you wish to send some pounds to receive dollars in payment, but your client can only pay in BTC, you do not have to own a BTC wallet to get your funds. Your client sends BTC from their gateway, and you receive the funds in USD from your gateway. This means your client saves time and energy from having to convert the BTC to dollars and also sending it via a banking system to you. Direct payment ensures that the process is faster and transaction costs are low as there are no extra charges.
Ripple does not run on a Proof of Work system or Proof of Stake system but rather on a consensus protocol that validates transactions in its system. Its consensus protocol ensures the system’s integrity by preventing double-spending and other dubious schemes. Like validators, individual nodes confirm which transaction was conducted through consensus.
What makes Ripple unique?
Ripple is not only a cryptocurrency but also a global payment platform designed to help banks move funds across borders cheaper and at a faster pace. Transferring from a local bank to an international bank takes days to complete and incurs hefty transaction fees. This is because the money is routed through several partner banks before it reaches its final destination, and each bank it goes through charges a small transaction fee. However, the transaction fee incurred from these banks ultimately sums up to a hefty sum. However, when banks and financial institutions use XRP, the transaction is easier, faster, and less expensive.
It connects multiple banks via its network and attempts to bridge the gap between cryptocurrency and traditional banks. In fact, unlike BTC or Visa, which completes seven transactions per second, Ripple can confirm 1000 transactions per second. At the same time, it only takes 3.5 seconds to confirm money transactions. Ripple also doesn’t require mining, and as such, it is more environmentally friendly and does not require extensive energy consumption.