In this guide we are going to take you through one of the highest-ranking crypto-assets by market capitalisation: the XRP, which is sometimes referred to as Ripple.
You may be surprised to find out that Ripple and XRP are two different things.
Ripple is a San Francisco-based fintech company behind the global payments platform RippleNet, and a steward of the XRP Ledger blockchain along with its native digital asset, XRP. The idea for Ripple first came about as early as 2004 by a computer programmer Ryan Fugger.
Ryan envisioned a decentralised monetary system where communities could create their own money. His goal was to create an Internet of Value, and his vision became RipplePay.
RipplePay saw some initial success, but its network was small and the software centralised. So, in 2012, RipplePay merged with another project called Open Coin by founders Jed McCaleb, and Chris Larson. Open Coin and RipplePay merged together to form what is known today as Ripple.
RippleNet is a fintech enterprise solution for financial institutions that lets users send, receive, hold, and move currencies across borders faster and more reliably. RippleNet solves the current problem with legacy banking systems and networks, which are fragmented and slow. Many of these networks are not unified across banks, and each system has not seen any major innovations for decades. This is where RippleNet comes in.
The Ripple network is fast, secure, and can settle transactions in 3 to 5 seconds from anywhere in the world, much faster than both Bitcoin and Ethereum. It is highly scalable, handling 1,500 transactions every second, with the potential to scale to the same speeds as the visa payment system.
Ripple leverages the open-source XRP Ledger blockchain to track, process and cryptographically guarantee all transactions. But unlike Bitcoin, XRP does not use Proof of Work and has no concept of mining. This means that the blockchain’s power consumption is minimal and is able to keep transaction fees low.
XRP transactions are handled by an independent community of validating computers all over the world best known as nodes who maintain the network and the transaction protocol. To keep the network’s integrity intact, users can select trusted validators from a Unique Node List or UNL, which is a publicly known and identified list of trusted nodes such as Microsoft and MIT.
The UNL ensures that no single entity is large enough to control the network and prevents participants from colluding to attack the network. More than half of the validators on Ripple’s recommended UNL are operated by nodes external to the company, with more independent validators continually being added to the list.
Another plus point for Ripple, and what financial institutions want to hear, is that Ripple is anti-money laundering compliant, with fraud detection, sanction screening, and regulatory reporting in place.
XRP –the digital asset on the XRP Ledger –provides On-Demand Liquidity for financial service providers within the Ripple network. Taking over the function of Nostro and Vostro accounts and eliminating the need for pre-funding, XRP acts as a bridge currency to facilitate cross-border payments.
For example, Bank A will convert its fiat to XRP and use XRP as a bridge currency to exchange with the fiat currency of Bank B. In this case, XRP takes over the US Dollar or South African Rand function as a base currency, but only much cheaper and without foreign conversion fees.
XRP’s transaction fee is 0.00001 XRP or 10 drops, which at today’s prices is less than R0.10 per transaction. With XRP, payment providers can reach other smaller markets, enjoy faster payment settlements, and reduce foreign exchanges’ overall cost.
Do remember that XRP, the cryptocurrency, is ultimately distinct from Ripple the software company. The XRP Ledger is open-sourced and maintained by a global and independent community, of which Ripple is an active member.
XRP is the option available to RippleNet members to source On-Demand Liquidity and one that Ripple, the company, continues to actively push adoption for.