What Is Ripple (XRP)?

This guide will have a look at the company behind the fourth largest cryptocurrency by market cap, Ripple, which specialises in low-cost global transactions. What is it and what are its goals?

Defining Ripple

If the inner workings of cryptocurrency are so special, it is because they do not depend on the states, governments or central banks. So let’s see how the Ripple cryptocurrency and blockchain is run.

What is cryptocurrency?

Unlike traditional money and traditional currencies, such as the pound, euro or dollar, cryptocurrency is an electronic and virtual currency that can be issued by anyone in order to contract or insure the settlement of a financial transaction. Its secret lies in how it is managed, as no one can issue this currency and it is devoid of a physical form, whether it is a company, state or individual.

What is a blockchain?

Cryptocurrencies are said to be decentralised because they are based on a single network which takes over their entire management. This management takes place through a mechanism driven by open source software that distributes copies of each transaction: the blockchain.

Simply put, the blockchain is like a public ledger. Anyone can write on it, but no one has the right to erase information off of it. More specifically, it serves as a history of all the transactions that have taken place, thus ensuring that the system does not rely on a single person or entity that is in charge of validating all the transactions.

The blockchain also has the following characteristics:

• It provides all the data from the sending and receiving accounts
• It is available online (digitally)
• It is fully transparent

What is Ripple?

According to Ripple, “RippleNet offers the most advanced blockchain technology for global payments – making it easy for financial institutions to reach a trusted, growing network of 300+ providers across 40+ countries and six continents”. To fill in the gaps, Ripple is a start-up specialising in very high frequency interbank exchanges between financial institutions and individuals in an unprecedented way.

Ripple was founded in 2004 by Ryan Fugger with the aim of creating a decentralised system where anyone could create money. The network was launched in 2012 and has since seen an increasingly large number of users. So why do we class XRP as a cryptocurrency if Ripple is a business?

This is where it is important to differentiate between Ripple and XRP, which are often used interchangeably. In reality, XRP is an independent digital asset with an open source blockchain. Ripple is therefore a company that created the Ripple payment protocol, XRP is the cryptocurrency token used by the company.

Ripple’s history and how it works

Contrary to popular belief, the Ripple business is older than it looks. Its protocol was not developed until later in the company’s history.

Ripple’s creation

Ryan Fugger conceived Ripple in 2004 with the aim of creating a decentralised monetary system that could allow individuals and communities to create their own currency. RipplePay was subsequently created, the very first iteration of the system dreamed up by Fugger.

At around the same time, in 2011, a certain Jed McCaleb began to develop a virtual currency system where transactions were verified by consensus among the members of its network, unlike the mining process used by Bitcoin.

In 2012, Fugger and McCaleb teamed up and began to develop the Ripple protocol as well as the Ripple payment and exchange network. By 2016, the Ripple company officially and legally obtained a virtual currency licence, becoming the fourth company at the time with a ‘BitLicense’.

What are the main goals for Ripple?

The main reason Ripple embarked on such a project was to save time by moving money quickly and inexpensively. The Ripple network primarily:

• Is a direct competitor to today’s banking and financial institutions
• Is an alternative to the payment system SWIFT
• Can send money anywhere in the world in three to five seconds
• Is the most innovative and fast when it comes to payment processing

By replacing the traditional, expensive and slow clearing houses, Ripple revolutionises and, in turn, improves liquidity and global finance. The Ripple transaction network is primarily used by financial institutions, while the XRP cryptocurrency can be used by anyone. It is not possible for an individual to buy shares in Ripple (although buying large amounts of XRP could be seen as an investment in the company’s future).

XRP was never intended to be a payment method for buying goods online, unlike Bitcoin, which aims to become the globally adopted currency. It is mainly used for:

• Speculative purposes
• Entering into contracts
• Ensuring the settlement of financial transactions

Ripple’s goal is to shake up money transfer networks by saving time, improving security and making it cheaper, removing the need for the current system.

Where and how to buy XRP?

XRP is the third largest cryptocurrency (if you do not count the stablecoin USDT) after BTC and ETH in terms of market capitalisation. It can be bought on a wide range of platforms. Click here to read our guide on how to buy XRP.

As always, if you do decide to buy XRP, make sure you store it in a wallet. You can see the best wallets here.

Why invest in Ripple (XRP)?

Choosing to invest in Ripple is a decision you should consider carefully, making sure to look at both its advantages and its disadvantages.

The benefits of buying XRP

Ripple is a cryptocurrency that could provide the perfect opportunity to invest and profit from blockchain technology. Among the arguments in its favor are:

• It takes only three to five seconds to move money across the Ripple network using a high transaction frequency (10,000/second versus just seven with Bitcoin)
• XRP is the third largest coin (ignoring USDT) by market cap, just behind Bitcoin and Ethereum: it is therefore available on almost all exchange platforms
• It’s low energy costs, as all XRP tokens have been already ‘pre-mined’
• Ripple technology can now manage the identity of the parties making a transaction – this confidentiality guarantees security
• It is a bridge currency to other currencies, as it facilitates trade between them

Apart from the advantages of its blockchain, we could also see an increase in XRP’s price thanks to the many partnerships that the company is starting to forge, in particular with the financial transfer giant MoneyGram.

The risks of buying XRP

Remember, investing does not guarantee wild profits because:

• It is difficult to predict any significant increase in the value of XRP, as it is has yet to achieve mass adoption
• Ripple is not a public company, there are no official Ripple shares to buy. It raises the question whether it could pay dividends in the future. 
• One section of its network, RippleNet, controls part of XRP. This means, unlike other cryptocurrencies, is not fully decentralised (which is precisely what characterises cryptocurrencies)
• Like any cryptocurrency, investing in Ripple can be a risky investment. It is important to know exactly what you are about to invest in before embarking on this project

Now you know what Ripple and XRP are, and you are ready to invest in this atypical cryptocurrency. Bear in mind that investing always comes with risk, so remember: ONLY INVEST WHAT YOU CAN AFFORD TO LOSE!