What Is XRP?
Ripple is a payment platform that seeks to emulate a blockchain network without its drawbacks and utilizes distributed ledger technology (DLT) to offer faster and more affordable global transactions.This distributed platform, XRP Ledger, issues a native cryptocurrency, XRP, to enhance payment capabilities and international transfers.
XRP Ledger, which is independent of Ripple, serves as a
decentralized market for XRP trading between users.While XRP’s primary intention is to function as a settlement layer for international finance, it is also a widely recognized and traded cryptocurrency.
To confirm XRP transactions, XRP Ledger relies on an unique
consensus algorithm that operates through trusted sub-networks, interconnected segments of a greater network of geographically-distributed validator nodes.Each sub-network trusts a specific set of nodes known as the Unique Node List (UNL), which consist of a limited number of servers owned and operated by diverse financial institutions, including banks.
Key Takeaways
– 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 Bitstamp, Kraken, Huobi Global, and Coinbase.
History of XRP
Ripple, the company behind the
blockchain technology powering XRP payments, was born out of the vision of crypto enthusiasts and entrepreneurs aiming to revolutionize international payments with financial technology.In 2012, Mt.Gox exchange founder Jed McCaleb, eLoans founder Chris Larsen, and a group of software developers, including Arthur Britto, Stefan Thomas, and David Schwartz, created a distributed ledger, the XRP Ledger, to facilitate faster and more efficient cross-border transactions.
To ensure the stability of XRP’s price, the developers put constraints on the
circulating supply and the total supply of XRP.The developers set a maximum limit of 100 billion XRP for the total supply, initially distributed 80 billion XRP to Ripple, the company, during the token sale, and placed the rest of the XRP in escrow accounts, reducing the circulating supply.
1 billion XRP tokens are slowly released from escrow every month to prevent tokens from flooding the market and inflating the price of XRP.
Initially, the XRP Ledger used digital assets called “ripples,” which evolved into the XRP currency token we know today.The XRP Ledger network comprised the Ripple Consensus Ledger, the Ripple Transaction Protocol, the Ripple Network, and the XRP cryptocurrency.Today, Ripple has transformed into RippleNet, an integrated suite of products and services designed to streamline global transactions and reduce
transaction costs while continuing to leverage XRP as a payment token.
Buying XRP
XRP cannot be purchased directly from Ripple’s website or systems, including the XRP Ledger.
The XRP Ledger is a decentralized network that maintains a record of XRP transactions.XRP can be purchased from centralized cryptocurrency exchanges,
peer-to-peer (P2P) services, decentralized finance (DeFi) platforms, cryptocurrency ATMs, payment processors, and mobile wallets.
XRP also can be earned inactively from
lending, liquidity provision, and rewards programs, but not from staking.Staking is the process of locking up or holding a certain amount of cryptocurrency to participate in the validation of transactions on a blockchain network.
XRP staking is not possible in the traditional sense of staking, where users lock up their tokens to validate transactions and earn rewards.XRP is not a
Proof-of-Stake (PoS) cryptocurrency and uses a consensus mechanism called the Ripple Consensus Protocol (RCP), which does not require staking.
Earning XRP as
passive income includes lending XRP to borrowers or participating in liquidity pools on a DeFi platform, and holding XRP on certain crypto exchanges that offer rewards programs.
Liquidity pools involve providing
liquidity to a basket of XRP and other cryptocurrencies, which allows traders to swap between those currencies.In return for providing liquidity, you earn rewards in the form of interest payments and trading fees.
However, liquidity pool rewards can be volatile, and you may earn more or less depending on the market conditions.
Some cryptocurrency exchanges offer rewards programs for XRP holders.
These programs typically involve holding XRP in your exchange account for a certain period of time in exchange for rewards such as
bonus interest on your XRP holdings or discounts on trading fees.
Centralized Exchanges
Centralized crypto exchanges are online platforms that allow users to buy, sell, and trade cryptocurrencies under the purview of a company.These exchanges typically have a wide selection of trading features and digital currencies, including XRP.
One trading option offered by centralized exchanges is
over-the-counter (OTC) trading.OTC exchanges act as financial intermediaries between buyers and sellers of large quantities of cryptocurrencies.OTC desks typically cater to institutional investors and high-net-worth individuals (HNWIs) who require more liquidity and personalized service.
Here are some popular centralized exchanges that offer XRP:
– Coinbase
– Binance
– Bitfinex
– Gemini
– Bitstamp
– Huobi
– Kraken
– KuKoin
– OKX
– Poloniex
Some crypto exchanges specialize in running OTC desks.
Here are some well-known OTC desks that allow XRP trading:
– Jump Trading
– Flow Traders
– Virtu Financial
– IMC Trading
Peer-to-Peer (P2P) Services
The
P2P economy facilitates the direct exchange of cryptocurrencies between individuals, eliminating the need for intermediaries like centralized exchanges and financial institutions, and offering greater privacy and control over transactions.However, P2P services may have lower liquidity and higher transaction costs compared to centralized exchanges.
Some P2P exchanges with XRP markets include:
– LocalBitcoins
– Paxful
– Bisq
– OpenBazzar
– HODL
Decentralized Finance (DeFi) Platforms
DeFi platforms are
decentralized applications (dApps) built on blockchain technology that provide third-party financial services without the need for traditional intermediaries like banks or brokerage firms.
P2P exchanges and DeFi platforms play complementary roles in the cryptocurrency ecosystem.P2P exchanges can provide additional liquidity for DeFi protocols that require assets for
crypto lending and borrowing, and other DeFi activities.Both P2P and DeFi offer greater privacy and control over their transactions than centralized exchanges and access to cryptocurrencies for users who may not have access to different financial institutions.
However, unlike P2P exchanges, which focus on buying, selling, and trading cryptocurrencies and direct transactions between individuals, DeFi platforms may involve
smart contracts or automated market makers (AMMs) as intermediaries and offer a wider range of financial services, including lending, borrowing, and yield farming.
Here are some notable DeFi platforms that support XRP:
– Aave
– Compound
– UniSwap
– PancakeSwap
– Cream Finance
– DODO
– Injective Protocol
– dYdX
– Element Finance
– ZeroSwap
Cryptocurrency ATMs
Crypto ATMs are kiosks that allow users to buy and sell cryptocurrencies using cash or debit cards.
Crypto ATMs provide a convenient way for individuals to access cryptocurrencies without the need for a traditional cryptocurrency exchange account.
Users can search for crypto ATMs that support XRP and other cryptocurrencies on websites that aggregates ATM locations worldwide, such as ATMlocator, Coin ATM Radar, CoinATMs, and Crypto ATM Map.
Some cryptocurrency ATM networks that provide XRP withdrawals include:
– CoinFlip
– LocalBitcoins ATM
– Bitcoin ATM
– General Bytes
– BitAccess
– Genesis Bitcoin ATM
Payment Processors
A
payment processor is a third-party company that facilitates electronic payments between merchants and customers.Payment processors play a crucial role in the modern e-commerce landscape, enabling merchants to accept various payment methods at the point-of-sale (POS), such as credit cards, debit cards, and digital wallets.
Payment processors that support XRP are largely crypto-focused, but traditional companies are beginning to experiment with XRP payment processing.For instance,
MoneyGram, a global money transfer company, has partnered with Ripple to pilot XRP-based cross-border payments.Tradelink, a trade finance platform, has integrated XRP into its platform to facilitate faster and more cost-effective international trade settlements.
In October 2020, PayPal announced that it would allow users to buy, sell, and hold select
virtual currencies, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, directly through their PayPal accounts.
In March 2021, PayPal expanded its crypto services to include the ability to checkout with crypto at millions of online merchants.However, PayPal has not yet announced any plans to support XRP payments.
Several
crypto payment processors offer support for XRP, such as:
– BitPay
– CoinGate
– NOWPayments
– TripleA
– Crypto Processing
Mobile Wallets
Ripple does not have a native wallet that allows you to buy XRP directly.
However, a number of third-party wallets support XRP purchases directly within the wallet.Some
mobile wallets allow you to buy XRP and store XRP on your phone.
While mobile payments are convenient, the fees charged can be high.
Some popular mobile wallet options include:
– Trust Wallet
– Exodus
– Coinbase Wallet
– Atomic Wallet
– Metamask
Future of XRP
The future of XRP remains uncertain as Ripple continues to navigate a complex legal landscape and
regulatory scrutiny.While recent court rulings have provided some clarity, the long-term viability of XRP hinges in part on the outcome of an ongoing legal battle with the U.S.Securities and Exchange Commission (SEC) and the evolving regulatory environment surrounding cryptocurrencies.
In December 2020, the
SEC filed a lawsuit against Ripple Labs, alleging that XRP was an unregistered security.
The SEC asserted that Ripple’s distribution of $1.3 billion worth of XRP to stakeholders violated securities laws.
The lawsuit cast a shadow over XRP’s future and the price of XRP has fallen over 80% since its filing.
In July 2023, a federal judge ruled that XRP purchased on an exchange by
retail investors was not considered a security, a significant victory for Ripple Labs and XRP holders, as it provided some clarity regarding the regulatory status of XRP.However, the court also ruled that XRP offered to institutional investors were considered investment securities that had to be registered with the SEC, and the executives who conducted these coin offerings were not given summary judgment and instead referred to trial.
The market reacted positively to the July court ruling, indicating renewed
investor confidence in the cryptocurrency while highlighting distinctions between retail and institutional investors.XRP’s value nearly doubled in the week following the decision, causing its market capitalization to jump from $24.7 billion to $42.8 billion.
Despite the legal challenges, Ripple Labs has expanded its global reach, developed new products and services, and made progress in securing regulatory approvals in certain countries.For example, in June 2023, the company was granted a license to offer regulated digital payment token products and services in Singapore, a major financial hub in Southeast Asia.
What Is the Difference Between Ripple, XRP, and XRP Ledger?
Ripple, XRP, and XRP Ledger are often used interchangeably, but they represent distinct entities with different roles.
Ripple is the
company that develops and promotes XRP-based payment solutions.XRP is the cryptocurrency that facilitates payments within the Ripple ecosystem.
XRP Ledger is the underlying technology that enables XRP transactions.
How Is XRP Used?
XRP was designed as a
utility token and a settlement layer for cross-border payments within the Ripple ecosystem.Over time, XRP morphed into an investment class for trading and speculation, a remittance method for sending money to a home country, a liquidity provider for improving market availability of other cryptocurrencies, and a supply chain token for tracking goods and invoices, among other use cases.
How Does XRP Match Up to BTC and ETH?
XRP wasn’t intended to be used as a cryptocurrency, but it began to stand out to
investors for its transaction speed, fees, and network scalability compared to other crypto-assets.Compared to Bitcoin, BTC is considered more of a store of value for investing purposes, as the Bitcoin blockchain has slower transaction times and higher fees but an anti-inflationary monetary policy.ETH is heavily used in decentralized Ethereum apps due to the Ethereum blockchain’s smart contract capabilities.
The Bottom Line
XRP is a cryptocurrency intended to speed up global payments at a time when clearing payments can take days.You can’t mine XRP, but you can buy it, receive it, or be rewarded it through centralized, decentralized, and peer-to-peer exchanges, mobile wallets, and payment processors.
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