Ripple (XRP)

Ripple is a global settlement of value network built on blockchain technology.

It differs from the Bitcoin network and other crypto projects which position themselves as disruptive alternatives to traditional finance that can be used by everyone (including regular folks).

Ripple mainly focuses on improving the existing financial system and working mainly with big companies like banks, remittance services, and payment providers.

But developers are also moving towards creating a public, community-driven blockchain that can support many of the use cases seen in many blockchain ecosystems, including DeFi, stablecoins, NFTs, and micropayments.

What is the XRP token?

Ripple’s native token XRP mainly functions as a middleman currency in order to facilitate transactions.

Their software, XRP Ledger, maintains a limit on the amount of cryptocurrency that can ever be created, capping the total at 100 billion XRP.

Out of the 100 billion, Ripple initially gave away 55 billion XRP to users on forums while the company escrowed the remaining supply to fund its technology development.

The XRP Ledger does not charge transaction fees, but it does require a small amount of XRP to be put up by the sender to be destroyed and deducted from the total supply.

As of 2019, only one Ripple service (xRapid) utilizes XRP. Other Ripple services like xVia and xCurrent did not require XRP but could connect to the XRP Ledger.

The following year, Ripple merged all three services under a common product offering called RippleNet, which has partnered with over 300 financial firms to date.

Under RippleNet, these companies can access “on-demand liquidity” to fund foreign accounts.

This is done by selling XRP for fiat currency on one crypto exchange, then converting those funds into their desired currency on another exchange.

Ripple maintains that all its services and tools, including XRP, will someday fuel an “Internet of Value” where fiat currencies, traditional assets, and cryptocurrencies can be traded freely worldwide and with little friction.

Currently, Ripple is involved in a lawsuit with the U.S. Securities and Exchange Commission (SEC) which claims that XRP is a security. Due to the uncertainty from the lawsuit, XRP’is not listed on several major crypto exchanges, keeping its price suppressed.

How does Ripple work?

Transactions on the Ripple network run through validating servers that constantly compare the information they receive and process through the XRP Ledger.

These servers use a mechanism called HashTree, which reaches a consensus by comparing a single value derived from summarizing the ledger’s data.

As such, it differs from the Proof-of-Work blockchain consensus used by the likes of Bitcoin which involves comparing all the data.

Thanks to HashTree, Ripple does not need as much energy and computing power, but it is able to execute transactions faster.

The XRP Ledger does not rely on mining or require specialized computing hardware for security. Instead, it enables servers to send transactions for consideration by their own network.

Like Bitcoin, the XRP Ledger allows users to send and receive cryptocurrency using public and private keys, with transfers between addresses requiring digital signatures.

Only transactions validated by “unique nodes” can create consensus on the network. According to their software rules, at least 80% of participants must deem the transaction valid for it to go through.

Unlike Bitcoin which allows anyone to contribute computing power for validating transactions and securing the ledger, Ripple’s validating servers are run by either approved individuals or by banks and institutions.

For some, this makes Ripple more suitable for regulated entities that must adhere to strict laws on money transfers.

Team Background

Ripple was initially called OpenCoin, which was founded by Jed McCaleb of Mt. Gox and Chris Larsen of E-Loan and Prosper in 2012.

McCaleb is credited with conceptualizing the XRP Ledger’s unique technical design, which he then used to create the Stellar network, powered by the XLM token, after leaving Ripple in 2013.

Larsen is an angel investor known for co-founding several Silicon Valley startups and is currently the Executive Chairman of Ripple Labs.

Other notable contributors to XRP technology include former CTO Stefan Thomas, who was also a contributor to the Bitcoin Core software, co-author of the original Ripple white paper and current CTO David Schwartz, and another co-author of the Ripple white paper Arthur Britto.

Notable Investors: Andreesen Horowitz, Arrington XRP Capital, Blockchain Capital, Pantera Capital, ValueNet Capital

Token Metrics:

  • Circulating supply: 50 billion XRP
  • Maximum supply: 100 billion XRP

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