Ripple (XRP): What Is It, and How To Buy It

Ripple is a blockchain-based transaction protocol and exchange network. It was Launched under the Ripple Labs company by Chris Larsen, David Schwartz, and Jed McCaleb in 2012. The payment settlement network was designed to facilitate remittance, just like the SWIFT system used by banks. However, it promises to eliminate the lags of the current financial remittance system by offering a cheaper and faster cross-border payment alternative. Through its technology, XRP Ledger (XRPL), Ripple settles transactions from central databases such as banking systems to a more trustless, cheap, and instant blockchain-based infrastructure.

At an average cost of 0.00001XRP per settlement, the Ripple network greatly overshadows traditional cross-border payment methods. It’s capable of processing at least 1,500 transactions per second. SWIFT can only handle up to 1000 payments per second and levies 3%-5% in fees. Ripple says its blockchain is 61,000 times more energy efficient than proof-of-work. The network has closed more than 70 million successful transactions as of writing this. Several institutions such as Bank of America, American Express and Santander, MoneyGram, and Royal Bank of Canada have already invested or shown interest in the project.

XRP is the native token for the Ripple network and one of the oldest cryptocurrencies, having been rolled out barely two years after bitcoin. With a capitalization of over $23,167,373,123, the coin is the 6th largest cryptocurrency by market cap. It had a maximum supply of 100,000,000,000 coins and a circulating volume exceeding 50,000,000,000 XRP tokens by 28th October 2022. Over 50% of the coin’s total supply is in a cryptographically secured escrow. XRP achieved an all-time high of $3.84 on 4th January 2018 but has struggled to stay afloat ever since SEC filed a lawsuit against it. The commission claims that the cryptocurrency was illegally sold to the public as a security without registration, as federal law requires.

XRP token uses the power of XRPL to bridge different currencies. Unlike other digital coins, it works efficiently with both fiat and cryptocurrencies.

XRP functions like any other cryptocurrency. So, you can use it as a medium of exchange where it’s accepted for payments or as an asset for investment. While on the Ripple network, XRP is used to pay transaction fees. Additionally, it facilitates international payments by enabling the digitization of fiat currencies and the exchange of other cryptos into the desired currency for instant international money transfer. For example,

• You have Euros and are looking to exchange them for Japanese Yen
• First, you’d swap your Euros for XRP on the Ripple network
• Now you can use those tokens to buy the Yen.

Ripple network’s DEX saves you time since you don’t have to go to the bank to send money. Moreover, it will only cost you 0.00001 compared to the high fees banks and other financial institutions charge.

Central banks seeking to issue their own digital coin don’t have to build an entire blockchain from scratch. Instead, they can take advantage of Ripple’s Central Bank Digital Currency (CRDC) to create and manage their own crypto project.

• Volatility Risk: Like any other crypto, XRP is susceptible to the high volatility usually witnessed in the crypto market. This might make it dangerous for transactions as investors could quickly lose their money if a sudden supply and demand shift occurred while they were making a payment.
• Legal Risk: Ripple is embroiled in a lawsuit with the SEC, which accuses it of conducting an illegal public offering. The final verdict could have detrimental effects on the value of the coin and the company if the SEC wins.
• Censorship Risk: Ripple has enormous control over the network and tokens. Over 60% of the coins are owned by the company leaving users at the mercy of decisions made by Ripple investors such as large banks. With such a level of control, the company can easily freeze funds arbitrarily.
• Slow Value Appreciation: Ripple’s use case looks good on paper. However, the most significant users of the network, banks and financial institutions don’t need to control large amounts of coins. This means the demand for the crypto will be low, leaving unanswered questions of what will drive its value upwards.

XRP Ledger derives efficiency from its speed, fees, and inbuilt technology. At the cost of only $0.0000046 tokens as of 28th October 2022, it offers users a significantly cheap alternative compared to Bitcoin and Ethereum, whose fees sometimes go past $20. The ledger’s speed gives it an edge over existing money remittance services, including SWIFT. Speed is achieved by the 80% validation rule, where a transaction is deemed successful as soon as 80% of the validators approve it. This eliminates delays that would have been caused by waiting for 100% approval. Regarding fees, all validators are interested in the project and are not paid mining fees. The energy requirements are also minimal, eliminating the need for high gas fees like those experienced in crypto like Ethereum.