What is Ripple and how does it work? 6 advantages of XRP.

From the author: In this article, we will look at both the Ripple cryptocurrency (XRP) and the Ripple network, as well as the transaction processing process and many other points related to Ripple.

Ripple is a decentralized peer-to-peer network that provides financial institutions with a digital payment protocol. It provides a seamless transfer of digital money, whether you want to send conventional funds in dollars or cryptocurrencies such as bitcoin. The network has its own token, designated XRP. By market capital, XRP is currently the seventh largest cryptocurrency. One of the unique facts about XRP is that all tokens are pre-mined.

RippleNet, running on a network of servers, is an open source platform designed to provide affordable and fast financial transactions. The XRP token stands for the transfer of value through the RippleNet. It acts as an intermediary for exchanges, allowing users to buy and sell both fiat and cryptocurrencies.

Why was Ripple invented?

Founded by co-founders Jed McCaleb and Chris Larsen in 2012, Ripple has taken a more diplomatic approach than other cryptocurrencies. Instead of trying to replace the entire banking and payment system, the cryptocurrency has tried to provide a way to facilitate fast and cheap payments through a decentralized platform.

Its main goal is to create a protocol for the exchange of settlement assets and money transfers, which works similarly to the existing SWIFT system. It offers a similar solution for secure international money transfer while eliminating intermediaries.

It's no secret that the modern international payment system is too fragmented and causes delays and frustrations for users. People have to jump through a lot of hoops in order to make cross-border payments, and also, as a rule, such payments are associated with additional fees and costs, apart from the long waiting time for transactions.

Ripple provides a platform for instant, secure and low-cost financial transactions to solve the problems associated with current payment systems. There are over 300 providers in over 40 countries that have adopted the innovative online payment platform.

How does Ripple work and what is the technology behind it?

Unlike other cryptocurrencies, it does not rely on blockchain technology. XRP coins are not mined and there is no proof of work or Proof of Stake protocol. To process and verify transactions, the company created and patented a proprietary technology called the Ripple Protocol Consensus Algorithm (RPCA).

This means that in order for a transaction to be validated, all nodes in the network must unanimously agree. This is one of the reasons why XRP transactions are comparatively cheaper and consume less energy compared to Bitcoin.

To ensure seamless transactions between two parties, the token relies on a medium called a gateway that acts as a link of trust for each party. The same carrier also sends and receives all forms of currencies to public addresses using RippleNet.

Both businesses and individuals can register and initiate a gateway allowing them to act as an intermediary to complete the exchange. Coins play the role of a bridge currency without any bias towards digital or fiat currencies.

The average network transaction verification time is less than 5 seconds, and despite the lack of a blockchain, the system is designed to be decentralized. There is no central department or body that manages the payment system.

Is Ripple real money?

There is no definitive answer to the question of whether XRP can be used to purchase products and services, but it is primarily a transaction processing tool on RippleNet. Places that accept XRP as valid currency include Cryptoshopper, Digitec Galaxus, Ledger, StakeBox, Redeem, Blockchain Coffee, BitCars and more. However, when compared to some of the more popular currencies such as Bitcoin and Ethereum, it does not have the same market dominance.

One significant reason why it has not been successful in becoming a currency is that the token itself is not trying to become a viable alternative currency. In essence, it is an intermediary token that facilitates the exchange of other currencies, including fiat money and cryptocurrencies.

Fees and costs

One of the significant advantages of XRP is its low transaction fees, which, for the most part, remain stable. The average transaction value at the time of this writing is $0.0001, which is extremely affordable, especially considering the fact that the network allows international payments.

If there is a lot of traffic on the network, the fee can go up to $0.0004, which still means almost nothing. Even the highest transaction fee the network recorded during the spike in July 2019 was just under 5 cents.

Keep in mind that this is a transactional cost on the network. If you want to buy or sell cryptocurrencies through trading platforms or cryptocurrency exchanges, they may charge you additional fees and commissions. Typically, these platforms charge a fee for every sale and purchase, while you also have to bear the cost of withdrawing funds.

Commissions and fees are not fixed and depend on many factors, including the amount of XRP you are trading, region, pricing structure, and more.

What are the benefits of Ripple?

Having a different technological infrastructure means that it offers many benefits that other cryptocurrencies do not have.

Instant transactions

Using a network of servers instead of blockchain mining to verify transactions allows Ripple to process and verify payments in less than 5 seconds. This gives XRP an edge over other cryptocurrencies like Ethereum and Bitcoin that rely on Proof of Stake or Proof of Work protocols.

Versatility and adaptability

The fact that it does not try to replace the already existing payment system, but helps financial institutions, makes it more versatile. This means that anyone from anywhere in the world can use it to create an account to buy or sell any currency they want.

Low transaction fee

Another key feature is its extremely low transaction fee, which is a hundredth of a cent. The price generally remains stable, and even if a temporary surge in network demand causes it to rise, it is still almost nothing compared to the transaction fees of other cryptocurrencies.

Decentralized network

Despite the fact that blockchain technology is not used, according to its creators, it is a decentralized network, which means that there is no central authority with absolute control over it. Even though it has been repeatedly disputed. However, anyone can use the platform to create their own gateways and exchange fiat and digital currencies.

Pre-mined tokens

One significant difference between popular blockchains and the Ripple network is that it offers pre-mined tokens. This means there is no currency to be mined, which not only saves time and money, but is also great for the environment as there is no excessive power consumption to validate transactions.

Business to business approach

Instead of focusing on consumers, its main customers are banks and financial institutions. The coin aims to revolutionize the payment system with RippleNet technology, which will ultimately benefit consumers. There are already big players on the platform including MoneyGram, American Express, Santander and Interbank.

Can Ripple be used anonymously?

Although you get some level of anonymity on the Ripple network, this is not one of their primary goals. The system uses tags to collect all metadata and general ledger information to track past transactions. In addition, the token currently works in tandem with financial institutions and payment gateways, which are required to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations in order to provide protection against fraud and prevent money laundering.

Every digital activity is tracked. While end-to-end encryption provides a certain level of anonymity to the user, law enforcement or hackers with malicious intent can always trace these transactions to personally identify the user, especially if they use common payment gateways.

How secure is the xrp coin?

Although Ripple does not use blockchain mining to secure transactions, it is still a decentralized platform with a network of validating servers. These servers work with an internal ledger to ensure that transactions are only verified by consensus. In addition, all digital exchanges on the network are end-to-end encrypted to prevent personal and financial data from being intercepted and compromised. To secure your tokens, you can also use physical and digital wallets.

What team is working on the development?

Because Ripple has a unique and focused approach to changing the payments and remittance landscape, which requires it to negotiate and establish business relationships with financial institutions, it operates more like a company than an open source project. While XRP tokens are created and distributed through an open source platform. Here are the key people involved in the project.

Brad Garlinghouse

With experience in senior positions at companies such as AOL, Yahoo and Dialpad, Brad is currently the CEO and a member of the Board of Directors. He is responsible for defining the long-term vision for the platform.

David Schwartz

As the original creator of the XRP Ledger, David currently serves as Chief Technology Officer (CTO). He worked with the NSA and CNN. A respected name in the digital currency community.

Ashish Birla

He joined the team in 2013 to lead the development of the platform and create a suite of primetime products. He is currently the acting senior vice president of products and corporate development.

Monica Long

With a background in helping technology companies drive change in the financial arena, Monica Long is Senior Vice President of Marketing.

Ethan Beard

As Head of New Business Development at Google and Facebook Developer Network, Ethan currently serves as Senior Vice President of Xpring. He also provides investment and advice to tech start-ups.

Eric Van Miltenburg

With over 20 years of diverse experience in operations management, strategic planning and business development, Eric is acting senior vice president of global operations and business development.

Which financial institutions are investing in Ripple?

As you know, the main goal of Ripple is to work with banks and financial institutions instead of offering an alternative payment system, a large number of financial institutions have supported the digital currency. 

Some of the big players in the financial arena who have invested financially and strategically in Ripple include Santander, Standard Chartered, SBI Group, CME Ventures, Core Innovation Capital, Accenture, and others. In the future, more financial institutions are expected to merge with Ripple.

Mining Ripple

All XRP tokens are pre-mined and the network does not rely on blockchain mining to verify transactions. It does not use the proof of stake protocol like Nxt nor the proof of work protocol like Bitcoin. There is a network of servers that runs a consensus protocol that verifies transactions and account balances on the platform. This server-supported consensus model maintains the integrity of the platform by ensuring that there is no double spending.

Ripple Wallet

If you want to securely store your XRP, then you should use a wallet to keep your coins safe from any potential compromise. Some of the best wallets include:
Ledger Nano S - Hardware Wallet
Guarda - Desktop, web and mobile wallet
Edge Wallet - Mobile Wallet
Toast Wallet - Desktop and mobile wallet
Gatehub - Web wallet.

Is Ripple worth the investment?

Ripple is one of those cryptocurrencies that has a very focused approach and vision for the future. With several banks and financial institutions already up and running, it appears to be well on its way to success. This is the success of the network and may lead you to believe that investing in XRP tokens is the right move. The only problem is the price - it is not known in which position the price of XRP will reach equilibrium. It can grow exponentially or fall even more.

Should I invest in Ripple(XRP) cryptocurrency? There is no clear answer. Since all investments in cryptocurrency carry an increased risk of losing your funds. Therefore, the author advises you to approach investing judiciously and with an understanding of the possible financial risks.