Despite the scheme’s long history, multiple people are still confused about how Ripple and XRP are related.
The theory behind Ripple reportedly predates Bitcoin(BTC) by four to five years. In 2004-2005, Ryan Fugger, a Canadian computer programmer, developed RipplePay as a way to deliver secure payment options to members of an online community via a global network.
But it would carry another six years before the Blockchain-based payment method known as XRP and its founding fintech company, now known as Ripple, were started.
What is Ripple, exactly?
Unlike the public nature of Ethereum and Bitcoin which seek to disrupt legacy finance, Ripple concentrates on improving the existing and fragmented traditional banking system.
It does that by uniting a network of independent banks and payment providers with a standardized protocol to communicate and send lost-cost, direct payments worldwide.
Those products comprised xRapid, a liquidity product; xVia, a payment application programming interface; and xCurrent, a real-time agreement system. In 2019, xCurrent and xVia were connected and rebranded to RippleNet. xRapid was also renamed “On-Demand Liquidity” (ODL), which is a product utilized to speed up the transfer and exchange of fiat currencies between countries.
How does Ripple work?
There are two main components that include Ripple:
Ripple: In its entirety, Ripple delivers a real-time gross compromise system (RTGS), currency exchange and remittance network. The platform, which is supported by its Blockchain payment protocol, uses RippleNet to facilitate immediate transactions between financial entities.
RippleNet: RippleNet is a separate network of payment facilitators and global banks that supports streamline communication and allows participants to send and receive payments seamlessly through Ripple’s distributed platform.
How does XRP work?
XRP is the native cryptocurrency of the XRP Ledger, a public blockchain that uses the federated agreement algorithm and that difference from the evidence-of-work and proof-of-stake mechanisms, as participants in the Ripple network are known and trusted by each other, based mostly on reputation. In March 2022, there were more than 150 validators on the network and about 36 on the default unique node list (UNL).
A special node list is a list of nodes that a network participant trusts. There are three entities – Ripple, the XRP Ledger Foundation, and Coil (a Ripple-funded entity) – that publish lists of suggested validators based on facets like past performance, confirmed identity, and secure IT policies, and these lists are the default unique node lists (dUNL). As more validators join the network. These lists
Pros and cons
Even though it uses the open nature of blockchain to decentralize its bookkeeping and keep transitions transparent, XRP is more centralized than Ethereum or Bitcoin in that no public entity or person outside of ripple can decide the issuance of new coins. That is large because XRP is evidently more a tool for transferring value across borders via Ripple products than it is a speculative investment vehicle-even though to the SEC’s mind, it has certainly functioned as an investment.
Here are some advantages of Ripple and XRP:
- Fast, efficient, and transparent payments with an added liquidity tool to help facilitate the settlement process.
- XRP settlement quickness is faster than Bitcoin’s or Ethereum’s.
- Ever-improving scalability – the XRP network can operate up to 1,500 transactions per second.