November 24, 2022
  • November 24, 2022

What is Ripple? What is XRP? – Adviser Forbes UK

By on May 30, 2021 0

Ripple is a money transfer network designed to meet the needs of the financial services industry. XRP, a cryptocurrency designed to run on the Ripple network, is consistently listed among the top five cryptocurrencies by market cap.

What is Ripple?

Ripple is a payment settlement system and currency exchange network capable of processing transactions around the world. The idea is that Ripple serves as the trusted agent between two parties in a transaction, because the network can quickly confirm that the exchange went smoothly. Ripple can facilitate trading for a variety of fiat currencies, cryptocurrencies like Bitcoin, and even commodities like gold.

“Ripple was designed from the start to be essentially a replacement for SWIFT (a leading money transfer network) or in some other way to replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.

Every time users make a transaction using the network, the network deducts a small amount of XRP as a fee.

“The standard fee for making transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the hefty fees charged by banks for making cross-border payments,” says El Lee, member of the board of directors of Onchain Custodian. At the end of April 2021, the price of XRP was £ 0.97 per token, which means the transaction fee is just £ 0.0000097.

What is XRP?

XRP is a cryptocurrency that runs on the XRP Ledger, a blockchain designed by Jed McCaleb, Arthur Britto, and David Schwartz. McCaleb and Britto were going to found Ripple and use XRP to facilitate transactions on the network. You can buy XRP as an investment, as a coin to be exchanged for other cryptocurrencies, or as a way to fund transactions on the Ripple network.

Notably, XRP’s blockchain works a little differently from most other cryptos. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can quickly solve complex equations, but transactions are secure because the majority of ledger holders must accept verification for them to be added.

Instead, XRP’s Ripple Network somewhat centralizes things: While anyone can download their validation software, it maintains what it calls lists of unique nodes that users can select to verify their transactions. based on which participants they believe are least likely to defraud them. Its default list currently contains 35 trusted validators. Ripple decides which validators to approve for this list and is also six of those validator nodes. However, users can unsubscribe from this default list and hypothetically remove Ripple-based validators from their transactions, instead of creating their own trusted validator lists. This would allow the network to continue to approve transactions even without Ripple remaining involved or even continuing to exist.

As new transactions arrive, validators update their registers every three to five seconds and make sure they match the other registers. If there is a mismatch, they stop to figure out what went wrong. This allows Ripple to securely and efficiently validate transactions, giving it an edge over other cryptocurrencies, like Bitcoin.

“Bitcoin transaction confirmations can take several minutes or hours and are usually associated with high transaction costs,” says Lee. “XRP transactions are confirmed in approximately four to five seconds at a much lower cost.”

Buy and sell cryptocurrency with Coinbase

The biggest and easiest place in the world to buy cryptocurrency

How to mine XRP

“Mining” is the distributed verification system used by most blockchain-based cryptocurrencies. It both facilitates transactions and provides the mechanism by which new currency is fed into a cryptocurrency system – usually as a reward to auditors for their work in supporting the network. For example, Bitcoin has a total supply limit of 21 million tokens which are regularly released as more transactions are verified.

XRP, on the other hand, has been “pre-mined,” meaning that the XRP ledger has created 100 billion tokens which are then periodically released to the public. Ripple owns around 6% of it to incentivize it to help the cryptocurrency grow and succeed over time. Another approximately 48% is held on a reserve to be regularly marketed through sales.

Naturally, this has led to concerns that a large chunk of XRP could be released at once, diluting the value of other XRPs already in circulation as part of what gives any currency its value is its comparative scarcity.

“The company tried to reduce uncertainty by putting in place several mechanisms (trust, predictable release, etc.)”, explains Tim Enneking, director of Digital Capital Management.

Ripple Advantages

  • Quick settlement. Transaction confirmations are blazingly fast. They typically take four to five seconds, compared to the days banks can take to complete a wire transfer or the minutes or potentially hours it takes for Bitcoin transactions to be verified.
  • Very low costs. The cost to complete a transaction on the Ripple network is only 0.0001 XRP, a small fraction of a dime at current rates.
  • Versatile exchange network. The Ripple network not only processes transactions using XRP, but it can also be used for other fiat currencies, cryptocurrencies, and commodities.
  • Used by large financial institutions. Large companies can also use Ripple as a trading platform. Santandar, Axis Bank and Yes Bank are a few to use this network, demonstrating that it is already more widely adopted in the institutional market than most cryptocurrencies.

Disadvantages of ripple

  • Very centralized. One of the reasons cryptocurrencies have become popular is that they have been decentralized, taking over the big banks and governments. The Ripple system is centralized and goes against this philosophy.
  • Ripple Labs controls the XRP feed. Ripple Labs decides when to release coins, which gives it control over other cryptos where coins are slowly and steadily released by mining. This means that Ripple Labs has more power to influence the value of XRP by deciding when and how many tokens to release.
  • Recent regulatory action against XRP. In the United States last year, the Securities and Exchange Commission (SEC) took legal action against Ripple, claiming that since it can decide when to release XRP, the company should have registered it as a security. . Until this is resolved, it could slow down the institutional use of this system. As a result, several exchanges have also stopped listing XRP, such as Coinbase.

How to use Ripple and XRP

You can use XRP like any other digital currency, whether for transactions or as a potential investment. You can also use the Ripple network to process other types of transactions, like exchanging currencies.

For example, if you are looking to exchange sterling for euros, you can first exchange your GBP for XRP on the Ripple network and then use them to buy euros, rather than handling the exchange directly through a bank or currency exchange. This can be a much faster and cheaper approach than paying the high fees that banks and money transfer agencies can charge.

Should you buy XRP?

While some might find XRP’s vision and benefits compelling, White is concerned the SEC lawsuit could create problems for those seeking to join.

“They position themselves as a settlement layer for regulated companies, but they’re also in deep conflict with the SEC. None of the customers they would like to join can really start using XRP until Ripple understands their legal issues, ”he said.

With all of this uncertainty, Enneking warns that XRP may not be a bet for the faint-hearted. Although it has more than recovered since, “the SEC announcement caused the price of XRP to drop,” he notes, making this crypto a particularly volatile investment until things are sorted out. with the SEC.

That said, if you think Ripple will emerge victorious against the SEC and continue to take over as a payments system, then it might be worth buying XRP. Just make sure it’s money you can afford to lose.

Buy and sell cryptocurrency with Coinbase

The biggest and easiest place in the world to buy cryptocurrency