Ripple is an innovative blockchain network that uses the XRP token to facilitate financial transactions. Today, as well as being an investment asset, Ripple is widely used within the banking industry as an efficient, affordable alternative to traditional cross-border payment technology. For example, moving £1 million from the UK to Australia can take days to complete and cost thousands in fees. Using Ripple and XRP, the process takes seconds and costs a few pence.
Now, it’s important to point out that Ripple and XRP aren’t officially connected. Ripple didn’t create nor does it control XRP. However, it is the only company to have built a platform based on XRP tokens. What’s more, it owns a majority share of XRP. Therefore, the two are often used interchangeably and that’s something we’re going to do in this guide (sorry crypto pedants!). So, if you want to learn more about Ripple, XRP and where they rank in the crypto investment sphere, make sure you read our expert overview.
Want to know what Ripple is how it’s connected to XRP? Let us explain…
Ripple has a complex history that goes back even before the creation of the first cryptocurrency, Bitcoin (BTC). Ryan Fugger first developed the concept of a decentralised money ecosystem in 2004. He later created RipplePay.com, which formed the basis of today’s Ripple network, but without the blockchain component.
In 2012, Jed McCaleb and Chris Larsen approached Fugger with their idea of a decentralised ecosystem powered by blockchain and distributed ledger technology. They took control of Ripple and launched a blockchain project called OpenCoin. This project was eventually renamed Ripple and linked to Ripple Labs and the digital token, XRP.
The name “Ripple” doesn’t have a very impressive origin. Like many cryptocurrency names, it’s meant to evoke the way the technology would go on to affect the fintech industry. Rather than blowing up the financial order, Ripple is designed to flow alongside existing fintech.
As we’ve already explained, Ripple wants to make it easier for institutions to send money anywhere in the world. It has already accomplished this goal and has become a new foundational technology for many international banks and fintech companies.
As for how Ripple works, we’re able to explain its fundamentals without getting too deep into the technical weeds. Let’s say you want to trade some British Pounds Sterling for Mexican Pesos. Normally, this would be performed through a circuitous process by your bank. Funds would be taken out of your account, and (in many cases) physical Pesos would be delivered to a local branch. The process would take days.
With Ripple, this process is greatly simplified. Banks hold large amounts of all major currencies and XRP is measured at variable exchange rates to each one. So, when you want Pesos, your bank would trade GBP for XRP. This XRP would be transferred to Mexico and immediately changed to their equivalent value in Pesos. Although this technology is aimed more towards banks dealing with large batches of transactions, it makes life easier for individuals too. What’s more, there are also possible applications for common people as well. This is what makes Ripple such an intriguing proposition in the crypto space.
We’ve already listed Ripple founders Larsen and McCaleb, both of whom continue to be important voices in the realm of Ripple and cryptocurrency in general. Perhaps more importantly for Ripple today, though, is the list of banks and corporations which now use Ripple’s suite of products for their various financial services.
From the banking sector, we’ve currently got Santander, PNC Bank, the Royal Bank of Canada, and a growing list of other international enterprises. Ripple is also used by Western Union and MoneyGram (through a partnership with none other than Wal-Mart). Finally, major traders such as hedge fund manager Ray Dalio have also backed Ripple.
Perhaps the best reason to buy XRP and, in turn, invest in Ripple is its affiliation with major financial institutions. Although various banks have shown a small amount of support for Bitcoin (BTC), very few have actually implemented the technology into their systems. In contrast, there are plenty of banks that are now linked to Ripple in one way or another.
Expanding on our overview of how Ripple works, the company has two main products: xCurrent and xRapid. This is important because the dynamic between the two and the way banks use them is an important reason to invest.
Put simple, xCurrent is already being used by the likes of Santander, American Express and UBS. This system allows them to settle cross-border transactions in real time using a clever messaging system. xRapid offers a similar service. However, the way in which it transfers data is via XRP coins. Importantly, xCurrent is a gateway, a stepping stone towards xRapid and, therefore, towards XRP.
Because Ripple already has working relationships with some of the largest financial institutions, getting them to invest in XRP should be a lot easier. Although there is still a way to go before Ripple and XRP are commonplace in banking, the foundations have been laid.
What’s more, if you scroll through our list of recommended crypto exchanges, you’ll notice something else too. As well as these sites offering easy access to XRP, you’ll see the price per coin is still low. Compared to some of the top altcoins such as Ethereum (ETH), Ripple is a bargain.
As we’ve discussed, the biggest strength of Ripple is its affiliation with major banks. However, there are some other pros and cons you need to consider before you invest:
XRP is extremely cheap compared to Bitcoin and altcoins.
Ripple is proven in a commercial/financial environment. Tests involving xCurrent and xRapid have already been successful, showing that Ripple can be effective in a real-world setting.
Ripple is improving. To ensure it has the capacity to process the same number of transactions as Visa et al, developers are constantly upgrading Ripple. At present, it can handle 1,500 transactions per second, but this will improve, making it a major rival for more established systems.
Some people argue that XRP isn’t a fully decentralised crypto because Ripple owns a majority share of the tokens, and that gives it a certain degree of control.
Ripple already has a high market cap which could make growth harder (i.e. it’s tough to see huge gains when you’re already a big company). Therefore, it may take a major innovation to see a real price surge.
One of the closest cryptocurrencies to XRP in terms of technology is Stellar Lumens (XLM). Like Ripple, Stellar allows two parties to exchange one currency for another. Basically, XLM is used to pay transactions fees on the Stellar network.
Through this mechanism, a bank can send money to a bank in another country and use XLM to cover the fees. By doing this, the original currency is essentially converted into XLM. To put it another way, XLM acts as an intermediary that carries currencies from one bank to another.
Although Stellar performs a similar job to Ripple, it can’t quite match it in terms of speed. What’s more, it doesn’t have as many high profile partners, meaning that it’s not as visible in a commercial setting.
Being among the top three digital coins means that XRP is fairly easy to buy. In fact, you can invest in XRP tokens in a variety of ways, including crypto-to-crypto, fiat-to-crypto and via contracts for difference (CFDs). Three of the best places to buy Ripple are:
The price of Ripple has remained fairly consistent in recent times. During the crypto boom of 2017, it followed the trend and hit highs of $3+. However, if we exclude that period of time where all valuations were spiralling out of control, XRP has remained relatively stable at >$1 per coin. At the start of 2019, XRP price charts had the coin floating around the $0.30 mark.
At that level, there’s plenty of potential for growth. Even if we exclude the fact all cryptos boomed in 2017, Ripple has already been 10x higher than was at the start of 2019. As more banks utilise this technology, there’s no reason it can’t reach those highs again.
Unlike other cryptos, you can’t mine XRP. Each token is created by the institutions connected to the network. These tokens are then used for each specific transaction, meaning they can only be used once. Because of that, mining Ripple on an individual basis isn’t possible. Fortunately, you can buy Ripple. Because a certain number of coins have been distributed, they’re now available on exchanges.
Storing XRP tokens in an exchange is the easiest way to access your coins. If you’re looking for a safer option, there are plenty of XRP wallets you can use. One thing that’s important to note, however, is that all Ripple wallets require a holding balance of 20 XRP.
For a hot solution (i.e. one that’s based online), software and mobile crypto wallets such as Toast are great. For a desktop solution, Rippex and Cryptonator give you safe, cost-effective storage space. Finally, for the most secure solution, an offline (cold) wallet such as the Ledger Nano S is perfect.
If you’re trying to decide whether to invest in Ripple or Bitcoin, there are a few things to consider. In terms of longevity, reputation and overall value, Bitcoin is clearly out in front. However, the same would be true if we compared BTC to any other altcoin. But in a world where perception matters, these credentials are still important.
With casual investors driving the market, coins that are given the most media coverage often do the best. If you read our Bitcoin handbook, you’ll see that BTC certainly fits into this category because it’s the original crypto and, for some, it’s still the best. However, it’s fair to say that Ripple has also received its share of media coverage over the last few years.
As we’ve said countless times in this guide, the company has forged relationships with major banks such as Santander. This has helped its reputation and, in turn, improved its value. Beyond that, Ripple can process many more transactions per second than Bitcoin. With scalability being an issue for all cryptos, this fact alone should satisfy the tech-heads out there.
Of course, you can invest in both coins. But if you have to choose just one, there’s certainly a ton of potential in Ripple.
Many traders believe the best way to improve your chances of a positive return is to hold multiple investments. If you subscribe to this idea then owning a few cryptos alongside XRP is a good idea.
Technically, no. XRP is a digital token in its own right. However, Ripple is the only company to have built a platform based on XRP, and many people use the two words interchangeably.
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