Coins: 14,774
Exchanges: 1,129
Market Cap: $2.544T 1.6%
24h Vol: $73.35B
Gas: 3 GWEI
Go Ad-free
Sponsored Content
TABLE OF CONTENTS

eToro’s Beginner Guide to XRP

4.9
| by
Ian Lee
-

This is a sponsored cryptocurrency guide by eToro.

In this instalment of the eToro’s Beginner Guide series, we will be looking at XRP, a current top three cryptocurrency by market capitalization. We will explain its use cases, structure, current status, and its main criticisms.

The first question is, what does ‘Ripple’ refer to?

Ripple: The Entity, the Network, and the Currency

The term Ripple is often interchangeably used to refer to three separate things:

  1. Ripple the company: This is Ripple Labs Inc., a private company founded in 2012

  2. Ripple the network: Ripple the network, known as RippleNet

  3. Ripple the currency: The native token of RippleNet, XRP

Ripple’s Purpose: A Fast and Low-Cost International Payments and Liquidity Solutions Provider

There’s quite a bit of financial jargon in that header. But this shouldn’t be surprising, because Ripple is, at its core, a finance company. It is a platform where parties can easily make payments without the usual ‘walls’ (think PayPal’s fees) and where financial institutions can source liquidity (i.e. large amounts of cash) from one another.

Ripple’s early investors reflect this goal, having names such as Standard Chartered, CME Group, Accenture, Google Ventures, and IDG Capital Partners. Ripple was designed to work with mainstream finance, not to oppose or replace it. Crypto-anarchists are surely no fans of Ripple.

Ripple’s Three Products (Only One Uses XRP)

Ripple has three main products, and only one of them actually requires the use of XRP. They are:

xCurrent

The first Ripple product and also its (currently) most widely-used one. It is an instant payments solution for banks, but notably only uses fiat currency. Ripple has claimed over two hundred financial institutions use this product.

xVia

The most recent product, it is an API that allows entities to access RippleNet to send payments. Again, it only uses fiat currency.

xRapid

Launched in October 2018, this is the crypto equivalent of SWIFT (recall how if you want to send/receive money to your bank internationally, you’ll need to know the SWIFT code). It is also for settling international payments, however in this case the XRP token is used as a bridge between currencies, whether fiat or some other crypto.

Of course, you might wonder what advantage using XRP as a bridge gives. To facilitate international payments, banks must have a pre-funded bank account in the local country (known as NOSTRO accounts). Since crypto is borderless, using a crypto-bridge eliminates this need while ensuring both sides of the transaction can remain in the local currency. Essentially, it provides on-demand liquidity, and frees up banks’ capital that would otherwise be sitting in those pre-funded accounts.

As you can see from the diagram above, the process requires digital asset exchanges on both sides to serve as crypto-fiat ramps. This means in addition to the end user financial institutions (its main clients), there needs to be a healthy ecosystem of digital asset exchanges to support widespread adoption.

The XRP Token

The XRP token has been a strong performer—it was in fact the best performing token in the 2017 bull run. While its price has of course steeply declined since then, in tandem with the broader crypto market, its price as of this writing still remains at levels seen in early Dec-2017.

If you wish to invest in XRP, you’ll have to buy them off one of the exchanges, because you can’t mine them. XRP is what is known as a pre-mine, meaning all 100 billion XRP tokens were already ‘mined’ at inception. About 40 billion XRP tokens are presently in circulation.

It is worth mentioning that Ripple itself holds about ~55% of the entire token supply in escrow, giving them major control over XRP itself. This concentration of power (aka centralization) is one of the main criticisms of Ripple.

RippleNet’s Performance and Fees

For XRP to be successful as a crypto-bridge between various fiat currencies, the network must have a certain performance standard. Ripple claims the network is capable of processing 1,500 transactions per second with the potential to further scale to Visa levels (~50k per second). For reference, Bitcoin can only do about seven per second and Ethereum around 20.

The next thing is fees. For mass adoption, fees have to be low and each transaction on RippleNet has a minimum transaction cost of 0.00001XRP. Importantly, fees do not vary by transaction amount, but only from the business of the network. XRP tokens used for transaction fees are burned.

But since XRP is fully pre-mined, how are transactions on the network validated?

The Ripple Protocol Consensus Algorithm (“RPCA”)

Ripple validates transactions through a group of validators known as the Unique Node List, sort of like a ‘High Council of Validators’. Currently this council is chosen by Ripple (the company) and it also runs significant number of nodes itself—the centralisation criticism surfaces here as well. However, it has stated it eventually intends to remove itself from the process and leave it up to network participants. You can see the list of validators here.

So far, there are no explicit rewards given out to chosen validators. This contrasts to, for example, Bitcoin and Ethereum, where the miners are the validators and receive direct block rewards.

Conclusion: Ripple is an Interesting Project That Could Bring Crypto into Mainstream Finance

Due to its ideological beginnings, Ripple has a good chance to bring crypto into mainstream finance. It already has a good base of financial institution clients, and if it can migrate them all over to using XRP and expand from there, it would be a coup. Nonetheless, it remains dogged by criticisms of being over-centralized, which is perhaps an inevitable trade-off they made to boost performance.

Resources

This is a sponsored cryptocurrency guide by eToro.

CoinGecko's Content Editorial Guidelines
CoinGecko’s content aims to demystify the crypto industry. While certain posts you see may be sponsored, we strive to uphold the highest standards of editorial quality and integrity, and do not publish any content that has not been vetted by our editors.
Learn more
Want to be the first to know about upcoming airdrops?
Subscribe to the CoinGecko Daily Newsletter!
Join 600,000+ crypto enthusiasts, traders, and degens in getting the latest crypto news, articles, videos, and reports by subscribing to our FREE newsletter.
Tell us how much you like this article!
Vote count: 12
Ian Lee
Ian Lee
Ian Lee is a freelance writer specializing in the areas of finance and all things crypto. He also has over five years of experience in investment banking. Follow him at Ian Lee.

Related Articles

Select Currency
Suggested Currencies
USD
US Dollar
IDR
Indonesian Rupiah
TWD
New Taiwan Dollar
EUR
Euro
KRW
South Korean Won
JPY
Japanese Yen
RUB
Russian Ruble
CNY
Chinese Yuan
Fiat Currencies
AED
United Arab Emirates Dirham
ARS
Argentine Peso
AUD
Australian Dollar
BDT
Bangladeshi Taka
BHD
Bahraini Dinar
BMD
Bermudian Dollar
BRL
Brazil Real
CAD
Canadian Dollar
CHF
Swiss Franc
CLP
Chilean Peso
CZK
Czech Koruna
DKK
Danish Krone
GBP
British Pound Sterling
GEL
Georgian Lari
HKD
Hong Kong Dollar
HUF
Hungarian Forint
ILS
Israeli New Shekel
INR
Indian Rupee
KWD
Kuwaiti Dinar
LKR
Sri Lankan Rupee
MMK
Burmese Kyat
MXN
Mexican Peso
MYR
Malaysian Ringgit
NGN
Nigerian Naira
NOK
Norwegian Krone
NZD
New Zealand Dollar
PHP
Philippine Peso
PKR
Pakistani Rupee
PLN
Polish Zloty
SAR
Saudi Riyal
SEK
Swedish Krona
SGD
Singapore Dollar
THB
Thai Baht
TRY
Turkish Lira
UAH
Ukrainian hryvnia
VEF
Venezuelan bolívar fuerte
VND
Vietnamese đồng
ZAR
South African Rand
XDR
IMF Special Drawing Rights
Cryptocurrencies
BTC
Bitcoin
ETH
Ether
LTC
Litecoin
BCH
Bitcoin Cash
BNB
Binance Coin
EOS
EOS
XRP
XRP
XLM
Lumens
LINK
Chainlink
DOT
Polkadot
YFI
Yearn.finance
Bitcoin Units
BITS
Bits
SATS
Satoshi
Commodities
XAG
Silver - Troy Ounce
XAU
Gold - Troy Ounce
Select Language
Popular Languages
EN
English
RU
Русский
DE
Deutsch
PL
język polski
ES
Español
VI
Tiếng việt
FR
Français
PT
Português
All Languages
AR
العربية
BG
български
CS
čeština
DA
dansk
EL
Ελληνικά
FI
suomen kieli
HE
עִבְרִית
HI
हिंदी
HR
hrvatski
HU
Magyar nyelv
ID
Bahasa Indonesia
IT
Italiano
JA
日本語
KO
한국어
LT
lietuvių kalba
NL
Nederlands
NO
norsk
RO
Limba română
SK
slovenský jazyk
SL
slovenski jezik
SV
Svenska
TH
ภาษาไทย
TR
Türkçe
UK
украї́нська мо́ва
ZH
简体中文
ZH-TW
繁體中文
Login to track your favorite coin easily 🚀
By continuing, you agree to CoinGecko Terms of Service and acknowledge you’ve read our Privacy Policy
or
Forgot your password?
Didn't receive confirmation instructions?
Resend confirmation instructions
IT'S FREE! Track your favorite coin easily with CoinGecko 🚀
By continuing, you agree to CoinGecko Terms of Service and acknowledge you’ve read our Privacy Policy
or
Password must contain at least 8 characters including 1 uppercase letter, 1 lowercase letter, 1 number, and 1 special character
Didn't receive confirmation instructions?
Resend confirmation instructions
Forgot your password?
You will receive an email with instructions on how to reset your password in a few minutes.
Resend confirmation instructions
You will receive an email with instructions for how to confirm your email address in a few minutes.
Get the CoinGecko app.
Scan this QR code to download the app now App QR Code Or check it out in the app stores
coingecko
Continue in app
Track prices in real-time
Open App