Ripple is a money transfer network designed to meet the needs of the financial services industry. XRPCryptocurrencies tuned to work on the Ripple network have always been listed in the top 10 cryptocurrencies by market capitalization and recently (June 2024) broke into the top 5 of the most profitable assets. did.
What exactly is Ripple?
Ripple is a payment system and currency exchange network that can process transactions around the world. Ripple acts regularly as a trusted agent between the two parties in a transaction because it allows you to quickly see that the network has been exchanged. Ripple can facilitate exchanges with various fiat currencies. Cryptocurrency like BitcoinAnd even commodities like gold.
“Ripple was designed from the beginning as an alternative to SWIFT (a major remittance network) or as a replacement for the payment layer between major financial institutions,” said Pat White, CEO of Bitwave.
Whenever a user makes a transaction using the network, the network deducts a small amount XRP As a fee.
“The standard fee for trading on Ripple is set at 0.00001XRP, which is minimal compared to the high fees that banks charge to make cross-border payments,” said Onchain Custodian. El Lee said. As of mid-2022, the price of XRP was about $ 0.35 per token. That means the transaction fee is only $ 0.0000035.
What is XRP?
XRP Cryptocurrency It runs on XRP Ledger, a blockchain designed by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto found Ripple and used XRP to facilitate transactions on the network.You can do it Buy XRP As an investment, as a coin to exchange for other cryptocurrencies, or as a way to fund transactions on the Ripple network.
In particular, the XRP blockchain behaves a bit differently than most other ciphers. Other cryptocurrencies expose transaction ledgers and validation processes to anyone who can quickly solve complex equations, but transactions because the majority of ledger owners must agree to additional validation. Is safe.
Instead, XRP’s Ripple network centralizes the process to some extent. Anyone can download the verification software, but keep what is called a unique node list that users can choose to validate the transaction, and validate the transaction based on the participants who are most likely to be fraudulent. increase. Currently, the default list contains 35 trusted validators. Ripple determines which validators approve this list and configures six of these validation nodes. However, instead of opting out of this default list and creating its own list of trusted validators, Ripple-supported validators can be permanently removed from the transaction. This allows the network to continue to approve transactions without the company continuing to be involved or present.
When a new transaction occurs, the validator updates the ledger every 3-5 seconds to make sure it matches the other ledgers. If there is a discrepancy, they stop understanding what went wrong. This allows Ripple to validate transactions securely and efficiently, giving it an edge over other cryptocurrencies such as: Bitcoin..
“Confirming a Bitcoin transaction can take minutes or hours, usually with high transaction costs,” says Lee. “XRP transactions are confirmed in about 4-5 seconds at a much lower cost.”
How to mine XRP
“Mining” is a decentralized verification system used in most blockchain-based cryptocurrencies. It facilitates transactions and provides a mechanism for new currencies to be introduced into cryptocurrency systems-usually as a reward to verifiers for their work in supporting networks. For example, the total supply limit for Bitcoin is 21 million tokens, which will be released steadily as more transactions are verified.
In contrast, XRP was “pre-mined”. In short, XRP Ledger has created 100 billion tokens and has been published on a regular basis. Ripple owns about 6% of it as an incentive to help cryptocurrencies grow and succeed over time. An additional 48% is held as a reserve for regular release to the market through sales.
Not surprisingly, this has led to concerns that many XRPs could be released at once, diluting the value of other XRPs already in circulation.
“The company sought to reduce uncertainty by implementing several mechanisms (trust, predictable releases, etc.),” said Tim Enneking, Principal of Digital Capital Management.
Benefits of Ripple
- Quick settlement. Transaction confirmation is incredibly fast. It usually takes 4-5 seconds compared to the number of days it takes a bank to complete a wire transfer and the minutes or even hours it takes to verify a Bitcoin transaction.
- Very low rates. The cost to complete a transaction on a Ripple network is only 0.0001 XRP, which is only 1 cent at the current rate.
- A versatile exchange network. Ripple networks can be used not only to process transactions using XRP, but also to other fiat currencies, cryptocurrencies, and commodities.
- Used by large financial institutions. Large companies can also use Ripple as a transaction platform.
Disadvantages of Ripple
- It is highly centralized. One of the reasons why cryptocurrencies have become so popular is DistributedTake control of major banks and governments. The Ripple system is centralized and goes against this philosophy.
- Ripple Labs controls the XRP supply. Ripple Labs decides when to release coins and gives them control over other ciphers where mining releases coins slowly and steadily. In short, Ripple Labs has the power to influence the value of XRP by deciding when and how many tokens to release.
- Recent regulatory measures against XRP. In the United States, the Securities and Exchange Commission (SEC) filed a proceeding against Ripple in 2021 and said it should have registered it as a security as it could decide when to release XRP. Until this is resolved, the institutional use of this system may be delayed. As a result, several exchanges, such as Coinbase, have also stopped listing XRP.
How to use Ripple and XRP
For example, if you want to exchange Australian dollars for euros, you can first exchange AUDs for XRPs on Ripple Network and then use them to buy euros instead of processing foreign currency exchanges directly at banks or exchange offices. increase. .. This can be a much faster and cheaper approach than paying the high fees that banks and money transfer organizations may charge.
Need to buy XRP?
While some may find the vision and benefits of XRP compelling, White is concerned that the SEC proceedings could cause problems for those trying to buy XRP.
“They have established themselves as the payments layer for regulated companies, but they are also deeply involved in the dispute with the SEC. Until Ripple resolves legal issues, any customer who wants to board You can’t really start using XRP, “he said.
Given all of these uncertainties, Enneking warns that XRP is not a bet on the weak. The crypto market plunged in May, wiping out billions of dollars in value, and the major coin Bitcoin fell below the psychological barrier of $ 20,000. XRPLike any other coin, it is subject to routing and is currently trading at around $ US.35. This is down from a record high of $ 3.84 in 2018. This is a drop of over 90%.
However, if you believe that Ripple will win the SEC and take over as a payment system, be sure to roll the dice. Make sure you have the money you can afford to lose.
This article does not endorse any particular cryptocurrency, broker, or exchange, nor does it constitute a cryptocurrency recommendation as an investment class.
Related: How to buy XRP in 5 minutes