A Complete Guide to Ripple (XRP): Fundamentals, Trading, Technology, and More

A Complete Guide to Ripple (XRP): Fundamentals, Trading, Technology, and More

Cryptocurrency XRP, the digital token created by Ripple, was one among the few cryptocurrencies that made their mark this year, outperforming rivals Ethereum and Bitcoin. This has been monumental for the crypto market, especially because, from the outside, the crypto world often appears to be primarily centered on Bitcoin. Bitcoin, being the most well-known cryptocurrency, is without a doubt the market leader in terms of market capitalization and investor interest.

But given the extreme volatility of cryptos and the roller coaster ride they've had in 2021, it's no surprise that deciding where to put one's money can be difficult for many investors, particularly novices. If you're searching for a low-risk cryptocurrency with a high return potential, Ripple may be the one for you. Ripple is not only a top 10 cryptocurrency by market capitalization, but it also has no substantial price correlation with Bitcoin, which means you don't have to worry about Bitcoin going up or down if you want to invest in Ripple.

Although Ripple and XRP are two separate things, they are frequently used interchangeably. In this article, we'll go over everything you need to know about Ripple, including how it differs from XRP, its underlying technology, price action history, trading, and everything else.

Introduction to Ripple

Founded in 2012 by Chris Larsen and Jed McCaleb, Ripple is a blockchain-based digital money transfer network that meets the demands of financial transactions. Unlike other top cryptocurrencies like Bitcoin and Ethereum, which have their own blockchain, Ripple operates on a novel 'hash tree' model, with XRP serving as the Ripple network's native cryptocurrency. Ripple Labs develops and manages the currency and technology to enable quick, secure payments throughout the world. XRP has a market cap of $42,347,536,689 at the time of writing, making it the seventh-largest cryptocurrency by market value.

Closely linked with a number of banks, investment firms, and organizations all over the world, the Ripple network can handle up to 1,500 transactions per second and has an average transaction time of 4 seconds, thereby eliminating the latency and lack of transparency that plague traditional international payment systems.

RippleNet, a system of payment networks designed to assist banks and other financial institutions in processing cross-border payments, was devised to address the issue of banking payments being difficult to set up between banks. By allowing clients to conduct business directly with financial institutions rather than through correspondent banks, RippleNet's powerful blockchain ledger allows its users to settle transactions. RippleNet may also be used by businesses to power real-time worldwide money transactions that are received instantaneously at the other end.

The history of Ripple

Ripple, as we know it today, first came into being in 2011, when three engineers - David Schwartz, Jed McCaleb, and Arthur Britto - set out to build the XRP Ledger (XRPL) with the purpose of creating a sustainable digital asset designed specifically for payments. They worked on a distributed ledger that would improve upon Bitcoin's core flaws and originally named the code Ripple. The ledger also contained a digital asset known as "ripples" at the time (XRP as the currency code).

By June 2012, Schwartz, McCaleb, and Britto had completed the ledger's code development. Chris Larsen joined them shortly after, and the group founded the company NewCoin in September that year. During early interactions with clients, the team was frequently asked about the distinctions between the Ripple project and OpenCoin. As the larger community increasingly began referring to the digital asset XRP, the company decided to rebrand to Ripple Labs, which has since been shortened to "Ripple.”

By 2014, many institutions had begun to use this system to settle remittances. Ripple has expanded consistently since then, having grown from a simple transaction platform to a cost-effective solution for organizations worldwide. Ripple has also built a use case in its cross-border payments business that uses the XRP Ledger and XRP for liquidity management.

In 2020, the XRPL Foundation was established with the goal of accelerating the development and adoption of the decentralized XRP Ledger. It is an independent and nonprofit organization. Ripple is also a contributor and stakeholder in the broader XRPL community.

How does the Ripple protocol work?

Ripple, unlike other cryptocurrencies, does not use a proof-of-work (PoW) or proof-of-stake (PoS) mechanism to operate. Instead, in order to authenticate account balances and transactions on the system, transactions rely on a consensus mechanism.

The protocol comprises validating servers, each verifying the requested modifications to the last ledger. Changes agreed upon by at least half of the servers are combined into a new request and sent to all servers. This procedure is repeated, with the percentages required for voting increasing. The server then verifies the changes and notifies the network that the last ledger has been closed. By prohibiting double-spending, the consensus also helps to strengthen the system's integrity.

Furthermore, the Ripple protocol's nodes usually fulfill three functions: users, market makers, and validating servers. Ripple users are also given a public/private key pair, unlike conventional transactions. As a result, anytime a user makes a payment to another user, the transfer of a fee denominated in XRP or any other cryptocurrency is cryptographically signed. For each user or gateway, Ripple also keeps track of all IOUs in a particular currency. However, even though data is publicly recorded and made available on a blockchain, it will not be traceable to any individual or business.

Regarding the validation of transactions, the Ripple technology is considered to be decentralized since no central authority determines who may set up a node or confirm transactions. As a result, there is no "single point of failure.” It will continue to work even if one of the nodes goes offline or is attacked, making it more secure. On the other hand, in terms of protocols and network acceptability, Ripple is centralized.

XRP - The native cryptocurrency

XRP is Ripple's native cryptocurrency, and it reflects the transfer of value in the network. XRP is also the most scalable and fastest digital asset, with the ability to handle the same transaction volume as Visa.

Companies generally choose US dollars or local currencies as the common currency for international transactions or transactions between two distinct currencies. Because of the large amount of time and costs involved in the transactions, bank transfers can take a minimum of up to three days to complete. This is where XRP stands out.

Ripple utilizes XRP as its common currency for currency exchange, which cuts down on the time and costs you'd otherwise have to pay. With XRP, currency transactions take only seconds. Ripple also charges a meager fee of just $0.00001 for a single transaction, thereby making it the most convenient solution for payments. The XRP Ledger is where XRP transactions take place and are recorded. It's an open-source project with a community of trusted validators and developers who works on the ledger on a daily basis.

Thanks to its extensive functionality and growing popularity, several businesses and organizations are now embracing XRP to facilitate their international transactions.

Ripple vs. Bitcoin

Here are the key differences between Ripple and Bitcoin.

  • While Bitcoin is a digital currency that can be used to buy and sell goods and services, Ripple is a payment settlement, currency exchange, and remittance system.
  • Furthermore, as previously stated, the Ripple network validates transactions using a unique distributed consensus method rather than the blockchain mining concept. As a result, when compared to Bitcoin, which consumes large amounts of energy, the XRP consensus mechanism requires very little energy.
  • XRP’s maximum supply is capped at 100 billion. Approximately 1 billion XRP were pre-mined and gradually released into the market when it first launched. Currently, XRP has a circulating supply of 47.54 billion units. Furthermore, Ripple's smart contract control distributes a maximum of 1 billion XRP coins every month, making it readily available. The maximum supply of BTC, on the other hand, is capped at 21 million to create scarcity. 18.89 million of these have already been mined and are on the market.

XRP Trading: Price Performance History

Source: C-Trade

Factors affecting Ripple price

Several factors are known to affect Ripple’s price, especially the overall crypto market sentiment, positive news about the cryptocurrency, custody and listing updates, increased whale activity, and its widespread adoption.

XRP is also the primary fuel for Ripple's On-Demand Liquidity Service and is used to power transactions on RippleNet, the company's native cross-border payments network. As a result, the price of XRP is influenced by news and events around the San Francisco-based company.

The news and events in Southeast Asia, an area with a fragmented payment landscape but where Ripple is very active, are another factor that influences Ripple pricing. When news regarding new cross-border payment options or state-issued cryptocurrencies breaks, price spikes in this region are common. The price of XRP, for example, rose in 2019 when Japan and South Korea experimented with lowering the time and cost of transferring international funds between the two countries.

The actions of the South Korean government have also played an important role in Ripple prices. Because South Koreans were already using Ripple in their daily lives, the government began interfering with XRP. The anti-money laundering policy was one of the first regulations enacted by this administration, with the announcement that all accounts holding XRP would have to conform to the requirements or be frozen. This had a natural impact on the price movement of XRP.

XRP Price performance over the years

At the time of writing, XRP trades at $0.8857. The total quantity of XRPs is aimed at 100,000,000,000, which explains to a large extent why they are so cheap.

  • 2013-2018

From its inception in 2013 until early 2017, XRP prices remained quite steady. Its value rose by about 35,000% by the end of 2017 when Ripple hit a milestone of 100 banks around the world signing up for RippleNet. XRP’s all-time high was recorded in January 2018 when the crypto hit above $3. However, it was unable to maintain such levels, and it fell by 76% in one month due to concerns about new market regulations in the Asian regions.

  • 2019-2020

Ripple's performance in 2019 was quite consistent, with no significant ups and downs. The company was hit with an SEC lawsuit towards the end of 2020, putting Ripple's future in jeopardy. However, despite the lawsuit, Ripple company has managed to stay afloat and is preparing to build a platform for financial organizations to provide their clients the option to acquire and sell cryptocurrencies.

  • 2021 and beyond

The highest price XRP recorded in 2021 was in April, when it traded at $1.8392, before falling back to $0.5 levels by May. The ongoing SEC lawsuit has played a major role in this price downtrend, however, with Ripple seeing good progress in the case whose verdict is expected to be made by January 2022, investors are bullish about XRP price for 2022 and beyond.

XRP Trading on C-Trade

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.