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What is Ripple? How It Works & XRP Price Prediction

 

XRP is both a cryptocurrency and a native token of Ripple. Like other cryptocurrencies, XRP has a currency code resembling Ether (ETH).

In 2012, the Ripple team introduced the XRP ledger, which included XRP as the native token. The development of XRP mainly facilitates worldwide financial transactions and currency exchanges.

What is Ripple (XRP)?

XRP is the cryptocurrency and native token of Ripple. In 2012, the team behind Ripple introduced the XRP ledger, which incorporated XRP as the native token to improve global financial transfers and facilitate the exchange of multiple currencies.

Ripple (XRP) is a cryptocurrency token that aims to move transactions away from centralised databases managed by financial institutions and towards a more open infrastructure while significantly reducing costs. XRP cost per transaction is low and it’s instantaneous and trustless, serving as an advantage for cross-border transfers.

The XRP Ledger, which enables the use of XRP, proposes a new approach to operating blockchains that supporters assert is more suitable for transactions. 100 billion XRP tokens were pre-mined and distributed to specific entities, individuals, and the public through gifts and giveaways at its launch. However, the distribution led to concerns about the decentralisation of XRP, as a few entities owned a significant portion of the coins.

Furthermore, XRP’s involvement in the market depends on a for-profit corporation Ripple, which remains the primary player in the XRP ecosystem. Ripple is instrumental in maintaining and developing the XRP Ledger while holding a significant quantity of XRP tokens.

How does Ripple (XRP) work?

Ripple (XRP) operates through a blockchain called XRPL, which records transactions like other cryptocurrencies. The ledger maintains information such as account details, balances, and transfers. The private key holder, similar to other cryptocurrencies, authorises transactions. 

However, Ripple differs from other cryptocurrencies because it uses a quorum-based consensus method called Ripple Protocol Consensus Algorithm (RPCA) rather than Proof-of-Work or Proof-of-Stake network consensus protocols. Validators, servers configured to participate actively in consensus, must agree that transactions should occur in a ledger entry validated and permanently written to the blockchain. 

Ripple provides a recommended list of validators, but each node can choose its own list of validators called a Unique Node List (UNL). Validators are selected based on their perceived honesty and trustworthiness. Consensus is achieved when 80% of validator nodes agree on the transactions and order proposed by each validator. If 80% of validators disagree with transactions, they modify their proposals to match the other validators they trust on their UNLs. This process repeats until a consensus is reached. 

Consensus can continue unimpeded as long as fewer than 20% of trusted validators are faulty. The network stops progressing if more than 20% but less than 80% of trusted validators are defective.

What is XRP used for?

Ripple was founded to increase the adoption of XRP by working with its community. Over time, the company has developed various products and services, including solutions for cross-border payments. Major players in the remittance industry, like MoneyGram, previously used Ripple’s products before ending their partnership.

Now, all of Ripple’s XRP-related offerings have been consolidated into RippleNet. RippleNet allows for global connections to hundreds of financial institutions through a single API, resulting in faster, cheaper, and more dependable money transfers. On-Demand Liquidity, a service that employs XRP to provide liquidity for cross-border transactions, removes the need to pre-fund accounts. Many banking giants and remittance players, such as American Express, Banco Rendimento, Bank of America, SBI Remit, and Santander, use RippleNet.

Ripple’s XRP-powered solution facilitates real-time settlement, enhances payment efficiency, and guarantees payment certainty. XRP provides on-demand liquidity and reduces the funds required in nostro accounts for global payments.

Additionally, Ripple funds the Interledger Protocol, a software platform that aims to enable transactions between cryptocurrencies and bank ledgers. Although it doesn’t require XRP, it can be connected to the XRP Ledger. 

Finally, RippleX leverages XRP by allowing developers and entrepreneurs to incorporate blockchain technology into their applications using tools and services developed on top of the XRP Ledger. XRP, like other cryptocurrencies, can also be used on-chain.

XRP price fluctuation

XRP has emerged as a popular alternative to Bitcoin and has gained significant adoption from various communities, leading to a surge in Ripple price over the years. 

Notably, during the crypto bull market from 2017 to early 2018, XRP price hit an all-time high of $3.40, representing a massive 51,709% increase from its starting price at the beginning of 2017. Although its value has since experienced an exponential decline, XRP market cap remains large, and currently ranks 7th on the cap table.

It is worth mentioning that XRP transactions don’t require a transaction fee, which sets it apart from most other cryptocurrencies. Instead, the sender must burn a small portion of the XRP, making XRP a deflationary asset. 

While a deflationary asset can lead to a depletion of the XRP supply, it’s estimated that this would take approximately 70,000 years at the current burn rate. Validators can mitigate such scenarios by adjusting the transaction cost and Ripple prices through a voting system, provided all requirements are met.

The XRP-SEC controversy

It is important to note that there is an ongoing lawsuit between Ripple and the US Securities and Exchanges Commission (SEC). In December 2020, the SEC filed a lawsuit against Ripple’s former CEO and co-founder, Christian Larsen, and current CEO, Bradley Garlinghouse. The lawsuit alleges that they conducted an unregistered, ongoing digital-asset securities offering that raised over $1.3bn. 

The SEC argues that XRP is a security rather than a currency and should be regulated accordingly. Ripple raised billions of dollars through the sale of XRP to finance its business, and Larsen and Garlinghouse profited by over $600m from “personal unregistered sales of XRP.” As of September 30, 2022, the SEC lawsuit against Ripple has not been resolved, and the outcome will likely have far-reaching effects on the cryptocurrency sector.

Since the collapse of the Terra ecosystem in May 2021, cryptocurrency regulation has been gathering momentum. In mid-September 2022, the market for the world’s second-largest cryptocurrency, Ether (ETH), experienced weakness after The Wall Street Journal reported that US SEC Chair Gary Gensler suggested Ethereum’s transition to proof-of-stake (PoS) may have made ETH a security. If a cryptocurrency is declared a security, it must follow rigorous disclosure rules similar to publicly-listed companies.

It is important to remember that the decision to buy a cryptocurrency should not be based solely on its total circulation and distribution. Whether XRP is a suitable investment for you should depend on your investment objectives, risk tolerance, and portfolio size. It is essential to conduct thorough research before making any investment or trading decisions and only to invest or trade money you can afford to lose.

How to mine XRP?

Most blockchain-based cryptocurrencies use “mining” as their distributed verification method. It also offers the process by which additional capital is injected into a crypto sector, generally as a reward for verifiers’ labour maintaining the network. XRP, on the other hand, was “pre-mined,” meaning that the XRP Ledger generated 100 billion units, which are regularly issued to the public.

Ripple holds a percentage of XRP in circulation, which incentivises it to promote the long-term viability of the cryptocurrency. Another fraction of XRPs is retained in reserve for regular market release through sales.

This has understandably led to fears that a large amount of XRP may be issued simultaneously, undermining the value of other XRP currently in circulation since comparative scarcity is a factor in determining the value of any currency.

Tim Enneking, chief executive officer of Digital Capital Management, explains, “The company has tried to reduce the uncertainty by implementing several mechanisms (trust, predictable release, etc.). This discrepancy between mine and pre-mining may also contribute to its 2020 battle with the SEC.

How to buy Ripple (XRP) crypto?

Using XRP requires the acquisition or receipt of the asset. You can buy XRP on centralised exchanges such as CoinSpot or Binance, peer-to-peer (P2P) markets, and decentralised exchanges (DEXs).

Buying XRP on a centralised cryptocurrency exchange often involves sending fiat currency (USD, EUR, JPY, etc.) to the exchange by bank transfer and then purchasing XRP with those funds. Customers may now acquire digital assets using credit cards on a few cryptocurrency exchanges. Depending on the exchange, you may also purchase XRP using other crypto assets, known as crypto-to-crypto pairings (such as XRP-BTC).

A P2P transaction entails meeting a relative or someone who possesses XRP to acquire the item directly. Please verify that the individual has XRP.

Notably, XRP cannot be bought on DEXs like SushiSwap, Uniswap, or 1inch since it is a token constructed on its own distributed ledger (called XRPL). The XRP Ledger is equipped with a fully functional exchange where users may swap issued currencies for XRP or with one another.

Is XRP a good investment?

XRP conforms to the generalisation that cryptocurrencies are volatile. If you feel Ripple’s growth will continue, it may be wise to buy in XRP. Although it is not as safe as investing in equities, you may earn big if Ripple succeeds. 

Ripple’s potential is readily apparent. It can replace an obsolete and inefficient international money transfer system. The existence of financial links is promising. And any beneficial changes in its legal standing might lead to a price increase, giving investors gains.

Is XRP price going to go up? It's important to conduct thorough research before deciding to include XRP in your investment portfolio. Your personal circumstances and investment strategy should be taken into consideration when making this decision.

Keep in mind that the past performance of XRP coin is not indicative of future returns, and it's crucial to never invest money that you cannot afford to lose when trading XRP.

FAQs

Who Are the Founders of the XRP Ledger?

David Schwartz, Jed McCaleb, and Arthur Britto introduced the XRP Ledger with its native currency XRP in 2012. Together with Chris Larsen, they established a company called Ripple in September of that year.

How Many XRP Coins Are There in Circulation?

The maximum supply of XRP is 100 billion. In December 2017, 55 billion XRP tokens were deposited in escrow accounts by Ripple. According to CoinMarketCap, the XRP circulation supply was around 49.9 billion as of September 30 2022. Since the launch of XRP, over 10.7 million coins have been burnt.

Who are the biggest XRP holders?

According to XRPL’s website, in September 2012, XRPL’s founders “gifted” Ripple 80 billion XRP, or 80% of XRP’s potential supply, in return for Ripple building on the XRP Ledger. The remaining 20 billion XRP tokens were maintained by McCaleb, Britto, and Larsen, the cryptocurrency’s co-founders.

What makes XRPL unique?

The XRP Ledger offers various payment-related applications and use cases, including micropayments, DeFi, and NFTs. Since its launch in 2012, the XRPL has provided enterprises and developers with significant utility and adaptability. In addition to its native cryptocurrency, the XRP Ledger is used by developers to design solutions for payments, DeFi, CBDCs, and stablecoins.

How is the XRP Ledger secure?

The XRPL differs from Bitcoin and Ethereum as it employs a unique Federated Consensus mechanism for verifying transactions. Validation of transactions on the XRPL is carried out via a consensus protocol in which designated independent servers, known as validators, agree on the order and result of XRP transactions.

What is the XRP price in 2025?

Notably, if XRP prevails in the lawsuit with SEC, it’s expected that the price of XRP would be at $3.81 by the end of 2025.

The Bottom Line

Despite several issues, XRP remains one of the largest cryptocurrencies by market capitalisation. Like other digital currencies, it may be used for transactions or as an investment. It’s advisable to do your own research and invest in what you can afford to lose.