Ripple emerged in 2012 aiming to redefine the way we conduct cross-border payments. Many believe the company's flagship product, Ripple Payments, has the power to disrupt conventional banking infrastructure for the better. How? By allowing funds to be sent internationally at exceptional speed and with minimal fees.
Underpinning the technology is Ripple's native token, XRP, which stood among the top five cryptocurrencies by market cap at the end of 2023. Not just a major asset traded across exchanges, XRP is a powerful force among Ripple's solutions.
Curious to learn more? Read on to explore the origins, features, and future potential of the XRP token.
TL;DR
XRP is the native asset underpinning the XRP Ledger.
The token is designed to enable fast and low-cost international money transfers as part of Ripple's payment protocol.
XRP provides liquidity and the seamless conversion of currencies as part of the Ripple Payments service.
Ripple's payment solutions have been adopted by leading names in TradFi, including Santander, Standard Chartered, and Cuallix.
Ripple has grown its reach and influence across new markets in 2023 as the company explores wider use cases for XRP.
What is XRP?
XRP (Ripple) is a digital currency created by Ripple. It's designed to enable fast and low-cost international money transfers as part of Ripple's payment protocol. The protocol has been adopted by individuals and financial institutions looking to benefit from its secure, instant, and low-fee transactions.
XRP began with the launch of the XRP Ledger (XRPL) in 2012, which aimed to build on what it perceived as the limitations of Bitcoin. XRP became the native digital asset underpinning the ledger. The XRP token was pre-mined during its early stages of development to create a maximum supply of 99.9 billion XRPs on launch. It has a circulating supply of 53.6 billion tokens as of November 2023.
How does XRP work?
Unlike other cryptocurrencies, XRP serves as a bridge currency in Ripple's payment protocol. More specifically, the Ripple protocol aims to address some of the challenges associated with traditional remittance services — relatively higher fees, slower transfers, and delays.
As the bridge asset between two fiat currencies, XRP creates liquidity on the Ripple network. Here, a financial institution would purchase an equivalent amount of XRP and transfer it via Ripple's network. Payments can be sent 24/7, 365 days of the year, and Ripple states there's no need for pre-funding.
XRP was designed to be an alternative to Bitcoin — a digital currency. The token relies on the XRPL, a public ledger for storing transaction details. XRP differs from Bitcoin through its ledger. Where Bitcoin uses mining to validate and record new transactions, the XRPL uses a consensus mechanism based on the Federated Byzantine Agreement (FBA) model. This allows trusted validator nodes to reach consensus and maintain the transaction ledger quickly. With this process occurring approximately every three to five seconds, transactions are confirmed rapidly.
The group of trusted nodes that maintain the XRPL is known as the Unique Node List (UNL). By combining the FBA model and UNL, XRP avoids the need for energy-intensive mining, providing a more environmentally friendly system.
Ripple: changing digital payments forever?
The XRP token is a fundamental part of the Ripple network and the company's solutions.
Ripple Payments is the California-based entity's flagship product. It's an enterprise solution celebrated for its high speed, minimal transaction costs, and reliability for international payments.
The Ripple Payments technology operates on a distributed open-source protocol and differs from other major modern-day crypto projects. Unlike Bitcoin's proof-of-work or Ethereum's proof-of-stake mechanisms, Ripple employs a unique consensus protocol that guarantees rapid transaction processing and greater energy efficiency.
The technology has been adopted by a growing number of financial institutions that now use XRP for international remittances and payment settlements. By providing liquidity and the seamless conversion between various currencies, Ripple Payments removes the need for pre-funded nostro accounts — an account held by one bank in another country. These characteristics create a sizable advantage over conventional banking methods (like SWIFT).
Ripple's CBDC platform, meanwhile, provides a comprehensive foundation for minting, managing, transacting, and destroying CBDCs and stablecoins. The solution aims to help governments create national digital currencies as part of their innovation strategies. The XRP token is an important part of Ripple's CBDC offering because the service relies on the XRPL to operate.
Ripple use cases
Ripple's payment solutions and the XRP token have been adopted by leading names in TradFi and beyond.
Santander adopted Ripple with the launch of One Pay FX in 2016 — a faster and more cost-effective cross-border payment service. With payments processed as fast as 30 seconds, Santander estimates $100 million in fee savings since launching One Pay FX.
Standard Chartered, which has a massive international customer base, launched a pilot program with Ripple to bring faster and more cost-effective cross-border payments to its users. The bank also completed a strategic investment in Ripple in 2016.
Cuallix, a Mexican multinational credit payment and lending company with branches in the US and Hong Kong, was an early adopter of Ripple's liquidity products. This includes xRapid for cross-border payments between Mexico and the US. The product uses XRP tokens to bridge different currencies.
What might the future hold for XRP and Ripple?
Ripple has evolved its technology to meet the changing demands of the financial industry. This includes enhancing the scalability and efficiency of Ripple Payments and exploring new use cases for XRP in areas like decentralized finance and smart contracts.
In November 2023, Ripple announced a partnership with Johannesburg-based financial services company Onafriq to expand the company's remittance services in Africa and across the UK, Australia, and the Gulf nations. Three new blockchain-based payment corridors will open between Onafriq customers in Africa and its partners across the new markets mentioned above.
Partnerships like that with Onafriq spotlight the potential for Ripple to integrate deeper with TradFi infrastructure and redefine international payment systems. Ripple's recent developments also underline the transformative potential of blockchain technology in reshaping financial transactions and paving the way for more innovative, inclusive, and efficient financial services.
Should Ripple's evolution continue, XRP could play an increasingly important role in allowing international payments to happen securely, at great speed, and for significantly less cost than alternative options. This could have a bullish impact on XRP's price action.
The token rose by more than 30% month-on-month between October and November 2023, buoyed by a wider lift in crypto prices and positive market sentiment towards Ripple.
Trading XRP? What to consider when choosing a platform
If you're considering trading XRP, choosing a reliable platform to buy and trade the cryptocurrency is essential. It might be helpful to consider the following factors when looking for a platform.
Security
Security is paramount when it comes to dealing with cryptocurrencies. Look for platforms prioritizing robust security measures such as two-factor authentication, encryption, and cold storage of funds. Ensure that the platform has a good reputation for safeguarding user assets.
User-friendly interface
Opt for platforms that offer an intuitive and user-friendly interface. A platform that's easy to navigate and understand will make your trading journey smoother, especially if you're new to cryptocurrency trading.
Liquidity
Liquidity is a vital aspect to consider when choosing a platform. It refers to buying or selling assets quickly without causing significant price fluctuations. Platforms with high liquidity ensure you can execute trades efficiently at the desired prices.
Fees
Different platforms charge varying fees for buying and selling XRP coins. Consider the fee structure of each platform, including deposit fees, withdrawal fees, and trading fees. Look for platforms with competitive fee rates that align with your goals.
The final word
XRP was designed to enable fast and cost-effective cross-border payments securely. Ripple is working today with a number of leading institutions to support their operations using Ripple's payment protocol and the XRP coin, with the goal of providing an alternative to traditional payment and remittance services. XRP is the native token on the Ripple network, and you can trade it today with OKX.
