Unlike most other cryptocurrencies, XRP is managed by a single company called Ripple. The Ripple network's native crypto XRP is being developed and published by the Ripple company. Ripple's open-source protocol and network are already being used by banks and other institutions. The Ripple network does not position itself as a direct rival for crypto but as a more updated version of the SWIFT system used by banks. There is no mining process to hit new XRP units. Pre-mined amount of 100 billion XRP units, but only a fraction is in circulation. In this lesson, you will learn the basics of Ripple and XRP.
The Ripple network and its crypto XRP were launched in 2012. The Ripple company has close ties with banks and other institutions. Their goal is to act as a global resolution network to improve existing infrastructure and services. Unlike Bitcoin, which is managed by a decentralised peer-to-peer network and is not managed by any entity, the XRP crypto was created by a single company called Ripple. The main objective of Ripple is to set up a network with which as many transactions as possible can be executed at the same time as quickly as possible. Ripple wants to attract companies such as large banks, transfer services and payment providers that are interested in the technology. Keeping this in mind, it is easy to see that Ripple is more a competitor of established financial infrastructure services such as SWIFT than of other cryptos.
The Ripple network does not work on a blockchain and the native crypto XRP is not dependent on a Proof-of-Work algorithm such as Bitcoin or Ethereum. For this reason, it does not require as much energy and computing power, while also allowing faster transaction speeds. Instead, transactions on the Ripple network are performed through validating servers, which constantly compare the information they receive and process with a common ledger. The validating servers of Ripple use a consensus mechanism called HashTree. The main difference between the Ripple network and a proof-of-work blockchain is that consensus is reached by not comparing all data, but only a single value, which is derived by summarising the ledger data. These independent validating servers are managed by private individuals or by banks and institutions. According to the Ripple Technical FAQ, the electricity needed to make a validator work is similar to that required to run an email server.
Ripple is more than just the XRP crypto. While Bitcoin and other crypto position themselves as independent alternatives to traditional currencies and (central) banks, the purpose of Ripple is more or less the exact opposite. Ripple wants to act as a global settlement network and therefore works closely with banks, payment providers and other financial institutions. The purpose of Ripple is to serve as a flexible intermediary currency to facilitate the exchange of each unit of value. Another interesting aspect of Ripple is that the company is older than Bitcoin. A precursor to the Ripple protocol was developed in 2004, which was then called "Ripplepay".
Ripple and XRP: What Lies Ahead
Since 2012, Ripple has been intended to use the internet, blockchain technology and XRP to enable value transfers across borders in a fast, cost-efficient and reliable manner. For example, some crypto payment processing platforms already offer XRP as payment and payment options. Ripple aims to bring about a revolution in the payment sector and at the same time to work on a certain standardisation of international transactions using financial technology. Ripple also encourages regulators around the world to introduce blockchain in traditional payment operations. Ripple Xpring is also an ecosystem initiative for investing in, incubating, acquiring and awarding grants to projects and companies that can play a role in use cases of XRP outside of international transactions, such as crypto solutions for debts and derivatives.