What is Ripple XRP? The Beginner’s Guide

This article is the beginner’s guide to Ripple and XRP token. What is Ripple XRP? It is one of the biggest and most popular cryptocurrencies in the market. XRP became known in the previous bull run of 2017/2018, when it was shilled in social media and even on television by CNBC. If you want to have Ripple explained simply, keep reading.

What is Ripple? A fintech company with XRP token.

Bitcoin is the oldest and best-known cryptocurrency. Bitcoin’s role is to act as a peer-to-peer digital currency. There are many projects in the crypto universe, which are more than that and XRP is one of those.

Ethereum and EOS are good examples of cryptocurrencies, which should be called as platforms or ecosystems instead. XRP is not really a platform for dApps, but it’s not a direct competitor of Bitcoin either. It is sometimes difficult to place XRP among other cryptos, but hopefully this article will succeed in that.

The name Ripple is confusing as well. It is an American fintech company, which is practically responsible of the development on XRP ledger technology. It is a system like blockchain but differs technically in many ways from its rivals.

The XRP Ledger is an advanced blockchain-like system that was designed to let people transact in multiple currencies. Users of the XRP Ledger can seamlessly track, trade, and settle multiple currencies in an exchange that’s as decentralized as the network itself. Users can issue their own currency-like digital assets, which may or may not represent obligations owed outside the XRP Ledger.

Tying it all together is XRP, the XRP Ledger’s native cryptocurrency, which acts as a medium of exchange and serves anti-spam purposes. (Ripple.com)

The XRP token was called Ripple for a long time. It still is, depending on the exchange you use. Ripple has tried to differentiate the token (XRP) and the tech company in the past year. Many exchanges have removed the title Ripple, so the token is called just XRP.

Next, let’s dig into the history of Ripple. When it was created and by whom?

XRP is one of the oldest cryptocurrencies

As mentioned above, Ripple is an American fintech company. It was founded by Chris Larsen and Jed McCaleb, who have become one of the richest and most famous men in the crypto industry.

Ripple’s roots are in the early 2010s. Ripple protocol was known as RTXP back then and the development really took off in 2012. The company was known as OneCoin at the time but re-branded to Ripple Labs one year later. In 2015 the company made its final change to Ripple.

The Ripple company was granted the second BitLicense in the U.S. history. This happened in June 2016. BitLicense is an operational license granted by NYSDFS (New York State Department of Financial Services) and only a handful of companies have been able to get it. One of them is Coinbase.

The CEO is Brad Garlinghouse, who is also one of the most known faces in the crypto industry. He’s been in countless tv interviews (especially in CNBC) talking about the Ripple protocol. See the video below, where Garlinghouse is talking about his vision regarding the XRP token.

Jed McCaleb, one of the Ripple’s founders, is also well-known from his other businesses. McCaleb was one of the founders of Mt. Gox, which is still the biggest crypto disaster to-date. Mt. Gox was hacked in 2014 and lost over 800.000 Bitcoins of user funds, which haven’t still been recovered.

In 2014, Jed McCaleb founded also Stellar and started to develop Stellar Lumens (XLM) cryptocurrency. Stellar was originally based on XRP’s technology, which is open source.

Many people don’t necessarily understand that Ripple is one of the oldest cryptocurrencies still running.

Probably no other cryptocurrency causes so much confusion in the market than XRP. This is because people do not really understand how it works. The social media is also full of misinformation and shilling, which makes it even harder for newbies.

This article will tell you what the XRP token is about. Just remember: Ripple is the company and XRP is the token.

Ripple technologies: xCurrent, xRapid and xVia

Most of the amateur investors know that Ripple is developing technology for banks. The problem is that people don’t really understand how the XRP token fits in.

Ripple has developed three different products, which are called xCurrent, xRapid and xVia. Let’s start from xCurrent.

Ripple’s vision is to build solution to the new internet-of-value environment the world is entering right now. In practice, they want to solve the issues of the legacy banking systems. What are these issues, then?

Ripple CEO Brad Garlinghouse has often used the following example. “If you want to move 10.000 dollars from New York to London, the fastest way is to put it to a luggage and fly it there.”

Banks are using a system called SWIFT – Society for Worldwide Interbank Financial Telecommunication. It is a network for banks, which was founded already 46 years ago. It is no longer a viable solution to the internet-of-value, where lightning fast micropayments are required.

Ripple’s solution is xCurrent technology and RippleNet.

ripple xcurrent

If two banks located in different countries want to make a transaction, it’s a slow and expensive process. The transaction goes through many different checkpoints, which make currency exchanges possible. Expensive labour is required to handle the money as well.

With RippleNet, banks can make this transaction seamlessly in a few of seconds. The system is based on a technology called ILP – interledger protocol. This is how it’s described at interledger.org:

”ILP is an open protocol for sending payments across different ledgers. Like routers on the Internet, connectors route packets of money across independent payment networks. An open architecture and minimal protocol enable interoperability for any value transfer system. Furthermore, ILP has no ties to any one company, blockchain or currency.”

There are no miners in the Ripple network, which slow down the traditional blockchains. This makes it possible for Ripple to scale up to 50.000 transactions per second, which is enough for even institutional use cases.

Ripple has already over 100 banks testing their technology and more coming every year. It is not some beta test company, which started last week. Ripple has developed their tech for years and it’s been running in many financial institutions.

Many crypto investors have run to buy XRP after hearing a new bank has been added to Ripple’s network. This is where people make mistakes. The xCurrent technology described does not require XRP token at all.

This technology is used to make fast cross-border fiat transactions and send other relevant information from bank to bank. These solutions don’t necessarily have any effect on the demand of XRP.

XRP token and xRapid technology

What is XRP needed for? This is where Ripple’s xRapid technology comes in. It is connected to xCurrent too, since both are part of the bigger puzzle. The spine of the RippleNet is xCurrent, while xRapid gives banks an access to a liquid currency pool.

Ripple CEO Brad Garlinghouse explains xRapid very well in this video starting at 3:30. I recommend watching it.

The significant difference to xCurrency is the following: xCurrency is all about moving funds that banks already have, but xRapid comes in when a currency exchange is needed.

xCurrent is enabling real-time messaging and real-time settlements between banks. xRapid is solving a liquidity problem.” (Brad Garlinghouse)

ripple xrapid

What is this liquidity problem that XRP is solving?

Currency transfers become much more complicated, when banks operate with banks needing different currencies. If an American bank is transacting with an Argentinian bank, it must buy pesos with dollars and keep them in the local bank as a liquidity pool. This causes currency risk for the American bank, if the peso is losing value against the dollar.

Ripple explains the problem at their website in a following way:

Financial institutions must pre-fund nostro accounts on each side of a transaction in that country’s native currency. These account balances in a local currency improve liquidity by lowering the risk for the parties transacting.

However, these accounts come at a high cost. According to a 2016 McKinsey Global Payments report, there is approximately $5 trillion dollars sitting dormant in these accounts around the world – tying up capital that could be used in more productive ways. They also must be actively managed to ensure balances are commensurate with transaction volume.

The cost and complexity of holding these accounts around the world is one reason why only a handful of banks can process global transactions. The burden of maintaining nostro accounts worldwide is simply unsustainable for most organizations. (Ripple)

As you can read from the quote, the situation is quite problematic. There is a lot of money tied inside the system and it is forcing transactions to go through a few big operators. This is where Ripple’s xRapid solution comes in.

Ripple can offer a digital and liquid currency pool using the XRP token. If we look at the previous example, the American bank doesn’t need to hold pesos anymore at all. If they need Argentinian currency, they can exchange dollars to XRP on the fly and further to pesos. The whole operation takes less than a minute.

If Ripple’s xRapid system becomes popular, it increases the demand for the XRP token as well. Therefore, xRapid is the technology you must follow as an XRP investor.

Ripple’s technology gains interest from investors

It should be quite easy to understand at this point why banks are interested in Ripple’s solutions. Ripple is estimating that xCurrent could save up to 30% in transaction fees compared to a legacy system. If a bank is using xRapid as well, costs could go down up to 60-70%.

There is also a third product called xVia. This makes it possible for other institutions to use Ripple’s technology than just banks.

ripple xvia

In practice, xVia offers an API, which could be used by an operator like Amazon. They could then enable Ripple’s technology in payments.

Ripple’s transactions are not entirely free – the reason is to prevent network spamming. The same reasoning is used by rivalling systems as well. One transaction is something like 0,001 dollars, so the fees are almost non-existent.

One XRP transaction takes about four seconds in the current network.

Ripple XRP as an investment

Ripple and XRP token are not exactly welcomed by the Bitcoin maximalists. Many investors don’t want to touch XRP tokens with a 10-foot pole. Why is this?

  1. Ripple develops technology for banks, which are the number one enemy for many cryptocurrency enthusiasts.
  2. XRP tokens are created and managed by one operator (Ripple) and the vast majority is still held by the company.

The circulating supply of XRP is about 43 billion tokens when this article is being written. The whole supply is 100 billion, so where are the missing 57 then? Held by Ripple.

When XRP reached 2- to 3-dollar valuations at the peak of the 2017/2018 rush, it made Ripple owners among the richest people on earth.

Can Ripple “unleash” 60 billion tokens on the market and crash the price? No, it cannot. Ripple announced in January 2018 that 55 billion tokens have been moved to an escrow account. A maximum of one billion tokens can be released each month.

Hopefully this article helped you to understand the critical differences between Ripple’s technologies and the role of XRP token in the puzzle. If some investor is buying Ripple, it tells you the person in question hasn’t fully understood the concept yet.

It might be possible in the future to buy shares of the Ripple company as well. Right now, only thing you can buy are the XRP tokens.

ripple products

To put it all together: Ripple is an American fintech company. XRP ledger is open source technology, which means anyone can build applications on it. At the moment, the development work is almost entirely done by Ripple.

Ripple is developing solutions for financial institutions. Their goal is to replace old and expensive legacy systems. The most important product of Ripple is xCurrent, which makes real-time fiat transactions possible between banks. XRP token is used with the xRapid product, which solves liquidity problems.

How to buy Ripple’s XRP

XRP token has had major ups and down in the past few years. It is a “penny stock” due to its low price and therefore a favourite of many retail investors. People think they can profit more by buying 10.000 XRP tokens compared to buying one BTC.

It seems like the XRP price has been manipulated up and down few times already, so I’d be extra careful when investing to cryptos such as this. Don’t ever buy into the FOMO if XRP token is rising sharply and the gurus at CNBC are investing into it. Then it’s time to sell.

Ripple’s XRP token real time price:


If you want to buy XRP tokens with fiat money, we recommend Coinbase. It is one of the most popular and trusted exchanges in the crypto industry. Other alternatives are Bitfinex and Bittrex.

You can also buy XRP with Bitcoins from crypto-crypto exchanges such as Binance and KuCoin.

After buying XRP tokens, it’s recommended to move them out of the exchange to a safer location. One option is to hold your XRP tokens in an online wallet called GateHub. If you want maximum security, we recommend using Ledger Nano X.

Follow Ripple on Twitter at @Ripple. The official subreddit can be found at reddit.com/r/Ripple.

Image credit: screenshots from this videoWikimedia commons

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