What is Ripple XRP? The Beginner’s Guide

What is XRP? Ripple XRP is one of the well-known cryptocurrencies. It is a coin dividing crypto investors in two: XRP has both fanatic supporters and haters. This article is an XRP beginner’s guide. We’ll go through the history of XRP and Ripple and all technical features.

XRP beginner’s guide – Ripple vs XRP

Let’s start by placing XRP to a correct category in the crypto world and explaining the difference between XRP and Ripple.

The best way to categorize cryptocurrencies is to use three clear groups: currencies, platforms, and tokens. Bitcoin is the best-known cryptocurrency. It has a clear role to function as a P2P digital currency. Other known currencies are Bitcoin Cash, Litecoin and Monero.

Platforms make the second category. The best-known example of these is, of course, Ethereum. You have probably heard the likes of EOS and Tezos as well. Platforms are essentially operating systems for Dapps and smart contracts.

Finally, we have tokens. These have usually utility inside a specific program. They can serve as currency as well and transfer value, but tokens are built inside platforms (like Ethereum) and don’t have their own blockchain.

Where should we place XRP, then? This is a tricky question because XRP doesn’t fit directly any of these categories. It is not really a competitor in the platform category, but it’s also designed to be more versatile than traditional cryptocurrencies.

The only real competitor for XRP is Stellar Lumens, which is based on the same technology. They both have a network, which supports also fiat transactions.

”Unlike other digital currency protocols, the XRP Ledger allows users to denominate their transactions with any currency they prefer, including fiat currencies, digital currencies and other forms of value, in addition to XRP (the native asset of the XRP Ledger)”

Let’s explain Ripple and XRP next. It’s not a surprise if they are confusing, because even crypto exchanges used both names (or just Ripple) in the past. The difference is this: Ripple is an American fintech company, while XRP is the native token of XRP Ledger (explained later).

Ripple wanted to differentiate from XRP in 2018. That is when the name Ripple started to disappear from exchanges and coin listings. You might still see Ripple or Ripple XRP being used somewhere. front page

The front page of

Ripple is a tech company building solutions for banks. They have a closed network called RippleNet built for this purpose. Many newbies confuse RippleNet with XRP Ledger and think that RippleNet is the blockchain of XRP token. This is not correct.

As mentioned earlier, XRP is a native token of XRP Ledger. XRPL is an open and distributed ledger, just like Bitcoin’s blockchain. However, the technology used in XRPL differs from known cryptocurrencies quite a bit.

If you find this confusing so far, don’t be alarmed. Ripple and XRP have a special, symbiotic, relationship.

The history of XRP and Ripple

The history of XRP begins in 2011 when Jed McCaleb began to develop a better, faster and more efficient alternative for Bitcoin. He wanted a consensus model with scalability and without physical mining devices.

Not many are aware that Roger Ver was also a key person in XRP’s history. The founder of Bitcoin Cash offered to pay the first year’s salary of David Schwartz, who was hired as the lead developer. Ver also invested in many other crypto startups in the early 2010s.

See the tweet below: David Schwartz is currently the CTO of Ripple.

Chris Larsen and Arthur Britto joined the project in 2012. Larsen is often named as the founder of Ripple with McCaleb and he’s currently the chairman of Ripple as well. Larsen is a known person in the crypto industry, while Britto has always wanted to stay out of the spotlight.

After a while, Larsen and McCaleb contacted Ryan Fugger. He had been developing a payment concept called RipplePay since 2004 already. Fugger decided to join Larsen and McCaleb in 2012. That is when a company called Opencoin was formed, which was re-branded in 2013 to Ripple Labs.

One could say that the history of XRP and Ripple goes all the way to 2004!

Ripple launched the XRP Ledger in 2013. Originally, it was named as Ripple Consensus Ledger. This is when the XRP token was created and exactly 100 billion of them. The token was distributed as follows: 80 billion to Ripple Labs and 20 billion to founders Larsen, McCaleb and Britto.

Ripple Labs was re-branded again to just Ripple in 2015. The company was also granted the 2nd BitLicense in the United States history by NYSDFS (New York State Department of Financial Services). Few companies have been granted a BitLicense. Coinbase is one of them.

CEO Brad Garlinghouse is nowadays the face of Ripple (and XRP). He is a well-known person in the crypto scene and features often in CNBC as well. See the video below where Garlinghouse shares Ripple’s vision of XRP.

One of the founders, Jed McCaleb, is also known for other projects. He was, in fact, the man behind the infamous Mt. Gox exchange. McCaleb sold Mt. Gox before it was hacked in 2014. About 850,000 bitcoins were lost and the disaster had a big impact on Bitcoin’s price as well.

McCaleb is no longer with Ripple. He left and founded Stellar Foundation in 2014. This foundation is overseeing the development of Stellar Lumens, which is the worst competitor of Ripple. McCaleb’s exit from Ripple was messy and lawyers were used on both sides.

Ripple and XRP have done fine in the past years. Ripple has already 200+ banks in the RippleNet network, which is expanding steadily. They’ve also got more funding and locked 200 million dollars in late 2019.

The XRP token is also 3rd biggest cryptocurrency. It has held its market position well, even if the Ripple company has been dumping billions of tokens to the market in recent years.

Now it’s time to look at the tech side.

XRP Ledger explained with ILP

Let’s begin with XRP Ledger (XRPL), which differs a lot from Bitcoin, Ethereum and other well-known cryptocurrencies. As mentioned earlier, Stellar Lumens is the only real competitor right now.

XRP Ledger is an open-source and permissionless payment network. Even if it’s 5+ years old, it should be compared to so-called 3rd generation platforms due to similar scalability. There are no miners in the XRPL like there are none in EOS, TRON and such platforms.

The throughput of XRP Ledger is impressive: block time is just three seconds and the blockchain can handle 1500 transactions per second. If you have ever made an XRP transaction, you’ve probably seen yourself how fast it is.

All this is achieved with the Ripple Protocol Consensus Algorithm (RPCA). This is Ripple’s answer to Proof of Work or Proof of Stake consensus algorithms. Nowadays all high capacity blockchains use PoS variants, where miners are replaced with network validators. This means a small number of nodes, which have the responsibility of validating transactions.

XRPL has also validator nodes. In fact, anyone can run their own validator and join this open network. The network is also using a Unique Node List (UNL), which is a list of reliable nodes pre-selected by Ripple.

”Since anybody can run a validator, the burden is on the network participants to choose a reliable set. Currently, Ripple provides a default and recommended list which we expand based on watching the history of validators operated by Ripple and third parties. Eventually, Ripple intends to remove itself from this process entirely by having network participants select their own lists based on publicly available data about validator quality.” (Source:”

The transaction fees are so small in the XRP Ledger, that nodes don’t really get any rewards from supporting the network. This is nothing unique since Bitcoin nodes don’t get any rewards either. The incentive is to support the network. If it can be done cheaply with a small computer, it’s not a big issue.

The official website has everything you need to know of the ledger and the technology behind it. Below you’ll find a video presentation done by CTO David Schwartz, which is about XRPL and ILP.

Even if XRP Ledger has all these fancy features, it is still just one ledger. The Bitcoin blockchain is also just one ledger among thousands of others. Then we have also the legacy systems run by banks.

The founders of Ripple saw quickly how XRPL wouldn’t be enough to fulfill their “Internet of Value” vision. A protocol was needed to connect XRP Ledger to other ledgers and legacy fiat systems.

This is where the InterLedger Protocol (ILP) is introduced. As the name suggests, ILP was built to connect different ledgers. The value of ILP is not currently to connect XRPL to other ledgers, but it’s used in Ripple’s RipplNet. This is a closed network s, where ILP is used as a connector between the banks.

The quote below is written by David Schwartz as a reply in Quora:

”RippleNet is a payment network that doesn’t actually move money. Like when you use a credit card to pay for a meal, the restaurant considers you to have paid them and you consider yourself to have paid them, but no money has moved. Really all that’s happened is that you now owe some bank money and some bank owes the restaurant money. The bank still has to transfer money to the restaurant’s bank account and you still have to pay your credit card bill. The actual movement of money is called “settlement”.

XRP is an asset that can be used for settlement. It’s a digital asset that trades on a public ledger. It can change ownership in seconds and doesn’t have any physical location. Since it has value, a transfer of XRP can be used to settle a payment with nothing left to do afterwards.”

To put it all together: XRP Ledger is a public ledger, what anyone can use. If you go to buy XRP tokens and send them to your XRP wallet, you’ll be using the XRP Ledger. Ripple is naturally developing XRPL as well and it supports several other entities, which are building on top of that.

Next, we’ll learn more about RippleNet.

RippleNet explained

XRP is a pretty unique cryptocurrency in considering how people know more about Ripple’s banking solutions than the actual XRP Ledger. It’s been also very confusing due to the name Ripple being in the center of everything. At least the XRP token is now called just XRP to make things clearer.

The RippleNet has been used as a shilling device for years. If a new bank has joined the network, you’ve seen XRP shills to activate in the social media. The truth is, however, that the XRP token has been barely involved at all in this sector.

So, what is RippleNet? It is simply a closed payment network Ripple has built for banks. These financial institutions don’t want to operate in the same open & public network as average XRP investors.

Ripple’s vision is to build a 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 into your 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. The image below is from Ripple’s website.ripple ripplenet

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 labor is required to handle the money as well.

With RippleNet, banks can make this transaction seamlessly in a few seconds. This is where the InterLedger Protocol is introduced. We explained the basics of ILP in the previous chapters. You’ll find more information about ILP at

Ripple wants ILP to become a global protocol in value transfers, just like TCP/IP is used on the internet and SMTP is used when sending e-mails.

Ripple’s promise to banks is simply this: you’ll get more money. RippleNet could save 30%, 40% or even 50% in transaction fees. The best-known RippleNet client is Santander Bank. Other clients made public by Ripple include American Express and MoneyGram.

On-Demand Liquidity and XRP

Many newcomers might rush to buy XRP when they see RippleNet-related headlines, like a new bank joining the network. This is where mistakes are made. Nothing we have talked about RippleNet has anything to do with XRP so far.

Where is XRP needed, then? This is where a technology xRapid comes in. CEO Brad Garlinghouse explains xRapid in the following video, which should start from 03:20.

xCurrent is enabling real-time messaging and real-time settlements between banks. xRapid is solving a liquidity problem.” What is this liquidity problem Garlinghouse mentions?

Currency transfers become much more complicated when banks operate with foreign banks and need multiple 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 the 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 what Ripple offers:

ripple ODL

Here we must make an important note: xRapid was re-branded in 2019 as ODL – On-Demand Liquidity.

Ripple can create a digital currency pool (ODL) by using the XRP token. This pool is then used by banks. For example, the American bank mentioned earlier can buy XRP with dollars, transfer them to the Argentinian bank in few seconds, which can then convert XRP to pesos.

The whole operation takes less than a minute and no pre-fund nostro accounts are needed.

If the ODL solution becomes popular, it could have an impact on XRP’s price. This is the part where XRP is needed and actually used.

ODL is being tested by MoneyGram, which is an operator in the huge remittance market competing for example with Western Union. Ripple acquired a significant share of Moneygram in 2019.

XRP as an investment

There are lots of hardcore XRP fans, but also an equal amount of XRP haters. Especially so-called Bitcoin maximalists seem to despise both XRP and Ripple. There are probably two main reasons for that:

  1. Ripple is building solutions for banks, which many consider as the enemies of cryptocurrencies.
  2. The token economy of XRP: created 100% for Ripple and its founders)

When this article is published (April 2020), there are about 45 billion XRP tokens in the market. The remaining 55 billion tokens are still held by Ripple. This is a fact that drives off many investors. When XRP price moved to 3+ dollars in January 2018, it made Ripple founder Chris Larsen as one of the wealthiest people in the world on paper.

Could Ripple then flood the market with XRP any time they want? No, that’s not possible. Ripple set 55 billion XRP tokens to escrow in January 2018. This limits them from selling more than one billion per month for almost five years.

All in all, XRP is a bit difficult investment. The XRP token economy is one thing and the fact is that Ripple has sold billions of them to fund their operations in the past. How much are they going to sell in the future and how will it impact the price? It isn’t easy to analyze the impact of ODL either.

Check out for more information. You’ll also find the latest news from the official Ripple Reddit page.

The XRP token has had some wild swings in the past few years. It is a “penny stock” due to its low unit price, which makes it attractive to newbie investors. This is quite counter-intuitive since XRP is actually a very difficult investment to analyze. We recommend being extra careful with it.


If you want to buy XRP with fiat money, go to Coinbase. It is a user-friendly exchange for newbies. You can also buy XRP with euros from eToro or with bitcoins from Binance.

The safest storage solution is Ledger Nano X or Ledger Nano S hardware wallet. Both support the XRP token these days. You can also store small amounts in Coinbase use Ripple’s official GateHub online wallet.

For more information, check the official website and Twitter handle @ripple. The official Reddit page is

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