Ripple is a money transfer network designed to serve the needs of the financial services industry. XRP, a cryptocurrency tailored to work on the Ripple network, is consistently listed among the top five cryptocurrencies by market capitalisation.
What Is Ripple?
Ripple is a payments settlement system and currency exchange network that can process transactions around the world. The idea is that Ripple serves as a trusted agent in between two parties in a transaction as the network can quickly confirm that the exchange went through properly. Ripple can facilitate exchanges for a variety of fiat currencies, cryptocurrencies like Bitcoin and even commodities like gold.
“Ripple was designed from the very beginning to essentially be a replacement for SWIFT (a leading money-transfer network) or to otherwise replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.
Whenever users make a transaction using the network, the network deducts a small amount of XRP as a fee.
“The standard fee to conduct transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the large fees charged by banks for conducting cross-border payments,” says El Lee, board member of Onchain Custodian. As of late April 2021, the XRP price was £0.97 per token, meaning the transaction fee works out to be just £0.0000097.
What Is XRP?
XRP is cryptocurrency that runs on the XRP Ledger, a blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto would go on to found Ripple and use XRP to facilitate transactions on the network. You can buy XRP as an investment, as a coin to exchange for other cryptocurrencies or as a way to finance transactions on the Ripple network.
Notably, XRP’s blockchain operates a little differently than most other cryptos’. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can solve complex equations quickly, but transactions are secure as the majority of ledger holders must agree with the verification for them to be added.
Instead, the XRP’s Ripple network somewhat centralises things: While anyone can download its validation software, it maintains what it calls unique node lists that users can select to verify their transactions based on which participants they think are least likely to defraud them. Its default list currently contains 35 trusted validators. Ripple decides which validators to approve for this list and also makes up six of these validation nodes. However, users can opt out of this default list and hypothetically remove Ripple-backed validators from their transactions entirely, instead constructing their own lists of trusted validators. This would allow the network to continue to approve transactions even without Ripple the company remaining involved or even continuing to exist.
As new transactions come in, the validators update their ledgers every three to five seconds and make sure they match the other ledgers. If there’s a mismatch, they stop to figure out what went wrong. This allows Ripple to securely and efficiently validate transactions, which gives it an edge over other cryptocurrencies, like Bitcoin.
“Bitcoin transaction confirmations may take many minutes or hours and are typically associated with high transaction costs,” says Lee. “XRP transactions are confirmed around four to five seconds at much lower cost.”
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How to Mine XRP
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