What is Ripple and How Does XRP Work?

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Ripple and XRP are never out of the news. In fact, according to news aggregator CoinFi.com, Ripple news is one of the most heavily reported-on categories, with both long- and short-term price actions discussed on a daily basis, as well as the project’s future. But what are Ripple and XRP, and why do they stir such high emotions in the crypto space? Follow our quick guide to find out.

A Short History of Ripple

Ripple Labs, which is the company behind the XRP token, began its life in 2004 with RipplePay, a decentralized monetary system developed by Ryan Fugger that aimed to empower individuals to create and work with their own money. Fugger sold the platform to Jed McCaleb and Chris Larsen in 2012, who had themselves developed a similar idea independently. RipplePay changed its name to OpenCoin and began developing the Ripple protocol (RTXP), as well as the Ripple payment and exchange network. OpenCoin changed back to Ripple in 2013 and then to Ripple Labs, while the token became XRP.

Ripple’s Products

Ripple had, until recently, a number of separate offerings, including xRapid and xCurrent, but in October last year, they fused them all into RippleNet. RippleNet is a service that the company claims “makes it easy for its diverse network of 300+ financial institutions worldwide to enable faster, lower-cost payments around the world.” This platform can boast a number of high-profile customers, including Standard Chartered, MoneyGram, American Express, and Santander, with hundreds of smaller companies also on board.

According to Ripple, these companies can send payments to each other quicker and with more certainty, and at a lower cost compared to traditional money transfers, with transfers taking place on the RippleNet blockchain. RippleNet is also able to integrate into existing payment processes rather than replacing them, which is a big incentive for those considering the move.

The XRP Token

The XRP token is the method by which Ripple prefers payments to be carried on its RippleNet system, although this is not a prerequisite. Payments between two entities on RippleNet who both accept XRP will have their transfer converted into XRP at the start of the transfer and re-converted to the chosen currency at the other end. XRP has long targeted big banks with this technology, stating that it could save them millions in costs per year, and it is the potential for huge adoption by these big banks that has XRP fans excited about the potential future price of the token, with four-figure predictions not uncommon. This potential has many XRP news watchers on tenterhooks, hoping that the next announcement is the big one. However, it must be noted that the adoption of RippleNet does not ensure adoption of the XRP token itself.

Ripple Continues to Cause a Stir

RippleNet is able to offer its improved performance compared to existing services thanks to its use of a centralized ledger, which is why it is so often criticized by blockchain purists who feel that centralized blockchains are anathema to the principle of distributed ledger technology. They also don’t like the fact that Ripple is betting heavily on further integration with big banks to increase its adoption—this, for many in the space, is a cardinal sin among crypto entities.

Ripple’s Escrow Problem

Something else that often makes the Ripple news feeds is the decision by the Ripple team to sell tokens on a regular basis. The team minted 100 billion XRP tokens when the project launched in 2013, of which 80% remained with Ripple Labs. Fifty-five billion of these tokens were placed in escrow, with the idea being that they would be drip-fed back into the circulating supply on a scheduled basis as adoption would require more tokens to be available.

To date, 25 escrow periods have ended of 1 billion XRP tokens each, with the company regularly selling a portion back into the market—Ripple Labs made $533 million from selling original XRP tokens in 2018. This has led to criticism from both supporters and detractors that the reintroduction of some or all of the tokens back into the supply is diluting the price, and they might be right—XRP was one of the worst performing top 20 coins in 2019.

XRP Not Going Away

Whether you are a fan or not, it’s quite clear that Ripple and XRP are here to stay for some time yet, providing plenty of entertainment along the way. Don’t forget that BitStarz News is the best place to find all the latest XRP news!