What is Ripple and the XRP cryptocurrency?
Ripple is a blockchain project founded in 2012 and powered by the XRP Ledger network. How does it work? What about XRP? Let’s read together!
The native XRP cryptocurrency is used for transfers in this network.
The Ripple project is used by financial institutions and is intended to become an alternative to existing interbank transaction systems such as SWIFT.
Ripple Labs, which is at the origin of the project, denies its involvement in the issue of XRP. Over the past few years, the company has been suing investors in the United States who accuse it of selling unregistered securities.
Who created Ripple and when?
Ripple was founded by American programmers Jed McCaleb and Arthur Britto, as well as cryptographer David Schwartz. The author of the basic concept is Canadian programmer Ryan Fugger.
In 2004, Fugger became acquainted with the Vancouver branch of the local exchange trading system and became interested in the concept of developing a decentralized payment system. In 2005, he launched the first iteration of such a system, RipplePay.com, which was not widely distributed.
In 2011, Fugger delegated one of his company’s top management positions to Jed McCaleb. He brought in David Schwartz as a consultant and hired Arthur Britto as a development manager.
In 2012, McCaleb founded OpenCoin, and American entrepreneur Chris Larsen took over as CEO after Fugger left the project. OpenCoin was renamed Ripple Labs in 2013. Brad Garlinghouse is the company’s current CEO, having taken over for Chris Larsen.
McCaleb left Ripple Labs and founded his own project, Stellar. By agreement with the team, he received 9 billion XRP — 18.6% of the total coin issue. The funds were paid in installments over the next eight years: McCaleb made the last sale in July 2022.
How does the XRP Ledger blockchain work?
The Ripple ecosystem operates on the basis of the decentralized XRP Ledger (XRPL) network. It has high speed (the average block production time is 3–4 seconds) and low fees for transfers.
According to the official website, XRP Ledger is suitable for microtransactions in applications, NET and deployment of DeFi protocols, as well as for the release of stablecoins and CBDC. In addition, “traditional” assets, such as securities or fiat money, can be tokenized in XRPL.
The non-profit organization XRPL Foundation, which was founded in the fall of 2020, is the primary developer of the XRP Ledger. Among the major users of the blockchain are the BitPay processing service, the BitGo custodian and the Forte platform for creating blockchain games.
The network uses its own consensus algorithm called the XRP Ledger Consensus Protocol.
The XRP Ledger is built on nodes that are managed by validators. As of August 16, 2022, the network has over 130 validators, 35 of which are in the so-called Unique Node List. This group is in charge of putting new protocol changes into effect. The XRPScan website displays the current state of the network.
What is the XRP cryptocurrency?
Ripple’s native coin is XRP. 1 XRP is divided into a million units known as drops. The coin has a total supply of 100 billion coins, which were all distributed at the network’s inception: Ripple Labs received 65% of all XRP on an escrow account, with the remaining 35% entering free circulation.
Most exchanges and trading platforms sell XRP cryptocurrency. A destination tag, which is generated in the wallet, is required for its transfers in addition to the user’s address. Transactions and storage for crypto assets, XP supports the most popular multi-currency wallets.
XRP is a payment unit in RippleNet, a Ripple-developed interbank communication system. It is used by big clients among financial institutions for transfers via payment bridges. Staking for XRP is not supported.
Individual investors can find the price of XRP on exchanges during free trading. The current XRP rate can be found on aggregators such as CoinGecko or CoinMarketCap.
Ripple Labs, which has large reserves of coins, sells large volumes of XRP to corporate clients. According to the report, which was released in May 2022, the total sales of coins for the 1st quarter of 2022 and the 4th quarter of 2021 amounted to almost $1 billion. At the same time, Ripple Labs acquired XRP for $1.4 billion.
What is RippleNet?
The key product of Ripple Labs is a global network for conducting cross-border financial transactions RippleNet, which is used by banks, payment services and other financial organizations. RippleNet provides users with real-time messaging, clearing and settlement of financial transactions.
RippleNet appeared in 2019 and combined the three main products of the company, namely:
- xCurrent
It is a cross-border payment processing solution embedded in the banking infrastructure. It improves the efficiency of traditional payment message formats while maintaining similar security standards and meeting regulatory requirements. - On-Demand Liquidity (ODL)
It is a service that provides liquidity in fiat currency transactions. Banks must keep a variety of local currencies on hand for international transfers. ODL allows you to free up capital by converting fiat into XRP — the cryptocurrency acts as a payment “intermediary.” First, the bank’s main currency is exchanged for XRP, and then, after the transaction is successfully processed in another bank, XRP is exchanged for its own currency. This product was previously known as xRapid. - xVia
It is an API designed specifically for the convenient use of individual components of the RippleNet ecosystem as a whole. xVia is a browser extension that does not require installation and can be embedded in existing software.
ODL has the potential to increase demand for the XRP token from financial institutions. According to 2021 data, the annual volume of payments via ODL increased nearly eightfold over the same period the previous year, reaching $15 billion. The Asia-Pacific region is the most frequent user of the ODL service.
How is the Ripple ecosystem evolving?
Ripple Labs provides commercial services to hundreds of businesses in over 50 countries. National Australia Bank (NAB), Canadian Imperial Bank of Commerce (CIBC), SBI Holdings, and the National Bank of Egypt are among the notable clients (NBE). RippleNet had over 300 financial organizations as of October 2021.
Ripple Labs is not limited to developing cross-border payment solutions.
In early 2022, the company announced the launch of Ripple Liquidity Hub, a crypto service for institutional clients designed for trading and storing Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, and Ethereum Classic.
Ripple Labs announced in March 2022 the allocation of 1 billion XRP for developer grants, as well as the establishment of a $250 million fund for digital artists and developers working with non-fungible tokens (NFT).
SEC vs Ripple Labs
Ripple Labs began to distance itself from XRP a few years after the project began. In July 2018, a message was published on the project’s website, where the coin is presented as an “independent” digital asset from Ripple. At the same time, the XRP distributed registry community rebranded the logo and changed the trading ticker from Ripple (XRP) to XRP on crypto exchanges and services.
This initiative was taken up by Ripple Labs’ management. Technical director David Schwartz stated that the company is working on a payment system but has nothing to do with the creation of the XRP cryptocurrency, which it received from the project’s founders.
According to the findings of the Cryptobriefing portal, Ripple Labs attempted to avoid prosecution for trading unregistered securities, which XRP coins may fall under.
Despite attempts by Ripple Labs management to distance themselves from the crypto asset, by August 2018, the company was defending itself in court in four class actions brought by investors for trading unregistered shares.
According to the findings of the Cryptobriefing portal, Ripple Labs attempted to avoid prosecution for trading unregistered securities, which XRP coins may fall under.
Despite Ripple Labs’ attempts to distance itself from the crypto asset, by August 2018, the company was defending itself in court in four class actions filed by investors for trading unregistered shares.
According to Jake Chervinsky, a lawyer and the head of the Blockchain Association’s policy department, the US Securities and Exchange Commission (SEC) did not intervene in the dispute right away because they expected the lawsuits to be settled.
However, the SEC filed a lawsuit against Ripple Labs in December 2020, alleging that the California blockchain company had sold unregistered securities in the form of XRP cryptocurrency to retail investors for seven years. Ripple CEO Brad Garlinghouse and co-founder Chris Larsen are named as defendants as well. The SEC’s lawsuit against Ripple Labs had not been resolved as of mid-August 2022.
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