XRP is the native cryptocurrency of the Ripple payment and exchange network, called RippleNet. The XRP Ledger operates using a unique blockchain protocol that delegates validation of transactions not to regular users, but instead to 36 financial institutions.
Officially, the XRP cryptocurrency is maintained by the community. In reality, however, most development is carried out by Ripple Labs, a private company based in the United States. Ripple Labs runs 6 — or 16% — of all validator nodes.
What Ripple lacks in decentralization is made up for in speed and scalability. XRP boasts 4-second settlement times and can handle 1,500 transactions per second.
How is Ripple used?
The primary use case of XRP is to enable fast and secure cross-border payments between financial institutions. In this way, the network positions itself as a direct competitor of SWIFT.
If client Alice in the US wants to send money to Bob in England, her bank that operates on RippleNET would trade dollars through a digital asset exchange for XRP. After receiving this XRP, Bob’s bank would exchange them for pounds before transferring them on to their client.
Similar to the vast majority of other cryptocurrencies, it is possible to carry out person-to-person (P2P) transactions using XRP. Like Bitcoin, Litecoin, and many other blockchains, Ripple features a fixed total supply, with a max of 100 billion XRP ever to be issued.
Why Hold Ripple?
There are two key reasons that some investors choose to include XRP in their portfolios. First, the cryptocurrency can serve as a hedge against the possibility that Bitcoin and the Lightning Network might for some reason not be able to be implemented as the world’s international payment rails.
Second, Ripple Labs has received some press attention as of late for helping certain countries create central bank digital currencies (CBDCs). While XRP’s value would not be directly affected by a CBDC issued using Ripple’s enterprise product, there may come to be some degree of interoperability between the cryptocurrency and any of these government-controlled digital assets.
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