The cryptocurrency world is full of outliers – but few currencies stand as far apart from the crowd as Ripple, which does almost everything differently. Here’s what you need to know about this odd cryptocurrency – and why major companies like American Express are using it.
Ripple (or Ripple XRP, or just XRP) is a cryptocurrency released by a company of the same name. Unlike most cryptocurrencies, Ripple cannot be mined by users. Instead, all units are released into circulation by the company, which can add as many as 1 billion coins per-month from a total pool of 100 billion.
This is where it starts to set itself apart from the competition. Ripple’s goal is not to create secure, decentralized transactions for a large number of private users. Instead, its main focus is working with banks to smooth out (and reduce the costs of) international transactions.
As things currently stand, most international transactions are fairly slow – they often take days to complete, and there’s little value or incentive for the bank. This is especially true in the digital age, where banks may be asked to handle high-volume, low-value situations like social media and app stores paying out tens of thousands of small amounts to advertisers and developers.
Ripple’s solution to this is instant liquidity – by acting as the medium between different national currencies, banks and businesses can make international transactions in as little as a few seconds.
How Fast Is XRP?
Most transactions in Ripple are settled in 4 seconds. As their website notes, this should be compared to the 2+ minutes for Ethereum and the 1+ hours for Bitcoin. Most cryptocurrencies cannot advance too much from their normal transaction speed – things are limited by how fast blocks can be added to the blockchain.
Furthermore, Ripple is designed to handle a high volume of transactions. As of the time we wrote this guide, Ripple was consistently working with about 1500 transactions per-second – but the system can scale upwards, and it’s designed to grow to the point of handling up to 50,000 transactions-per-second. In contrast, Ethereum manages about 15 transactions each second.
The Three Solutions
Ripple’s primary functions are wrapped into three “solutions”, which are systems that different organizations can use.
xCurrent (Ripple For Banks)
xCurrent is a cross-border payment system with end-to-end tracking. In this system, banks can communicate with each other in real-time to confirm the details, then verify the correct amounts with each other after the payment is sent.
To help with this, Ripple includes a Rulebook that instructs financial institutions on how to operate the system, and how all legal aspects should be understood. This helps to ensure that each institution remains in compliance with local regulatory requirements.
xRapid (Ripple For Payment Providers)
xRapid is the part of Ripple focused on improving liquidity. The biggest concern here is helping payment providers and financial institutions that want to enter a new market.
For example, let’s say that Generic Banking Corporation, an American business, would like to expand north of the border and begin offering services in Canada. Normally, to do this with anything resembling effectiveness, this bank would have to convert a significant amount of money to the Canadian Dollar before they even opened their doors.
This money is “locked” because it can’t be used for any of the bank’s other operations. If Generic Banking Corporation suddenly needed to make a large loan in United States Dollars, they might not have enough cash to do so – and a customer would head elsewhere.
xRapid reduces the need to invest in liquidity by allowing for quick currency conversions. Essentially, money in any currency becomes money in every currency, allowing the bank to move as much cash as necessary as often as required.
xVia (Ripple For Businesses)
xVia is the last of Ripple’s three main solutions. This system focuses on providing a standard payment interface, allowing money to be sent to other businesses, to employees, or to anywhere else that needs the cash.
Major features include payment tracking (even to non-traditional storage areas, like wallets), the inclusion of rich data like invoices, and the benefits of not needing to keep capital in a foreign currency when it’s not actually necessary.
Note: At the time this guide was written, xRapid and xVia were still in development, but access was available on request.
How To Get XRP Ripple
At the moment, Ripple can only be purchased by exchanging other Cryptocurrencies. Most people buy XRP with Bitcoin or Ethereum. If you don’t already have a Cryptocurrency to spend, you can get some through services like Coinbase. Once you have the amount you want, a service like Binance will allow you to exchange them for XRP.
(These two services are only examples – albeit reputable ones. Other currency exchanges can also let you obtain and trade your currencies.)
Should I Use Ripple For Retail Transactions?
In general, no. Ripple wasn’t designed to be a valuable currency in and of itself – one of the many factors that set it apart from other cryptocurrencies. Instead, its primary purpose has always been to facilitate other transactions by improving their speed and security.
To a certain extent, this is easier on the users. At this time, no cryptocurrency is widely accepted by merchants, governments, and other people who want to be paid. Some cryptocurrencies are trying to change that, but for the immediate future, most people ultimately want value in the primary currency they use. By exchanging currencies back and forth, Ripple makes it easier for people to pay – and get paid – without locking the value in something that’s much harder to use.
How Safe Is Ripple?
Ripple is one of the safest cryptocurrencies currently available. While it doesn’t have the aggressive privacy practices of Monero, the fact that it’s already being used by banks and payment processors (the best Ripple coin news the owner has ever gotten) gives it a certain degree of legitimacy that many other cryptocurrencies lack.
Ultimately, things only have value because we say they do, and the perception of value changes based on situations. In emergencies, for example, food and water may be considered far more valuable than money – you can’t spend money if you’ve starved to death.
Cryptocurrencies get their value from three categories: trust, acceptance, and features.
Trust involves the security aspect, such as how resistant the system is to hacking and tampering. Cryptocurrencies, in general, are trustworthy because any transaction that goes against the blockchain is likely to be rejected. Ripple is controlled by one company, but this company has no incentive to mess with the blockchain and destroy the trust it’s developed. Indeed, they willingly accepted limitations to prevent flooding of the market.
Acceptance revolves around how many people are willing to use the currency. In theory, you could create your own cryptocurrency and give yourself ten billion units, but those units are irrelevant if nobody else wants them. In general, the more widely-accepted something is, the more valuable it tends to be as currency.
Features are what set cryptocurrencies apart from traditional fiat money and focus on things other than security measures. For example, Ripple has a four-second transaction time and the ability to scale up and handle more transactions-per-second. This makes it more useful – and therefore more attractive – than any currency that can’t process quite as quickly.
While features are good, they’re also the biggest weak point of cryptocurrencies. If somebody develops something better – say, a currency that resolves in two seconds and can handle twice as many transactions as Ripple – then there’s no real incentive to keep using that currency. The value can crash overnight, and if that happens, anyone still holding the cryptocurrency is out of luck.
On the bright side, this means that cryptocurrency developers are highly incentivized to keep developing and improving their currency – and there’s enough competition in the market to stop them from becoming complacent.
Ripple has a major advantage here. Some cryptocurrencies require the approval of a large segment of users before changes can be implemented – and debate can drag on for literal years. Ripple – and currencies using Masternode setups, like Dash Coin – can make decisions and implement them much faster than their competition.
Despite all of Ripple’s positive qualities, there are a few drawbacks to consider. The first – and perhaps most important – is that Ripple is not a private, anonymous system like most cryptocurrencies. Ripple can monitor everything that happens, and those records are subject to scrutiny by governments. This isn’t a problem for most people, but it is something you should keep in mind.
Furthermore, the company’s control of the currency gives it more power over the currency than most people have. This means the system is considerably more at-risk for moves that benefit Ripple, rather than the network as a whole. It’s not likely that the company behind this currency is going to destroy its users’ trust – they’d just abandon it – but it does mean changes need a high level of scrutiny.
Pricing And Value
The Ripple price has been going up since relatively early in 2017, and it’s expected to continue doing so for quite some time. That said, the Ripple XRP price doesn’t matter too much unless you’re a bank, payment processor, international company, or investor. For that matter, even most Ripple news isn’t too concerning.
As a back-end cryptocurrency – rather than a front-end system meant for the masses – you may eventually get the benefits of Ripple through your bank without ever needing to glance at the system.