If you examine the market capitalization rankings of cryptocurrencies over recent years, you'll notice many new entrants in the top ten list annually. However, only a handful have consistently maintained their position, and XRP is one of them.
When people think of XRP, their impressions are often limited to its high market cap and its use in cross-border payments, without deeper understanding. While Bitcoin has Satoshi Nakamoto and Ethereum has Vitalik Buterin, the founders of Ripple and XRP are far less known. Media coverage about Ripple is also relatively scarce.
Why does such a low-profile asset, which even many industry insiders know little about, consistently rank among the top cryptocurrencies? What problem does it actually solve? Let’s explore.
Understanding Ripple and XRP
Every major cryptocurrency has a core mission. Bitcoin aims to be a peer-to-peer electronic cash system, Ethereum a decentralized platform for smart contracts, and XRP is designed to enable seamless global payments.
Global payments, especially cross-border transactions, are often slow, expensive, and burdened with paperwork. The most commonly used system for these transactions is SWIFT, established in 1974. While SWIFT offers secure and reliable communication for bank settlements, it often takes three to five business days to complete a transaction and involves high fees. This has made it increasingly outdated for modern needs.
In 2012, Chris Larsen and Jed McCaleb founded OpenCoin (now Ripple Labs) and introduced the Ripple project. The goal was to use XRP as a bridge currency for financial institutions, enabling faster and cheaper international payments.
To achieve this, Ripple uses the Ripple Consensus Algorithm, which can handle over 1,500 transactions per second with confirmation times of just four seconds. The fee per transaction is as low as 0.00001 XRP—less than a penny and practically negligible.
Unlike Bitcoin’s proof-of-work mining mechanism, the Ripple network does not rely on miners. Instead, it uses validator nodes, all of which are approved by Ripple Labs. The total supply of XRP is 100 billion, all of which were created at launch. The founders kept 20 billion, and the remaining 80 billion were allocated to the company for operational purposes and sales.
This centralized supply is often criticized, as the company can influence the market by selling its holdings. However, Ripple’s focus on improving rather than replacing the existing financial system has won the support of numerous banks, governments, and financial institutions.
As the world’s first open payment network, Ripple gained attention for its simplicity, speed, and low cost. In 2014, it was named one of the "50 Smartest Companies" by MIT Technology Review for enabling affordable cross-border transactions and promoting financial inclusion.
In 2015, OpenCoin was renamed Ripple Labs to better align with its branding and operational goals.
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Frequently Asked Questions
What is the main purpose of XRP?
XRP is primarily used as a bridge currency in cross-border payments. It allows financial institutions to settle transactions quickly and with minimal fees, making international transfers more efficient.
How is XRP different from Bitcoin?
While Bitcoin aims to be a decentralized digital currency, XRP is intended for institutional use in payment systems. It uses a consensus algorithm instead of mining, making it faster and more scalable for financial transactions.
Why is XRP considered centralized?
Ripple Labs controls a significant portion of XRP’s supply and approves all validator nodes. This level of control is seen as centralized compared to decentralized cryptocurrencies like Bitcoin or Ethereum.
Who uses Ripple and XRP?
Banks, payment providers, and financial institutions use RippleNet for cross-border payments. Companies like Santander and American Express have integrated Ripple’s technology into their services.
Is XRP a good investment?
XRP’s value is closely tied to its adoption by financial institutions. While it has maintained a high market cap, investors should consider market trends, regulatory developments, and overall crypto volatility.
Can XRP be used for everyday transactions?
Although possible, XRP is not commonly used for daily purchases. Its primary use case remains in the backend systems of financial institutions for large-scale transfers.