Bitcoin (BTC) is the world’s largest cryptocurrency, with Ether (ETH) in second place, Tether (USDT), USD coin (USDC) and BNB coin (BNB) rounding out the top five list, and Binance USD (BUSD) coming in sixth. XRP, formerly Ripple (XRP), comes in next in seventh place. But according to CoinMarketCap, there are well over 20,000 cryptocurrencies out there. So how will XRP fight for market dominance as the crypto asset space matures?
This article aims to show you what is XRP and how does XRP make money. Please read on.
What is XRP?
Ripple is a real-time, cryptocurrency gross-settlement system, currency exchange and remittance network created by Ripple Labs Inc, a US-based technology company. The company then created the XRP cryptocurrency, which it describes as a “digital asset built for global payments”.
To cut a long story short, it is fair to say Ripple has its sights set on the international currency transfer market. So what is XRP coin used for?
At present, it can often be really expensive to send money around the world, with banks charging astronomical fees. To add insult to injury, banks’ outdated systems can also mean payments take several days to reach the recipient’s bank account.
The XRP coin is designed to tackle this by allowing large sums of money to be sent securely and quickly at very little cost. This offers more than just the potential to help everyday consumers – financial institutions themselves are also keen to get in on the action.
As a result, it’s telling that Ripple has already attracted an impressive list of banks and payment providers that use its network, including American Express, Bank of America, HSBC, Barclays, Royal Bank of Scotland, Santander, UniCredit and Japan’s SBI Holdings.
According to the team behind the Ripple cryptocurrency, XRP also offers compelling advantages over other established digital currencies. Whereas it can take more than an hour for BTC transactions to clear and about two minutes for an ETH payment to be successfully completed, Ripple claims its XRP payments are cleared between three and five seconds.
This is a breath of fresh air for crypto advocates who are concerned about scalability issues, helping alleviate fears that blockchain networks will prove unable to cope with a considerable rise in demand.
How does XRP make money?
Before we explain this, it is first worth drawing a distinction between Ripple and XRP.
Ripple is the technology company offering the infrastructure to facilitate these faster payments. The company describes the XRP coin it produces as an “independent digital asset”. Ripple says that the coin is used within its suite of products, but that it does not have control over the technology.
There is a maximum supply of 100 billion XRP tokens and the company controls about 60% of them. The organisation placed about 55 billion of the XRP coins it owns in a secured escrow account, from which it can release one billion coins every month. However, Ripple has never released such quantities to the market with any regularity.
Rather confusingly, Ripple is not involved in physically sending money from one place to another. Instead, it allows for the transfer of the promise of payment. Confused? Let the following examples explain how it works.
XRP history and price history
So… who created Ripple? Well, it was initiated by a man called Jed McCaleb, who first came up with the idea. He then enlisted developers David Schwartz and Arthur Britto to help bring it to life, and they began creating the XRP Ledger (XRPL). Their idea was to create a digital asset that was more sustainable than bitcoin, specifically set up to process payments.
According to Ripple’s own account of its history, the XRPL first launched in June 2012. Shortly thereafter, the trio were joined by Chris Larsen, and the group started the company NewCoin in September 2012, which was quickly renamed OpenCoin before settling on its current name, Ripple.
The XRPL founders gifted 80 billion XRP, the platform’s native currency, to the company. Ripple has since put the majority in escrow.
At the time of Ripple’s launch, BTC coins were trading at about $12 or $13. Given the fact there are so many XRP coins out there (100 billion, compared to BTC’s maximum supply of 21 million) it’s understandable that this cryptocurrency’s valuation normally comes in cents rather than dollars. Like other digital assets, XRP hit an all-time high in early 2018 – reaching $3.84 on 4 January of that year.
Ever since then, the value of the XRP crypto has continued to fall. On 22 August 2022, for example, it was fluctuating around $0.34.
The steady decline in value can in part be attributed to Ripple’s actions. Ripple owns more than half of the supply of XRP, and most of it is in escrow, as mentioned above. Every now and again, the company releases some of these tokens, a move that can suppress its value and that has angered some investors.
The SWIFT of the future?
But where will Ripple be in five years’ time? How high can Ripple go? And how will the above scenario with the SEC affect its price? These are questions with no easy answers.
Usually, the fate of a major coin such as XRP is tied to how the crypto industry performs as a whole. Ripple CEO Garlinghouse maintains that the company is continuing to attract new clients, and says he is on a quest to rub shoulders with senior banking executives and show them that “crypto isn’t a bad word”.
All eyes are on Ripple as it battles the SEC in court. If it defeats the lawsuit, the world could be Ripple’s oyster. In fact, former Goldman Sachs analyst Andrew Lokenauth is so bullish on XRP’s future that he suggests it could be the heir apparent to SWIFT, currently the global interbank transfer standard.
Lokenauth said: “Ripple will redefine online payments, and I believe Ripple will likely go public once the SEC lawsuit is resolved. The main advantages of using the Ripple protocol are speed and reduced risk. XRP is a replacement for SWIFT, which is expensive and slow.”
The popular mononymous crypto analyst Guy concluded a list of reasons why the SEC could be cracking down on Ripple by citing SWIFT. The Coin Bureau host suggested that Ripple’s RippleNet could have posed a potential threat to the entrenched American SWIFT payment system, highlighting the timing of the SEC’s lawsuit.
How to trade Ripple
Let’s wrap up our guide to the Ripple cryptocurrency with a look at where and how to trade XRP (XRP), and where to store it.
XRP is actually available on most major exchanges and can be stored in a wallet – however, who accepts Ripple as payment?
XRP is accepted by Western Union, Travala and the Red Cross. More businesses are also using BitPay (and other platforms) as a payment service provider, so Ripple can be spent at numerous institutions. This includes purchases from Microsoft or Amazon by way of a gift card, along with other businesses that are slowly adopting decentralised payment systems.
How many XRP coins are there?
XRP currently has 49.38 billion tokens in circulation, out of a max supply of 100 billion XRP tokens. Ripple Labs initially owned 60 billion XRP tokens, with the ability to sell one billion per month.
Is Ripple Protocol secure?
The general consensus is that yes, it is secure, but that it is not the most secure of blockchain protocols. Payment information on the ledger is private and transaction information is public.
For a more comprehensive list of companies that accept XRP, see Cryptwerk. However, few major retailers accept Ripple for everyday payments because it’s not intended for retail use. It was designed to allow large sums of money to be sent quickly and securely.
Is Ripple Protocol legit?
The SEC lawsuit has had a huge impact on XRP trading, especially in the US. However, the cryptocurrency remains active and legitimate on international markets, and the end of the lawsuit is likely to trigger the relisting of XRP on most US exchanges should Ripple be successful.
What makes Ripple Protocol unique?
Instead of blockchain mining, the network uses a unique distributed consensus mechanism to validate transactions. Participating nodes verify the authenticity of a transaction by conducting a poll, which enables an almost instantaneous confirmation of a transaction without a central authority.
Hope this article can provide you with a better understanding about what is XRP and how does XRP make money.
