What is XRP?
XRP is a cryptocurrency that was launched in 2012 with the intention of altering payment methods. This digital currency is intended to serve as a bridge for financial institutions that employ numerous currencies by offering an open architecture that allows for fast and efficient payment and remittance settlement.
XRP intends to provide a more streamlined and efficient alternative to the old SWIFT payments system, which is routinely used by banks and intermediaries for international money transfers, by allowing transactions to be processed in real-time. This makes XRP an appealing alternative for organizations and people who require quick and easy cross-border payments.
Ripple Labs: What is it?
The history of XRP, Ripple’s cryptocurrency, is long and complicated. RipplePay, a money transfer platform founded by software developer Ryan Fugger in 2004, started it all. However, the initiative took a new turn in 2011 when Jed McCaleb, the developer of the now-defunct Japanese bitcoin exchange Mt. Gox, established a separate firm, OpenCoin. Fugger handed up the project to McCaleb after conversations with the RipplePay team.
McCaleb set out with two other developers to construct a more complex version of Bitcoin. In 2012, this resulted in the establishment of the XRP network and its native currency, XRP. The firm behind the initiative changed names multiple times, from Ripple Labs in 2013 to Ripple.
The XRP Ledger, How does it work?
The XRP Ledger is not like traditional blockchain networks that use proof-of-work or proof-of-stake protocols. To validate balances and confirm transactions, it instead use the XRP Ledger consensus protocol. Rather than being open to all, this is maintained by independent members carefully picked by the network.
Instead of blocks, as in a PoW blockchain, the XRP Ledger generates “ledgers” that include data that links to the preceding ledger in the chain. Transactions are posted to the network for review and can only be validated if a sufficient number of validators agree. As a result, confirmation times are reduced to 3-5 seconds, as opposed to Bitcoin’s 10 minutes.
It’s also worth mentioning that, unlike Bitcoin miners, the XRP Ledger does not reward nodes with XRP for processing transactions. At debut, a total amount of 100 billion XRP was created and dispersed, with 20% going to the founders and 77.8% going to Ripple for development purposes.
Use case and adoption
Ripple had garnered over 100 banks as customers by 2018, mostly for its messaging infrastructure rather than its XRP coin. Ripple and XRP have been under attention from regulatory organizations, particularly the United States Securities and Exchange Commission, as they continue to gain popularity in traditional finance (SEC). The SEC has designated XRP as a security, bringing it under its purview.
The SEC charged Ripple and two of its executives in December 2020 with raising more than $1.3 billion through an unregistered issuance of digital asset securities. Ripple has contended that the SEC’s action is premature, coming so long after the formation of XRP, and that XRP has been classed differently by other US government authorities.