Know Your Crypto — XRP Edition
Ripple (XRP) has indeed left a ripple (pun intended) in the crypto industry. Keep reading our latest addition to the KYC series to learn everything about Ripple or XRP.
Ripple — or some of you may know it as XRP — is a token designed to migrate transactions from central databases controlled by financial institutions to a more open infrastructure while significantly cutting costs. XRP transactions are trustless, instant and cheap, putting them at an advantage for cross-border movements. Launched in 2012, the cryptocurrency has one of the most ambitious goals in the cryptocurrency space. The software enabling the use of XRP — the XRP Ledger — proposed a new way of operating blockchains, claimed to be suitable for transactions.
The Bitcoin blockchain allows anyone to contribute computing, validate transactions and secure its software. The XRP Ledger, on the other hand, only allows select network participants to help validate transactions and secure the network. There are 150+ of participants in the network, known as the Unique Node List. But, is XRP decentralized? At launch, 100 billion XRP tokens were pre-mined and subsequently distributed to specific individuals. At the time, the move led to concerns surrounding its decentralization as a few entities controlled a large supply of the coins.
One Quick Time Travel To The Origin Of XRP
Most cryptocurrencies have one specific individual or entity who can be credited with creating the crypto. Bitcoin, for example, was created by the pseudonymous Satoshi Nakamoto. XRP’s history is complex, as several individuals were involved in creating both the technology behind it and the business entities that helped it grow. OpenCoin’s co-founders Jed McCaleb, Arthur Britto who helped develop the XRP Ledger, and Chris Larsen are often credited for the creation of XRP. Still, while they were notable individuals in the space, other people were involved.
Now That You What It Is, Here’s How It Works
The mission of Ripple’s blockchain infrastructure, RippleNet, is to provide banks with quick, low-cost and simple cross-border transactions. As a result, it is a viable alternative to the current international payments system used by most banks, which is the Society for Worldwide Interbank Financial Telecommunication. To verify transactions, the XRP cryptocurrency employs a consensus system involving several bank-owned servers. Validators verify that proposed transactions are valid by comparing them to the most recent version of the XRP Ledger.
The Secret Sauce Of XRP’s Efficiency
The average XRP transaction cost being $0.0013927 may stand out to most experienced cryptocurrency users. The average transaction fee on both Bitcoin and Ethereum — the top two cryptocurrencies by market capitalization — has often reached two digits, with all-time highs standing above $50. The XRP Ledger is not a fork of the Bitcoin blockchain network, but it uses some of its features and the use of a public ledger and digital signatures required for transactions. It doesn’t, however, rely on a classic PoW algorithm backed by specialized computing hardware.
Instead, it relies on a network of “unique nodes” that efficiently agree on which transactions can be processed in the network. Permissioned servers maintain a unique Node List that helps the network achieve consensus through a Federated Byzantine Agreement consensus mechanism. If 80% of these unique nodes deem a transaction to be valid, transactions are efficiently validated. The XRP Ledger naturally uses a more trusted design than other cryptocurrencies, which has led to some concerns regarding its decentralization and permissionlessness.
How Good Is XRP As An Investment?
XRP is no exception to the rule that crypto is volatile. If you believe Ripple’s growth will continue, an investment in XRP may be worthwhile. However, it’s not as safe as investing in stocks, but you may make a lot of money if Ripple succeeds. It can potentially replace an inefficient and outmoded international money transfer system. The fact that it has bank ties is encouraging. And any favorable changes in its legal position could result in a price hike, providing profits to investors. So, stop asking yourself: Should I buy XRP? Do your research and then take any action.
Non-Financial Advice: The data, resources, and statistics in this article have been consolidated from multiple sources and neither the author nor the site is responsible for any financial profit/loss incurred from opinions present in this article. Readers understand that all risks associated with cryptocurrency are taken on by themselves.
