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What is XRP? Your simple guide to Ripple’s cryptocurrency

By Connor Freitas

Find out more about the world’s third-biggest cryptocurrency here – including its price history and predictions for the future.

Bitcoin is the world’s largest cryptocurrency, with Ether in second place. But here’s the question. Can you name any of the other 5,100 coins out there – or explain what they do? This article is about XRP, the third biggest digital currency in terms of market capitalisation. If you’re wondering what XRP is, and where it fits into the increasingly fragmented crypto landscape, you’ve come to the right place.

What is XRP?

0'>XRP is a cryptocurrency that was devised by Ripple. The company describes it as a “digital asset built for global payments”. To cut a long story short, it’s fair to say that Ripple has its sights set on the international transfer market. At present, it can often be really expensive to send money around the world, and banks charge astronomical fees. To add insult to injury, outdated systems can also mean payments take several days to reach the recipient’s bank account.

The 0'>Ripple coin (XRP) is designed to tackle this by allowing large sums of money to be sent securely and quickly at little cost. This doesn’t just have 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 who use its network – including American Express, Bank of America Merrill Lynch, HSBC, Barclays, Royal Bank of Scotland, Santander, Unicredit and MoneyGram.

Ripple to US Dollar
Daily change
0.19799
Low: 0.19687
High: 0.20089

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 XRP payments are cleared in under four seconds. For crypto advocates concerned about scalability issues – mainly that blockchain networks will be unable to cope with a considerable rise in demand – this has amounted to a breath of fresh air.

How does Ripple work?

First, it's worth drawing a distinction between Ripple and XRP. Ripple is the technology company offering the infrastructure to facilitate these faster payments. It describes XRP as an “independent digital asset” – insisting that, though the coin is used in its suite of products, it doesn’t have control over the technology. The Ripple currency has a maximum supply of 100 billion tokens and the company owns about 60 per cent of them.

Rather confusingly, Ripple isn’t involved in physically sending money from one place to another. Instead, it allows for the transfer of the promise of payment. I feel an example coming on, don’t you?

Let’s imagine that Katie lives in London and her friend David lives in France. She owes him money for a holiday they’re taking. Both of them want to avoid punishing exchange rates and delays. As a payment platform, Ripple can be compared to the ancient hawala system of money transfer in the Arab world.

Here’s effectively how Ripple works. Katie goes to a London agent with $2,000 and hands the cash over. In return, the agent gives her a special code. Next, the London agent rings his counterpart in Paris, and tells him how much money he has received. While all of this is taking place, Katie rings David to tell him the special code that she was given. David can then go to the Paris agent, reveal the code, and get the cash.

It’s weird to think that a trusted system from medieval times could have its place in the crypto world but that’s essentially what Ripple and XRP deliver. The only difference is that validators and gateways take the place of agents – which is a lot harder to explain in a straightforward example.

As a coin, XRP serves as a neutral asset that can represent anything. Katie can convert her pounds into XRP, and David can take that 0'>XRP  can convert it into euros. An even better example of its utility lies in currencies that aren’t commonly traded against each other. If you wanted to make a conversion from the Ugandan shilling to the Icelandic krona, you’d often have to change the shillings into dollars, and then the dollars into krona. Every step in this process attracts high levels of commission, gradually eroding the value of the funds being sent. The Ripple currency’s stated aim is to tackle this.

So… who created Ripple? Well, a man called Jeb McCaleb initially came up with the idea, and he enlisted developers who could bring it to life. Looking at Ripple history, the company began life back in 2012, when Bitcoin traded at about $12 or $13.

XRP price history

Given the fact there are so many XRP coins out there (100 billion – Bitcoin’s maximum supply is 21 million) it is 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 January 4 of that year.

Ever since then, the value of the Ripple cryptocurrency has continued to cool. At the time of writing, it was trading at just $0.24. Part of this slump might be Ripple’s own doing. As mentioned earlier, Ripple owns more than half of the supply of XRP – and most of it is in escrow. Every now and again, the company releases some of these tokens, a move that can suppress its value and has angered some investors.

Aside from that, what affects Ripple price? Well, good news about banks continuing to adopt the technology that underpins Ripple would help. Listings on big exchanges also help – and, as with other cryptocurrencies, it has enjoyed a healthy boost whenever it has been made available to a broader cross-section of consumers. Another cloud on the horizon that could send the price of XRP downwards are the rumblings of a rather unpleasant lawsuit.

Ripple has been accused of violating laws in the US, with regulators claiming that XRP is an unregistered security. To compound the problem, allegations have been swirling around of misleading advertising – and even that exchanges were paid to list XRP early on. The US Securities and Exchange Commission has successfully taken crypto projects to court in the past (often attracting punishing financial penalties), and this has often been followed by dramatic declines in a token’s valuation. Ripple has been unable to get the lawsuit dismissed so far, and it could result in massive headaches for the company if it continues to advance further.

But where will Ripple be in five years? How high can Ripple go? It’s difficult to know the answers to these questions – and usually, the fate of a major coin such as XRP is tied to how the crypto industry is performing as a whole. There is plenty of debate as to whether or not XRP will be able to surpass $1 again, let alone when. Ripple’s CEO Brad 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 “crypto isn’t a bad word”.

Ripple to Bitcoin
Daily change
0.00002096
Low: 0.00002092
High: 0.00002112

All eyes are currently on the price level of $0.30. Many analysts believe that breaking this level could result in runaway success in the short term and that it could provide an outlet to $0.50. This would require an increase of about 25 per cent on current levels, not an easy ask. Others in the crypto community are far more fatalistic and believe that the Ripple coin could decline to $0.02 over the course of 2020. Facebook managing to launch its Libra stablecoin, which is designed to deliver low-cost transfers between consumers worldwide, could also undermine Ripple’s position and gobble up precious market share in the retail market.

How to trade Ripple

Let’s wrap up our guide on the 0'>Ripple cryptocurrency with a look at where to trade Ripple and where to store Ripple.

0'>XRP is available on most major exchanges and it can be stored in a wallet. Who accepts Ripple as payment? Being honest, there aren’t that many places out there that accept this coin for everyday purchases – primarily because that isn’t the main purpose of this cryptocurrency. Whereas Bitcoin and Ethereum are trying to go toe to toe with the US dollar and other fiat currencies, the Ripple coin is focused on a different segment of the market altogether.

FURTHER READING: ‘Unclear' whether XRP is a commodity or a security - CFTC Chair

FURTHER READING: Make money with cryptocurrency

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