Contents

• What is XRP (XRP)?
• How does XRP work?
• A system of trust
• XRP history and price history
• Legal battle with the SEC
• The SWIFT of the future?
• How to trade Ripple
• FAQs

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 is about Ripple – the company that created the Ripple Consensus Ledger, and XRP as a digital asset. Ripple is the sixth-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 (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 To add insult to injury, banks’ outdated systems can also mean payments take several days to reach the recipient’s bank account.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 work?

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.

A system of trust

Let’s imagine that Katie lives in London and her friend David lives in France. She owes him money for a holiday they are taking. Both of them want to avoid punishing exchange rates and delays. Enter Ripple to offer a solution.

As a payment platform, Ripple can be compared with the ancient hawala system of money transfer, which supposedly originated in South Asia in the 8th century AD, and was soon taken up by much of the Arab world.

According to Investopedia, the hawala system is “an informal method of transferring money without any physical money actually moving. It is described as a ‘money transfer without money movement’. Another definition is simply ‘trust’.”

Here, effectively, is how that works. Katie goes to a London agent with £2,000 in cash and hands that 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 strange to think that a system from medieval times could have a place in the crypto world today, but that is essentially what Ripple and XRP deliver. The only difference is that its validators and gateways take the place of agents – which is a lot harder to explain in any kind of 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 XRP and convert it into euros. But an even better example of XRP’s utility lies in currencies that are not commonly traded against each other.

If you wanted to make a conversion, say, from the Ugandan shilling to the Icelandic krona, you would 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.

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.

Legal battle with the SEC

Aside from that, what affects the Ripple price? Well, the good news is that banks are adopting the technology that underpins Ripple. 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.

One cloud on the horizon that could send the price of XRP downwards, though, is the rumbling of a rather unpleasant lawsuit. The US Securities and Exchange Commission (SEC) has accused the company, its co-founder Chris Larsen and its CEO, Brad Garlinghouse, of violating US laws by selling XRP as an unregistered security.

To compound the problem, allegations have been swirling around concerning misleading advertising, which said that exchanges were paid to list XRP early on.

The SEC has successfully taken legal action against or conducted probes into crypto projects such as BitConnect and Binance Holdings, often resulting in punishing financial or regulatory penalties. This has often been followed by dramatic declines in a token’s valuation. However, in this case Ripple’s legal team has argued that the SEC itself is at fault for publishing confusing guidance on cryptos. 

Although Ripple has been unable to get the lawsuit dismissed so far, and while it could result in massive headaches for the company if it continues to progress further, the company does possess some strong cards in its Ripple versus SEC hand.

In fact, what feels increasingly like a long-running lawsuit is now being viewed by some as the crypto “trial of the century” – or certainly as a very pertinent test case for the future of cryptocurrencies, or perhaps for the SEC’s authority and ability to regulate them. 

On 12 March 2022, the District Judge allowed Ripple to use a fair notice defence by striking down the SEC’s motion. As a result, Ripple has the opportunity to argue on the grounds that it was the SEC that failed to inform Ripple about how selling XRP could violate the pre-established legislation. Hot on the heels of the ruling, XRP jumped up the price charts. However, the judge refused to dismiss the case against Ripple’s executives, so although it was a procedural win, the case is far from over. 

On 12 April, Ripple enjoyed another big win, which some initially thought might trigger an abrupt end to the XRP lawsuit. Judge Sarah Netburn denied the SEC’s Motion for Reconsideration of the DPP Ruling in the latest court order, and many close to the case believe the SEC would rather settle than hand over its internal documents.

On the flip side, Jeremy Hogan, a partner at the law firm Hogan & Hogan, said: “I’m pretty sure that Ripple will do a little legal judo and spin this into a positive for it, because the SEC didn’t even move to strike the FND in the LBRY case. Sometimes you don’t want to try and throw EVERY case into a pleading.” 

However, in April, plans to conclude the protracted brawl this year came to an abrupt end. “It now looks like a resolution will come in 2023,” Ripple general counsel Stuart Alderoty said in a tweet. It was found that published SEC emails caused potential conflicts of interest, particularly in the case of Hinman’s role as an SEC director.

On 12 July, in a major breakthrough for Ripple, the U.S. District Court rejected the SEC’s request to withhold documents on Hinman’s speech of 2018. However, it is anticipated that the SEC will appeal against the decision. 

All in all, Ripple (XRP) is currently seeking collaboration with Congress on smart cryptocurrency regulation to put an end to the Wild West reputation that the industry currently has, to help establish a way of protecting consumers and also to foster innovation in the market.

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.

FAQs

Further reading

How many XRP coins are there? Counting the ripples

Ripple states SEC has ‘muddied the regulatory waters for crypto’

Ripple price analysis: Rally to $0.50 is possible if setup completes

Ripple price prediction: What’s next for XRP?