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What Is Ripple (XRP)?

Read 9 min
Coins spiraling in a circle
— Ripple is a technology company that uses blockchain to replace the SWIFT banking network to make international transactions faster, cheaper, and more reliable.

— Ripple has a suite of products and initiatives like RippleNet, Ripple Protocol, XRP Ledger, and InterLedger protocol to achieve this goal.

— XRP, its native cryptocurrency, serves as a bridge currency and a settlement layer to facilitate efficient transactions globally.

The existing banking system relies on traditional finance methods, and, unfortunately, these processes can be opaque, slow and often extremely expensive. As this technology provides the basic framework for payments and transactions for both businesses and individuals, the need for innovation becomes increasingly important.

To address this shortcoming, banking institutions are showing an interest in blockchain technology, a faster and more reliable solution. However, most traditional banks and other financial institutions are reluctant to adopt the most popular blockchains, such as Bitcoin and Ethereum.  This is mainly due to their decentralized nature. Put simply, banks want more control over their systems than the biggest blockchain platforms offer.

This is where Ripple comes in. Put simply, this company aims to enhance banking efficiency using blockchain technology in a slightly different way to public and permissionless blockchains you might be familiar with. The aim is to allow institutions to retain sufficient control over transactions. 

But before we dive into the details, what exactly is Ripple and how does it work?

What Is Ripple (XRP)?

Ripple is a for-profit technology company that uses blockchain to let financial institutions worldwide make cross-border transactions faster, cheaper, and more reliable. To aid its ambitions, Ripple has crafted various products and initiatives like RippleNet, XRP Ledger, and Interledger protocol (ILP)

In addition to this, Ripple has also developed a native cryptocurrency called XRP. It serves as a settlement layer and facilitates transactions within the globally accessible network.

What Is Ripple for?

To comprehend why Ripple is important for traditional financial institutions, we must understand the problem the network aims to solve.  To explain, when users make a cross-border transaction, the funds don’t directly go from their bank to the recipient’s bank. Instead, the transaction goes through several intermediary banks before reaching the destination address. These banks communicate all necessary information and instructions via the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. 

However, SWIFT takes days or even weeks because the intermediary banks operate in different time zones and have their own systems and processes. But that’s not the only problem. Additionally, the transactions often involve the exchange of currencies in foreign exchange markets which complicates and delays the transaction. Plus, each of the intermediary banks also takes a processing fee, making it more costly.

Thus, Ripple aims to replace  SWIFT with a global blockchain ledger system. Ripple offers a fantastic alternative to SWIFT as it can handle up to 1,500 transactions per second (TPS) and takes only 3-5 seconds to settle a transaction. That’s a massive jump in transaction efficiency when compared to the usual three days to a week’s time international bank transactions take. 

But how does Ripple manage to get these traditional financial institutions onboard?

Well, importantly, it claims to comply with anti-money laundering (AML) laws and prevent fraud. As a result, finance giants like American Express and IndusInd Bank now use Ripple to conduct international transactions.

But there’s a bit more to it than that. Let’s explore its history to find out why.

History of Ripple

Ripple has a long history that dates back to even before Bitcoin. Firstly, software developer Ryan Fugger founded RipplePay in 2004. It was a global network that let community members make payments anywhere in the world. 

Then in 2011,  Jed McCaleb, alongside other developers started working on NewCoin. To explain, NewCoin was a system for distributed digital payments. It also introduced its own digital currency, XRP. In 2021, McCaleb and his team reached out to Fugger to use RipplePay’s network. Fugger agreed to give control of RipplePay to NewCoin. To follow, NewCoin launched in 2012 and was renamed to OpenCoin the same year. After raising a funding round, OpenCoin was finally renamed to Ripple Labs Inc. on September 26, 2013. In 2015, the company underwent another rebrand, settling with its current name Ripple. A year later, Ripple received a license from the New York State Department of Financial Services.

Ripple (XRP) Ecosystem Explained

Ripple aims to bring speed, scalability, and cost-effectiveness to international transactions. As a result, the company has garnered significant attention from banks, remittance services, and other entities seeking to streamline global payments. Two important aspects of the Ripple ecosystem make this possible: XRP and RippleNet. But why are they so important? Let’s explore,

What is XRP? 

XRP is the native cryptocurrency of the Ripple ecosystem. It acts as a settlement layer and facilitates seamless and efficient transactions within the Ripple network. The smallest unit of XRP is known as a “drop,” which is equivalent to 0.000001 XRP.

When it comes to supply, XRP is capped to a maximum of 100 billion coins. Unlike some cryptocurrencies that are mined as the network progresses, XRP’s complete supply was pre-mined during its inception. However, this is not the fixed supply as XRP is deflationary. Thus every time a transaction occurs on the Ripple network, it burns a small amount of XRP. This means the total supply is gradually reducing—even right now! 

So where is all the XRP now? Well, Ripple Labs currently holds a  significant portion of the supply to provide liquidity and support the ecosystem’s development. And that comes with its own advantages and disadvantages, but before we get there, let’s dive into Ripple’s network.

What is RippleNet?

RippleNet is a payment network which has the potential to revolutionize cross-border transactions by replacing the current SWIFT messaging network. 

However, it originally started off as three separate offerings; XCurrent, xRapid and xVia. So what were these products all about and what’s it to do with RippleNet?

xCurrent: An interbank communication software to settle cross-border transactions.

xRapid: A liquidity provider for banks that can use XRP tokens instead of worrying about fiat conversions for cross-border transactions. 

xVia: An application programming service (API) for customers to access xCurrent and xRapid.

In late 2019, Ripple unified these three products under the RippleNet umbrella as a part of a rebranding effort. However the new name is more of a cosmetic change rather than a utility change.  Since Ripple was turning out to be a suite of software, it chose a name to reflect that However, the network’s three core parts, and its wider operations remain the same.

How Does Ripple Work?

Unlike Bitcoin or Ethereum, Ripple neither uses the proof of work (PoW) or proof of stake (PoS). It uses an entirely different consensus mechanism to confirm transactions. 

So how does that work exactly?

Put simply, Ripple uses Unique Node Lists (UNL). To explain, this is a list of nodes the server queries to reach a consensus about a state or value in the network. In other words, when determining consensus, each node in the network only considers the votes of nodes in its own UNL. This means Ripple relies on significantly fewer nodes to reach a consensus than blockchains like Bitcoin and Ethereum.

Benefits of the Ripple Ecosystem

So, you now know how the Ripple ecosystem works, but what about its benefits? Well, Ripple boasts a ton of benefits for its users. Let’s explore some of the reasons Ripple offers something previously unexplored.


Since there are fewer nodes on RippleNet than on other popular blockchains, it means that transactions are more flexible. For example, if there is a mistake in a transaction, RippleNet’s nodes can easily edit the transaction. 

To clarify, the less nodes there are, the easier it is to override the system. This is a big win for banks, who may want to change transactions, either to catch a criminal or to fix a mistake. Whatever the reason, Ripple’s fewer nodes means the blockchain is more editable, which can be a huge benefit.


Using a UNL mechanism means that Ripple is significantly faster than today’s most popular blockchains. In fact, a single transaction on the Bitcoin network can take anywhere from a few seconds to an hour. This is completely inefficient for the banking system, which aims to execute transactions as fast as possible. Ripple’s UNL mechanism means that it increases the speed of transactions, with a single transaction typically executing in less than four seconds.


It’s not just the speed of a single transaction that makes Ripple so useful, it also boasts great scalability. To explain, Ripple can handle a huge amount of transactions at one time. Today, it can manage to execute a huge 1,500 transactions per second, which puts it on a similar level to VISA at 1,700 transactions per second. This is significantly faster than its other blockchain counterparts, such as Ethereum which can only process 30 transactions per second. 

Potential Risks of the Ripple Ecosystem

Obviously, it’s not all easy sailing with the Ripple ecosystem either. Before you start exploring, there are a few key risks to consider too. Let’s take a look at some of the things you should know:


Ripple is a lot more centralized than today’s most popular blockchains. 

Firstly, it works using a more permission-based blockchain model. To explain, the most decentralized networks allow any participant to become a validator. However, that’s not how Ripple works. Instead, only validators recommended by Ripple via its UNL will verify transactions. While this does make the chain more centralized, it also means that it’s easier to organize and implement upgrades and rule changes to the network, something integral to an ever-changing banking system.

Another feature contributing to Ripple’s centralization is the allocation of XRP. Since the Ripple Foundation owns most of the supply, it has the power to influence the price of the token. This means that should a problem occur, Ripple has the power to change a transaction. However, it also means that if the CEO goes rogue, or a hacker gains control of Ripple, it could wreak havoc on the network itself. 

Despite these fears,  it’s these centralized features which make Ripple so attractive to banks and financial institutions in the first place. Plus, while it is possible that Ripple could remove all of the liquidity from the system, it’s also highly unlikely. 

And of course, the network isn’t your only worry when it comes to funds. You’ve also got to worry about bad actors! Fortunately, a more centralized system allows you to change transactions, meaning blockchain criminals can’t hide behind immutable transactions like they do on decentralized chains.

Possible Collusion

Finally, since the Ripple ecosystem has fewer nodes in general, in theory, it’s easier for validators to collude than on most networks. Colluding validators could easily disrupt the consensus process and undermine the integrity of the network, thus potentially putting your funds at risk.  

To combat this, Ripple verifies all of its validators or nodes and evaluates their performance based on various metrics. Then it even displays all the details on their Validator Registry page. This lets users select a list of trusted validators to be a part of their UNL and conduct transactions securely.

How To Buy XRP Securely

So now you know what Ripple is, what it does, and the benefits and risks of using the network, you might be wondering how to purchase XRP and start using the network. Luckily, it’s easy to start using Ripple directly with your Ledger device. 

Step 1: Download and install Ledger Live on your computer. You can find the official Ledger Live here.

Step 2: Open Ledger Live and connect your Ledger device to your computer. Make sure your Ledger device is running the latest firmware version. 

If there are any firmware updates, follow the steps here.

Step 3: Create your XRP account in Ledger Live. Follow these steps:

— Go to Accounts

screenshot of XRP instructions

— Click the “+” button to add a new account.

XRP instructions

— Select XRP from the list of cryptocurrencies.

XRP instructions

You can now follow the on-screen instructions, connect your Ledger device, and confirm the transaction to create a new XRP account.

This will generate a unique XRP address associated with your Ledger device. However, if you want the full guide, make sure to check out the support article on how to install an XRP account on your Ledger.

Step 4: To fund your XRP account with tokens, you can use one of the Ledger-integrated on-ramp services such as Transak, Moonpay, or OnRamp. These services let you buy XRP using your debit or credit card. 

Alternatively, you can also transfer XRP tokens from your existing crypto wallet to your Ledger XRP account address.

Future of Ripple 

Ripple is an ecosystem exploring new territory, leading to it increasing its profits by $100 million in the previous quarter. Plus, the network currently boasts collaborations with huge banks such as Bank of America and Santander (USA).

But innovation comes with new challenges. No one said acting as the bridge between the crypto and traditional banking systems would be easy.

For example, Ripple experienced some pushback from the US government in 2020, when the Securities Exchange Commission (SEC) sued the company for selling XRP as an unlicensed security. However, in July 2023, a judge ruled that selling XRP through an exchange is not an investment contract.

This ruling is significant – not just for Ripple and XRP – but the wider crypto community. While we may not know what the future may bring for crypto law and regulation, this ruling may set the precedent for many years to come.

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