XRP is a cryptocurrency and the native token of XRP Ledger, an open-source blockchain designed to enhance global financial transfers and currency exchanges. Investors also utilize XRP to store value and profit from price fluctuations.
XRP and the XRP Ledger are integral to Ripple’s payment platform, facilitating transactions between financial institutions, businesses, and organizations. Key Takeaways: 1. XRP, founded in 2012 by David Schwartz, Jed McCaleb, and Arthur Britto, is a cryptocurrency and the native token of the open-source XRP Ledger. 2. XRP is pre-mined with a total supply of 100 billion tokens. 3. Compared to Bitcoin, XRP offers cost-effectiveness, faster transaction times, and lower energy consumption. 4. Ripple, the company, uses but does not own XRP or the XRP Ledger; it operates six unique nodes on the XRPL network. The History of XRP: In 2011, Jed McCaleb, David Schwartz, and Arthur Britto began developing the XRP Ledger to address Bitcoin’s limitations. Launched in 2012, the XRP Ledger’s native token, XRP, was created to support its functionality. Shortly after, Chris Larsen joined, and Opencoin was established. The XRP Ledger’s goal was to provide a more efficient, faster, and secure global transaction method, similar to Bitcoin’s vision. However, it was always marketed towards businesses rather than consumers. Ripple was the original open-source project, encompassing XRP, the Ripple Consensus Ledger, the Ripple Transaction Protocol, and the Ripple Network. Opencoin, later rebranded as Ripple Labs (now Ripple), continued to develop the XRP Ledger, which remains open source. The XRP Ledger Foundation, funded by donations from Ripple and other businesses, was launched in 2020 to maintain and further develop the XRP Ledger. XRP Ledger and XRP: While XRP is often referred to as Ripple, it’s crucial to understand that XRP is an independent open-source cryptocurrency. Ripple, a cryptocurrency services and technology company, uses XRP in its solutions due to its fast, efficient, reliable, and carbon-neutral delivery. XRP operates on the decentralized, open-source XRP Ledger (XRPL). Unlike most cryptocurrencies, XRP is pre-mined, with a maximum token supply of 100 billion. The token’s total supply was distributed in three ways: First, 80 billion XRP tokens were allocated to Ripple (the company).XRP, a digital asset designed for speed and efficiency, was initially created with a straightforward concept: a peer-to-peer trust network. To ensure a stable supply, 55 billion XRP were locked in an escrow account, with the Ripple co-founders and core team receiving the remaining 20 billion XRP. The XRP in escrow is scheduled to be released at a rate of 1 billion per month, with the original release schedule targeting 55 months. XRPL and Ripple highlight XRP as a faster, cheaper, and more energy-efficient digital asset capable of processing transactions within seconds and consuming less energy than some counterpart cryptocurrencies. Approximately 55% of XRP tokens are in circulation. XRP serves as a settlement layer on Ripple Net, Ripple’s commercial platform, facilitating transactions. It is traded as a cryptocurrency and is available on various exchanges, including futures, options, swap exchanges, spot exchanges, custodial exchanges, and non-custodial exchanges. Notably, XRP transactions do not require a transaction fee; instead, a small portion of the XRP is burned, making XRP deflationary. When discussing cryptocurrencies, being inflationary or deflationary refers to their internal value on a blockchain, not their market value. Some investors view certain cryptocurrencies as a hedge against inflation, given that price increases of popular cryptocurrencies often outpace inflation. XRP and BTC share some similarities but have more differences. One key distinction is in their consensus mechanisms. XRP uses a unique consensus mechanism relying on trusted validators or a Unique Node List (UNL) to decide which transactions to consider for the next ledger. For transactions to be valid, most trusted validators must agree. In contrast, Bitcoin relies on miners to solve complex mathematical problems using proof of work to validate transactions. XRP’s unique consensus mechanism, known as XRPL Consensus or Federated Consensus, allows it to authenticate transactions faster and cheaper, consuming far less energy than Bitcoin and most other cryptocurrencies. The XRP ledger is reportedly scalable up to 1,500 transactions per second. With Payment Channels, it can theoretically scale up to tens of thousands of transactions per second. Payment Channels are opened between transacting parties, flagging XRP on the blockchain so it isn’t spent again, allowing parties to send and receive payments while the channel is open. The payments are settled in bulk when the channel is closed, enabling thousands of transactions to be settled at once without tying up the blockchain’s consensus apparatus.
What is XRP? XRP Coin is a cryptocurrency. Is it a good investment? This depends on your outlook for the market and other cryptocurrencies. It’s advisable to talk to a financial advisor familiar with cryptocurrencies to determine if it suits your investing goals.
How safe is it to invest in XRP? All cryptocurrency prices are volatile, carrying a significant risk of loss. Discussing XRP with a financial advisor can help determine its effect on your portfolio and whether it’s a safe investment. Why is XRP so important? XRP is similar to many other cryptocurrencies. It is the native token of a blockchain that operates like several others. Its market position is based on investor belief, hope, and trading activity. The bottom line: XRP remains one of the top cryptocurrencies in terms of market cap. It can be used for transactions or as an investment. However, if you choose to invest, ensure you don’t invest more than you can afford to lose. The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.