Published On : Tue, May 11th, 2021

An Investor’s Guide to Ripple

Cryptocurrencies are essentially virtual currencies and exist in the thousands. It may be a complex concept to get one’s head around initially, but it is fast emerging as an alternate investment avenue, and in some cases, as alternate payment solutions. The most popular among cryptocurrencies is Bitcoin.

However, several other cryptocurrencies are as liquid as Bitcoin. Enter Ripple, or rather XRP. Only a few spots behind Bitcoin in terms of market capitalization, XRP is a cryptocurrency used explicitly on the Ripple network, better known as a digital payments network. We’ll understand why that is soon.

What is Ripple?

To be clear, XRP is the cryptocurrency, and Ripple is the company responsible for its creation. So what’s Ripple, you ask? Well, Ripple is a blockchain technology company that offers its commercial clients (banks and other financial institutions) efficient (read fast, cheap) products to help send money across the globe through blockchain technology. At its inception, the company’s founders created several billion XRP coins.

The Ripple network utilises the XRP Ledger, which is not under its control, and its ‘native’ digital asset XRP to help improve payments services globally.

How does Ripple work?

In Bitcoin, a very public, very decentralized peer-to-peer blockchain network determines the authenticity of a transaction. These so-called ‘miners’ help with the verification of transactions continuously. In return for the time and computation power they put in to authenticate these transactions and add them to the blockchain, adding to the peer-to-peer network maintained ledger, they receive bitcoins in due course.

On the other hand, the Ripple network uses a distributed consensus ledger maintained with a network of validating servers that authenticate the transactions.

This ledger, meanwhile, remains decentralized. It uses a consensus algorithm, i.e., the servers within the network determine a transaction’s authenticity through consensus, which helps settle transactions within a few seconds, making it ideal as an efficient and fast payment solution.

Each account in the XRP Ledger must hold a small amount of XRP in reserve, and sending transactions in the Ledger destroys a small amount of XRP. Suppose users were first to convert the value of their transfer from its current currency value to XRP. In that case, they could eliminate exchange fees, and processing of payments would be faster than the several days it usually takes for global transactions.

What is XRP?

The XRP is the native cryptocurrency of the XRP Ledger and does not require mining, unlike Bitcoin. The first ledger had 100 billion XRP, and new XRP coins were not possible.

XRP represents the value of any transaction taking place on the web in terms of the Ripple network.

One XRP to INR is valued at Rs.111 currently. ,

How is XRP related to Ripple?

The XRP Ledger was built between 2011 and 2012 by individuals. These individuals then went on to form the company Ripple and gifted 80 billion XRP to the company, which would use this to develop the XRP Ledger.

Thus, Ripple holds this reserve of XRP, gifted to it by its founding members, and at the start of every month, it releases 1 billion XRP for circulation. These can be bought/ sold directly to its institutional clients or on cryptocurrency exchanges like CoinSwitch Kuber.

CoinSwitch Kuber is one of the largest crypto exchange aggregator in India. It makes investing in ripple simple and easy.