However, every time you see a mention of XRP, you will also see one of Ripple, and if you just entered the market, you might want to learn more about the two names to understand what’s the connection between them. Let’s start with Ripple.
Ripple Labs is the company that developed the XRP Ledger, and XRP is its native token. XRP has numerous utilities besides being a payment currency, but before discussing them further in this article, let’s learn more about the Ledger.
The most effective way to get an XRP price prediction is to learn as much as possible about the project to understand how it reacts to market changes.
A Walk In the Past – Unraveling XRP’s History
If you want to understand how XRP functions, it’s essential to research its history. The XRP Ledger was created in 2012 when it had 100 billion XRP tokens. In September 2012, Ripple Lab gifted 80 billion to itself as a gift for developing the Ripple ecosystem on the XRP blockchain.
Part of XRP’s present popularity in the sector is due to the intense promotion Ripple executed. Users received XRP tokens for their contribution to improving the Ripple ecosystem, but the company also sold tokens to develop a foundation for the project on crypto markets.
In 2017, Ripple made a bold move: It invested 55 billion XRP tokens in escrow to ensure that the established number of tokens entering the general supply would grow steadily.
Next, Figuring Out How the XRP Ledger Works
XRP aims to be one of the fastest blockchains in the sector and facilitate cost-efficient, secure, and rapid transactions so people can complete financial applications effectively.
Traditional blockchains like Bitcoin and Ethereum use energy-intensive mining processes like the Proof-of-Work mechanism or token holding like the Proof-of-Stake, but the XRP Ledger relies on a unique method to validate transactions.
It doesn’t require the miners to use modern and powerful equipment or to hold wealth in the sector. XRP uses the Proof-of-Association consensus mechanism, which was previously named Federated Byzantine Consensus Protocol, and which includes a Unique Node List, which is a group of reliable validators who have the role of approving transactions.
The validators are recommended by Ripple or other reliable sources to ensure that they are only trusted entities that contribute positively to the decision-making process. A node can become a validator only after it earns the trust of the network, so its financial resources play no role in the process.
Nodes have two main roles in the XRP Ledger:
- They can be validators that vote network upgrades or participate in the consensus – and gain no financial reward.
- They are stock nodes that process transactions but don’t get involved in the consensus process. They enable developers to create applications on the Ledger by providing them with access to data and blockchain history.
As mentioned earlier, XRP’s main purpose is to provide users with access to an efficient and fast ledger, so it updates every 3-5 seconds in two steps.
- The consensus step when the nodes hone and exchange transaction protocols to reach an agreement.
- Validation step when over 80% of validators approve a transaction and add it to the blockchain. When several versions of the ledger overlap, the process repeats until over 80% of validators agree with the same rendition.
The XRP Ledger can process around 1500 transactions every second, through this streamlined process, while maintaining the associated costs to a minimum. Besides processing transactions, the XRP blockchain also supports built-in decentralized exchanges, automated market makers, non-fungible tokens, tokenized assets, and synthetic assets.
All these features have transformed it into one of the most complex networks in the sector, and one of the users’ main options for tokenized asset management, cross-border payments, and financial applications.
Diving Deep – Use Cases of XRPL
XRP is highly popular among developers because it supports JavaScript, Python, and Java programming languages. Due to its broad range of features, it caters to both independent developers and companies looking to exploit varied use cases on the blockchain.
The XRPL website also includes a library of videos to help developers understand how to create apps on the Ledger, how to employ the programming languages, or how to manage their accounts.
XRPL has several use cases:
- Payments. Similarly to other cryptocurrencies, XRP can be used for making payments, enabling users to transfer assets cross-border. RippleNet relies on the decentralized network of payment providers and banks to complete cross-border payments. Besides the XRP Ledger, crypto users can alternatively utilize Xumm, a wallet that also enables payments and asset transfer.
- CBDC (central bank digital currencies) and stablecoins. The tokenization of CBDC is possible on the XRP blockchain, so central banks can engage securely with other payment providers. The Ledger also enables the development of stablecoins.
- Tokenization. Any asset can be tokenized on the XRP Ledger (stablecoins, fungible tokens, non-fungible tokens, etc).
- DeFi. XRP also supports decentralized finance through its decentralized exchange. Crypto users can use the Ledger to trade their digital assets.
So, why is XRP the subject of headlines?
XRP is a unique ledger in the crypto sector through its features. It stands apart through its energy efficiency, with XRP consuming 0.0079kWh per transaction. It has evolved in tandem with the financial markets and positioned itself at the forefront of the movement meant to innovate blockchain-based payments.
It aims to improve inefficiencies in traditional finance by providing investors with affordable and rapid settlements, as well as scalable and cost-efficient operations (compared to SWIFT).
XRP could become a worthy opponent to Bitcoin and Ethereum if the ecosystem continues to develop solutions at the same pace and its blockchain protocols meet the market’s requirements.
