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Ripple (XRP)

Manuel Valente

Introduction

Ripple (XRP) is a crypto-currency designed to facilitate fast, secure and low-cost international payments.
Unlike other cryptos that focus on total decentralization, Ripple has teamed up with numerous financial institutions to create an efficient payment network, enabling cross-border transactions in seconds.

Used primarily for on-demand liquidity and funds transfer, Ripple stands out for its integration with banks and businesses, offering a hybrid solution between the traditional world of finance and blockchain technology. Buy XRP with Coinhouse.

The history of the Ripple team

Ripple was conceived back in 2004 by Ryan Fugger, a Vancouver-based web developer, as a decentralized digital monetary system.

It was originally named RipplePay.
Ryan Fugger’s idea was to make it easy for individuals and communities to develop their own virtual currency.
The RipplePay system was launched in 2005, still with the idea of offering secure payments worldwide.
In 2012, Jed McCaleb of the eDonkey network and Chris Larsen, founder of E-Loan and Prosper, approached Ryan Fugger with their idea for a new digital currency.

The idea was based on a system of verification by consensus between members of the same network, rather than on mining, like Bitcoin.
Ryan Fugger handed over the reins of RipplePay.
McCaleb and Larsen rename the company OpenCoin. The goal of the ripple project Their objective was clear: to offer payment solutions for banks and financial institutions.
They developed a new payment protocol, based on the concepts created by Fugger.
They call it the Ripple Transaction Protocol (RTXP).
By 2012, inspired by the creation of Bitcoin, Ripple’s leaders were deploying their own blockchain to provide exchange services on several currency pairs, but also to store all the accounting information of network participants.
The blockchain’s native cryptocurrency, XRP, is created at the same time.
In 2013, OpenCoin changes its name to Ripple Labs.
The company launches numerous projects, some of which are now discontinued.
Ripple Labs, for example, proposed Codius in 2014, the aim of which was to develop smart contracts.
It wasn’t until 2015 that the company took the name Ripple. Ripple’s promise Ripple’s promise is to enable secure interbank exchanges verified by network participants via a consensus mechanism.
All in real time with an open source solution.
On June 13, 2016, the New York Department of Financial Services awarded Ripple a virtual currency license.
In October 2017, the company sets up partnerships with hundreds of financial institutions.
Ripple’s virtual currency, XRP, is now a benchmark in cryptocurrencies.

Ripple (XRP) is a cryptocurrency focused on the financial sector, designed to facilitate fast, low-cost international payments.

Used mainly by banks, XRP serves as a transitional currency on its platform for more efficient cross-border transactions than traditional systems such as SWIFT.

See Price Ripple.

How does Ripple work?

Unlike the Bitcoin blockchain, the Ripple blockchain is not based on the Proof-of-Work consensus algorithm.
Nor is there any mining to verify transactions.
The network works differently, reaching consensus using its own algorithm.
There is no remuneration for running the network, and it is not possible to mine XRP: as we have seen, tokens are issued by the Ripple company.

The decentralization of the proket also raises questions.
It is possible to be a validator of the XRP blockchain without requesting authorization from Ripple.
But here again, Ripple recommends that its customers use a list of identified trusted participants to validate their transactions.
This list is known as the Unique Node List.
Of this list, around half of the nodes belong to the Ripple company, which strongly calls into question any idea of decentralization of the project.
Being a validator on the Ripple blockchain is very restrictive.
Compared to the Bitcoin blockchain, you need much more space on your computer.
The Ripple company has strict requirements: you have to be able to maintain the node 24/7, integrate updates very quickly and be identified.

All of which severely limits the number of participants.
In theory, then, the Ripple blockchain functions as an open source distributed ledger, which can endure even if the company ceases to exist, and to which anyone can contribute.
In reality, however, the company exercises tight control over the validators and, ultimately, over all the transactions that pass through the network.
Ripple and its cryptomarket have undeniable advantages, but you need to think carefully before buying or selling XRP.

Ripple: good or bad?

In short, Ripple has both advantages and disadvantages.
Advantages include fast transactions, high levels of security and low costs.
Ripple also acts as a bridge between real and virtual currencies.
But these undeniable advantages are outweighed by a number of disadvantages:

  • Since cryptocurrency is premined, it offers no reward system;
  • The XRP token is not yet widely adopted by the general public;
  • Ripple’s centralization gives it a questionable monopoly.

The future of Ripple and XRP is complex to predict.
The company has won over powerful institutions such as the National Bank of Abu Dhabi.
The latter now uses XRP to carry out transactions involving exorbitant amounts.
Today, the XRP token is one of the world’s top three cryptocurrencies, just behind Bitcoin and Ethereum.
However, XRP’s volatility remains an obstacle to predicting its long-term evolution.
It may be tempting to buy when the price falls, but it fluctuates too much to guarantee any real capital gains later on.
Caution is therefore called for, even if XRP’s future looks promising.

Understanding Ripple's solutions

The Ripple network is currently offering a three-product package, designed as a payment system solution for banks and other financial institutions.
The three main products are: xRapid, xCurrent and xVia.

xRapid

xRapid is undoubtedly the product of choice, as it is an on-demand liquidity solution that uses the XRP token as a global relay currency between different fiat currencies.
The system offers shorter confirmation times and much lower fees than conventional transfer methods.
Let’s take another example: a Spanish bank A wishes to send €10 million to a Peruvian bank B. The latter first converts the €10 million into XRP from “liquidity providers”, sends the XRP in a matter of seconds, and the receiving bank exchanges the XRP from other “liquidity providers” for €10 million in Peruvian Sols.
There may still be difficulties linked to the volatility of XRP, but this is unlikely given the speed of the operation.
Such a service is of interest to banks because it enables much faster transactions than traditional inter-currency transfers.
The value of the XRP token could therefore appreciate if the xRapid system confirms its success on a large scale.

xCurrent

xCurrent is another solution designed to enable instant settlement and tracking of cross-border payments between members of the Ripple network.
But unlike xRapid, the xCurrent solution does not use the XRP cryptocurrency by default.
Keep in mind that xCurrent enables cost-effective, real-time payments between financial institutions.
It is based on an asset exchange system in the form of IOU (I Owe You).
Literally meaning “I owe you”, this is simply an informal document acknowledging a debt.
IOUs can be sent at extremely low cost, in the order of fractions of an XRP.
Financial institutions are therefore also interested in this solution.
xCurrent incorporates a messaging service that ensures peer-to-peer communication between financial institutions connected to the Ripple network.
It enables information to be exchanged on fees, exchange rates, payment details and the time taken to disburse funds.
xCurrent also supports cryptocurrency transactions.

xVia

Less essential, xVia facilitates the work of banks through a standardized programming interface (API) that enables them to interact within a common framework, without having to support multiple payment network integrations.
To our knowledge, these products are not widely used at present.
One of the major problems with the protocol is that XRP, which is supposed to act as a currency of exchange between different interlocutors, is not stable: its rate fluctuates against the dollar, for example.
What’s more, the various products on offer are all based on the idea that customers only keep XRP for the duration of the transaction, and get rid of it as quickly as possible.
However, new protocols with a stable currency have since appeared, such as Tether’s USDT, and are being adopted much more quickly, as they do not have this problem.

What are Ripple tokens used for?

XRP tokens, the native crypto-currency of the Ripple platform, are primarily used to facilitate transactions on the RippleNet network.
Here are the main uses of XRP tokens:

  1. International funds transfer: XRP is used for cross-border payments, enabling money to be transferred quickly and cheaply between different currencies.
  2. On-Demand Liquidity (ODL): Financial institutions can use XRP as a bridge to convert one currency into another instantly, avoiding the need to maintain pre-funded accounts in multiple currencies.
  3. Transaction fees: Transactions on the Ripple network require a small amount of XRP as a fee, which helps protect the network from spam attacks.
  4. Minimum account reserve: Ripple accounts must hold a minimum amount of XRP to be active on the network, which helps prevent abuse of the system.

Tokenomics

  • Supply Total and Circulating:
    • Supply Total Initial: 100 billion XRP were created at launch, making up the total supply.
    • Circulating supply: Around 50 billion XRP are in circulation, the remainder being held mainly by Ripple Labs, the company behind Ripple.
  • XRP distribution:
    • Ripple Labs: A significant proportion of XRP is held by Ripple Labs, the company behind the Ripple technology.
      These funds are often placed in escrow to be released progressively according to pre-established conditions, ensuring controlled distribution over time.
    • Distribution to Founders and Investors: A proportion of XRP has been allocated to Ripple’s founders and early investors.
  • Escrow:
    • Escrow mechanism: Ripple Labs has placed around 55 billion XRP in escrow to guarantee stability and transparency.
      Each month, a certain amount of XRP is released, and unused amounts are put back into escrow.
  • Transaction fees:
    • XRP Burn: Transaction fees paid in XRP are “burned”, i.e. destroyed, gradually reducing the total supply of XRP.
      This contributes to the deflation of XRP supply over time.
  • Use of funds:
    • Financing Development: Funds held by Ripple Labs are used to finance the development of the Ripple network, strategic partnerships, and integration with financial institutions.

What are Ripple’s projects?

  • RippleNet expansion:
    • Ripple continues to expand its global payment network, RippleNet, by signing new partnerships with financial institutions and businesses around the world.
      The aim is to facilitate faster, cheaper and more transparent cross-border transactions, using blockchain technology and XRP as an on-demand liquidity solution.
  • Development of Central Bank Digital Currencies (CBDC):
    • Ripple is collaborating with several central banks to develop and test central bank digital currencies(CBDCs).
      Ripple’s platform is being used to explore how CBDCs can interact with private and public networks to improve national financial systems.
  • Expansion in Asia and the Middle East:
    • Ripple has identified Asia and the Middle East as key markets for its expansion.
      In 2024, the company aims to strengthen its presence in these regions by forging strategic partnerships with local banks and financial services operators.
  • Ripple Liquidity Hub:
    • Ripple’s Liquidity Hub is an initiative to provide businesses with easy access to liquidity in a variety of digital assets, including XRP.
      The project is designed to help companies manage their liquidity needs while minimizing transaction costs and delays.
  • Adopting Smart Contracts via XRPL:
    • Ripple is working on the integration of smart contracts on the XRP Ledger (XRPL) via the Hooks project.
      This will enable developers to create decentralized applications (dApps) on XRPL, opening up new usage possibilities for XRP and strengthening the ecosystem.

How to buy Ripple?

  • Create an account: Register with Coinhouse by providing your e-mail address and creating a secure password.
  • Verify your identity: Follow the verification process by uploading the required documents, such as ID and proof of address, to validate your account.
  • Deposit funds: Once your account has been verified, deposit euro funds into your Coinhouse account via bank transfer or credit card.
  • Buy XRP: Access the section dedicated to buying cryptocurrencies on the platform, select XRP from the available options, enter the amount you wish to buy, and confirm the transaction.
    Exchanging your USDC (buy USDC) for XRP is possible.
  • Store your XRP: After purchase, your XRP will be securely stored in your Coinhouse account.
    You can also transfer your XRP to an external wallet if you wish.

Coinhouse's opinion

Ripple is a highly centralized network, under the control of the company that manages it.
Money creation depends entirely on the goodwill of its managers.
The XRP token has no purpose other than speculation, and is not stable, which is far from ideal for a medium of exchange.
The vast majority of XRP tokens are held by a handful of people, and the US authorities are accusing the company of manipulation.
We urge you to be cautious about investing in XRP.
Just because the price is low compared to Bitcoin doesn’t necessarily mean it’s a “good deal”, as you need to consider the total capitalization, which of course depends on the number of tokens in circulation.
Caveat emptor is a Latin expression literally meaning “let the buyer beware”.
Here, it takes on its full meaning.

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Investing in crypto-assets carries risks of liquidity, volatility, and partial or total capital loss. Crypto-assets held are not covered by deposit and securities guarantee mechanisms.

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