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What Is Ripple Currency

By August 2, 2017 No Comments

Ripple has extensively grown in the last few weeks and it’s the 5th biggest cryptocurrency. Even though it’s still incomparably cheaper than most cryptocoins, it cannot be as such compared to Bitcoin as its purpose is different.

Ripple is here to support and modernise traditional banking system, not to abolish it.

It has been said in the past that explaining what is Ripple currency and understanding it could take up to 6 months due to its ambiguity and multiple layers.

But think about a scenario you probably had to go through more than once – you want to send your friend in America holiday money in Dollars, but your native currency is Euro. Transferring it directly through a traditional bank will cost you quite a bit and it will take days by the time your friend receives the money.

This is exactly what Ripple is trying to change – it’s a global settlement network which makes transferring any currencies easy for everyone around the world. Thus it’s working closely with banks, offering them a more efficient and cost-effective way of making international payments.

Before we jump into the bigger picture, we have to make a clear distinction between the Ripple network and it’s currency – XRP. The former is a payment network and the latter is the native currency of that network.

What you do have to understand at the moment is that Ripple is a completely new type of cryptocurrency – there are no retailers accepting XRP and Ripple serves as a medium to instantly convert currencies, without relying on a central exchange.

What is Ripple

what is ripple currency

Let’s start off with the Ripple network – the protocol is based on a technology that is similar to blockchain but it’s not entirely the same.

If we take Bitcoin as an example – it’s a customer-facing product which is produced through mining. Ripple, on the other hand, is a back-end network which is based on a consensus.

Keep in mind that Ripple is not a currency but an open source, global exchange, which is accessible equally to everyone.

Ripple is similar to other cryptocurrencies in being a publicly shared database, with a built-in distributed foreign currency exchange that can operate as a world’s money translator.

What does it mean?

The network has been designed to replace SWIFT or the Western Union by finding the best way of translating Dollars to Euro etc. At each step of transferring money abroad, the fees keep on growing but with Ripple, one can trade any currency for XRP (Ripple’s native currency). The person will receive XRP in 3-4 seconds and can exchange them to their local currency. And the money would be sent with the cheapest available price in the market.

In this sense, Ripple focuses on being the ‘Internet of Value’ – a belief that money transfers should move as quickly as the information does in the technological age.

By providing nearly instantaneous transactions, Ripple is about to revolutionise the traditional financial system in a different way to most cryptocurrencies. It doesn’t offer an alternative, decentralised currency that can be used to pay for goods, but provides a platform for modern money transfers.

At this point, Ripple is focused on working primarily with banks which have been slow in responding to the new technology so far. But there’s no doubt that real time worldwide payments are the future.

However, the network wouldn’t exist if not for its native currency that acts as a mediator between foreign currencies.

What is Ripple Coin (XRP)

Now, that you understand what the Ripple network does, let’s move on to Ripple XRP (the native token of the network).

To use the exchange, you have to pay a small transaction fee in XRP. One thing worth mentioning is that nobody collects the fee, the tokens are destroyed. And unlike other cryptocoins, Ripple cannot be mined.

XRP is issued by Ripple Labs and it can be traded but not mined like Bitcoin or Ether. However, there is a limited amount of XRPs and there were only 100 billion released at the beginning, 38 bln being currently in circulation. Conversely, no more will be produced due to the protocol restrictions.

XRP doesn’t, however, share the decentralised nature. Ripple Labs controlled how many XRPs are released and they can also control the price to make it on an acceptable level.

Can You Mine Ripple

can you mine ripple

One XRP costs a minuscule amount and the transaction speed is less than 4 seconds. The transactions’ costs are also very low, especially if you compare it to Bitcoin or other cryptocurrencies that require a mining fee.

Rather than relying on a proof-of-work or proof-of-stake system to verify transactions, Ripple has a unique consensus system – whatever the majority of the computers on the network see happening, that’s what gets recorded in the public ledger.

XRPs were all pre-mined upon the release and now the network has to be maintained by the consensus system. Unlike traditional cryptocurrency mining, the consensus system requires less power to run and process transactions much quicker.

If at this point you’re concerned about the security and the exposure to malware, you don’t really have anything to worry about. The system is perfectly reliable and when something suspicious is happening in the network, the system will reject it and start all over again, preserving the security system.

So the answer is a ‘no’. You cannot mine Ripple as you would any other cryptocurrency.

What are the Advantages of Ripple

There are numerous advantages of Ripple over other cryptocurrencies:

  • It works directly with banks, giving it more legitimacy
  • Focuses on smart business decisions by making ties with corporations that control the global banking system
  • Steady and long-term price increase
  • It’s fast – confirming a transaction takes only 4 seconds
  • It can handle up to 1,000 transactions per second
  • Ripple’s token supports every fiat currency and cryptocurrency as well as air miles and rewards points
  • It has regulatory, legal and business experts

What are the Drawbacks of Ripple

The original version of Ripple allowed people to make international payments for a minimum fee and maximum speed. However, now it focuses exclusively on banks which turned a lot of people off. Here’s why:

  • Ripple owns the majority of XRP tokens, hence it can be considered as the central bank of XRP
  • Ripple platform has owners and CEOs which questions its decentralised nature
  • Due the network’s open nature, the nodes can be a subject to hackers’ attack
  • It doesn’t support everyday payments and it’s unlikely it will become accepted as a payment for goods
  • It’s not as anonymous as most cryptocoins

Why Banks are Using Ripple

It’s quite obvious how Ripple can be beneficial to all of us – it makes transactions quicker and it saves money. But would banks want to use a platform that interferes with the current system and can cut the profits?

Well… according to Ripple, banks can save an average of $3.75 per payment using their protocol. And if there is anything banks (and other big companies) like is making money while saving money. Plus, Ripple is not trying to destroy the existing financial system but to improve it.

Everyone benefits from implementing Ripple – customers can enjoy a real time, inexpensive, money transfers and banks are saving on millions of transactions per year.

Unlike any other cryptocurrency that has an adverse attitude towards the financial system, to say the least, Ripple is lead by people with vision and plan. Banks trust Ripple, they know who they can speak to and that`s what builds the confidence.

Currently, there are few banks that have already supported Ripple, among those is Santander, Axis Bank, UBS, UniCredit and many others.

How to Buy Ripple

how to buy ripple

Buying Ripple has the same principles as buying any other cryptocurrency. Except, you have less choice.

You still have to find a wallet, an exchange and figure out the most convenient way of purchasing them. Here’s what you have to do:

Step 1 – Get a Ripple (XRP) wallet

Like with any other cryptocurrency, you first have to get a wallet. Afterwards, make sure to store your private key in a secure location and never reveal it to anybody.

Find a wallet that supports Ripple is not as easy as finding one for Bitcoin. There’s only a few that can store XRP.

The most secure way of storing XRP is on a hardware wallet. The only reliable hardware wallet that supports Ripple is Ledger Nano S that will be released in September 2017. Apart from Ripple, it also supports Bitcoin, Ethereum and many other popular cryptocurrencies.

If you want a desktop wallet, the best choice would be Rippex which can be installed on Mac, Windows and Linux.

Currently, there aren’t any mobile wallets that support Ripple. But with the networking rapidly growing, it’s likely to change soon.

Step 2 – Find a Ripple exchange

There are few ways of buying Ripples and your choice of the exchange will depend on the preferred payment method.

Buy Ripple with Fiat currency

Perhaps the most popular way of buying Ripple is to purchase it directly from an exchange via bank transfer or a bank card. Afterwards, you can transfer your Ripples to a wallet. Currently, you can choose from:

  • Bitstamp – SEPA bank transfer; trade BTC for XRP
  • GateHub – SEPA bank transfer is free; $15 charge for international transfers

Buy Ripple with Bitcoin (trade BTC for XRP)

If you want to buy Ripple with Fiat Currency, then you have to make peace with high bank charges. Hence, one of the cheapest ways is to exchange Bitcoins for Ripple.

This method will give more options as more exchanges accept trading BTC for XRP but not buying them directly:

Step 3 – Withdraw your XRP to your wallet

If you’ve been interested in cryptocurrency for a while, then you know that leaving your fund on an exchange is never a good idea. You cannot control your private keys and the cryptocoins are not actually yours.
So the last step is to withdraw your XRP to a wallet. Once you get a confirmation, that’s it. You’re a proud owner of Ripple!

How to Invest in Ripple

If you want to invest in Ripple as a network, then you should prepare for bad news as at the moment it’s only available to banks. On the other hand, you can put some money into the native currency – XRP.

As is stands, XRP has the third highest market cap behind Bitcoin and Ethereum. Thanks to the bank adoption and speculative interest, XRP value took off at the beginning of 2017 when it jumped from $0.01 to almost $0.20.

Ripple is trying to turn XRP into a global reserve currency. Thus every time a currency is traded into XRP, the value of XRP rises due to a growing demand and so does the liquidity.

Most banks are still cautious of having anything to do with cryptocurrency as the XRP price is volatile as much as most cryptocurrencies. Since it can dramatically change overnight, banks are afraid of taking the risk and moving into XRP.

However, at some point, it might be easier to make global payments with XRP than Fiat currency. Since it’s the easiest and cheapest way of making international transfers, it might make more sense to simply use XRP for global payments. If banks decide to turn into XRP from fiat currency, the value of XRP will skyrocket.

Is it Worth to Invest in Ripple

investing in ripple
Upon the Ripple’s invention, the CEO, Brad Garlinghouse, made a sad but honest statement that nowadays it’s quicker to take a bag full of money on a plane a take it to a different country than sending them via international bank transfer.

XRP allows smooth financial transactions between any given currencies, across the borders. Ripple platform holds the majority of XRP and the managing force behind the platform will definitely fight for a long-term appreciation of XRP.

In the next couple years, Ripple will be more appealing to banks and large organisations and they will be the driving force behind Ripple’s growth.

But anyone who decided to purchase the initial XRP assets can count on a hefty return on their investment. The value has just started increasing and it’s a golden opportunity for an investment. Regardless of what will end value, a small investment now won’t result in a large loss.

After Bitcoin chain split and Ethereum multiple hackers’ attacks, the question of what is Ripple currency will keep on appearing even more. Especially, among those who don’t want to risk and prefer a smaller investment that can result in big success.

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Megan Frydel

Author Megan Frydel

Megan is a self-thought blockchain enthusiast. She enjoys combining finance with technology, from a less-techy perspective. BiteMyCoin is her most recent project underneath the umbrella of an international digital marketing agency ANCHOVY.

More posts by Megan Frydel

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