What is Ripple and XRP

Ripple – Ripple Transaction Protocol is a real-time settlement system designed to be used by banks for currency exchange, remittance and gross settlement. The idea is to replace age old systems like SWIFT –  which was developed in 1972 and used by most banks today. The Ripple protocol offers significant advantages in both speed of transfer and transfer tracking. Ripple uses distributed ledger technology, similar to Bitcoin. When compared with Bitcoin, it is faster and cheaper to send on the ripple network. However, there is one significant trade-off which is its lack of decentralization. The Ripple network is closed off and cannot be joined by any user – meaning there is a significant amount of centralization.

xCurrent Settlement between banks

XRP – The cryptocurrency XRP is commonly confused with the Ripple Protocol (also named Ripple) issued Ripple Labs. The XRP is an issued token that uses the Ripple network – it can be sent extremely quickly and with low fees. However, it should be noted that the XRP is not required for the network to work nor is it required for banks to use it if they choose to adopt Ripple. In fact, the xCurrent communication between banks do not use XRP.

Ripple Logo

Ripple Currency (XRP) vs the Ripple Protocol

So lets start off with one confusing factors. So I must make a distinction between Ripple the transaction protocol (which is used between banks and other businesses) and the ripple issued currency, XRP. When you see Ripple making gains its actually the XRP, the currency that is issued by Ripple. And this is actually quite different from the network protocol or Ripple protocol. Both share the same name and I’m sure this has definitely confused a lot of investors.


Ripple Protocol

So lets start off with the transaction network known as Ripple. So the Ripple protocol is based on technology that’s similar to blockchain but not completely the same. It doesn’t require any mining and its based on a consensus network instead of being consumer-facing which is what Bitcoin is. Basically, it’s for the everyday person.

Ripple is exclusively used by big institutions such as banks. The whole idea of Ripple is to allow banks to transfer any sort of asset, be it currency, USD, Euro, gold, or any other asset such as airmiles. You can transfer that between other institutions near instantaneously. This rivals systems such as swift. So if you ever bought Bitcoin with bank transfer you will know how painful that is. You have to contact your bank and send the transaction to a swift bank code account and this might take up to two to three days and theres a lot of transaction fees involved for both the sender and the receiver. Ripple is set to revolutionise this by providing near instantaneous, sub-second transactions for institutions such as banks. It’s already been adopted by quite a few big banks and

XRP – Currency of the Ripple Network (xRapid)

So now that I explained what is the Ripple transaction protocol, let’s move on to Ripple XRP. XRP is actually issued by Ripple Labs and is a form of cryptocurrency that can be traded and it’s not “mined”. So there is a finite number of ripples and that amount is actually issued by the company behind Ripple called Ripple Labs. 

XRP by itself has no underlying related assets or values eg. Its not tied to USD or gold. Rather, it can be used to act as an intermediate currency in institutions. It has one huge advantage in that transaction costs are very, very low (unlike Bitcoin, which is now reaching 1.5 usd in transaction fees).

xCurrent doesn’t use XRP

Ripple Labs have developed two different technologies aimed at solving the transfer of value between nations. Xcurrent is an enterprise technology aimed at banks that allow instantaneous transfer of value. This technology does not use the XRP currency, rather it is ledger for value transfer in the currency of the bank’s choosing. 

Is the XRP Centralized

XRP transactions can be confirmed very quickly because of the small number of validator nodes on the network. The XRP network is not open consensus, so only a small number of validators (~30 validators) need to communicate a transaction before it is considered “confirmed”. Proponents of XRP praise it for sub 1 second confirmation times whilst opponents point to the centralized architecture and lack of censorship-resistance. XRP transactions can be reversed and accounts can be frozen – similar to how traditional bank accounts my be frozen.

Concerns about Ripple

So moving on, XRP is currently only issued out at less than 40% of its total. The remaining amount (minus the 20% retained by the creators of Ripple) is held by Ripple Labs to distribute whenever and however they so wish. This is actually kind of interesting because unlike a lot of decentralized currencies, Ripple Labs plays a huge part in distributing XRP. Ripple Labs is actually a company and this is very different from Bitcoin, where Bitcoin is fully decentralized and doesn’t have a central controlling authority. Ripple Labs is registered in many countries and it could be sued and held under police custody. This is again very different from other technologies.

So that’s a little information regarding the Ripple protocol and XRP. I’m sure this may be a little bit confusing for some people and since the technology and the currency share the same name it could be misunderstood. I hope this clarifies a little for you about what Ripple protocol is and what XRP is.

You can buy Ripple (XRP) on Binance – https://www.binance.com/

Previous articleFIX Ledger Nano Compatibility problems with latest Windows 10 1903
Next articleStellar Lumens (XLM) in a Nutshell
Ben Chan
Ben is a cryptocurrency China correspondent who loves Bitcoin and Bananas. He has been covering the Chinese cryptocurrency market for the past 5 years and has a deep understanding of the industry. He is passionate about the potential of blockchain technology and its impact on the world economy.


  1. Hello,

    I am only now just learning about cryptocurrencies, so thank you for the informative video and explanation. My question is that is there any way to invest in the Ripple Protocol rather than the XRP?

  2. Hello Boxmining, I love your show. Huge fan and thanks for all your hard work. Regarding Ripple, it is very easy to understand the use and how it can help the banking system in a revolutionary way. No doubt! But what I don’t get is how their adaptation would push the price of the coin (XRP) to be up except for investor chasing it up. There is no fundamental reason why, please explain! If I am a bank, and i use Ripple coin as my transfer device would not I want XRP is stay constant at 1 and never change. ideally, i dont want it move up and down whatsoever. In short, what does this amazing tech has anything to do with the price of the coin whatsoever. Iam long XRP because I think investor will chase it up but I have no other reason. Can you answer that? Thanks!

  3. Hello Boxmining, one more item. Since Ripple is not decentralized and pretty much controlled by Ripple Lab, can they arbitrarily add more coins out of thin air and dilute the system? Thanks!

    Again, a huge fan and watched a ton of your video. I love your approach, you provide facts and honest assessment on the topic. Excellent! And not some dumb ass random prediction like Bitcoin to $1 million.

  4. Could your same analysis be applied to Stellar Lumens and XLM? I.e., could the Stellar network be used without the XLM token?

  5. “So if you ever bought Bitcoin with bank transfer you will know how painful that is. ”

    This is contrasting

  6. […] Ripple has booming lately as more and more financial institutions have started to use the service for its fast transactions and extremely low fees. As banks seek to move away from the somewhat outdated SWIFT system, the Ripple protocol and it’s token XRP has risen up as a viable alternative. […]

  7. I am new to this and want to invest in Ripple but now I am unsure if I want to invest in Ripple or XRP or both? I was one of the confused that thought XRP was Ripple. I haven’t bought any cc yet, but was getting ready to buy when I ran across this platform. Any thoughts?

  8. This article is outdated and need to update for correct information. This can be misleading due to the changing in the technology and it’s progress. If you need more information to update, please follow the #xrpcommunity on tweeter to get more detail info.

Comments are closed.