A Beginners Guide To Ripple

Last Updated January 10th 2022
18 Min Read

What is Ripple? A Beginners Guide

Ripple is a cryptocurrency and a for-profit platform developed by Ripple Labs. Ripple provides currency exchange services and real-time payment settlement services to banks and other financial institutions. Over 100 companies around the world have partnered with Ripple, using it for fast and frictionless transactions.

Ripple's native cryptocurrency, XRP, is the third-largest cryptocurrency in terms of market capitalization. Even though you can buy XRP, XRP's primary function is to provide liquidity for banks to facilitate cross-border transactions. All of Ripple's coins are pre-mined, and Ripple Labs controls when new coins are issued. Currently, there are 47.5 billion XRP in circulation. Ripple Labs releases new coins whenever needed to maintain the supply in circulation. 

Transactions taking place on Ripple are not limited to XRP only. The platform supports traditional fiat currencies like the Dollar, Euro, Pound, and Yen. It even supports other cryptocurrencies. Ripple's primary function is to act as a facilitator for currency exchanges and as a payment processor. Ripple competes with payment systems like Swift and ACH, bringing blockchain security to the cross-border payment industry. It aims to make global transactions quicker and more decentralized. 


What is Ripple?

A brief history of Ripple 

How does Ripple work? 

Difference between Ripple and XRP 

How can you buy XRP? 

What are the features of Ripple? 

What are the uses of Ripple? 

What are xCurrent, xRapid, and xVia?

What are the advantages of Ripple?



What is Ripple?

Ripple is an open-source protocol released in 2012 by Chris Larsen and Jeb McCaleb. It enables users to make faster transactions at lower fees compared to other platforms. Ripple operates on an open-source, peer-to-peer, decentralized platform, allowing the users to transfer funds in the form of traditional fiat currencies or other cryptocurrencies. Ripple is a decentralized platform. This means that there is no central authority or third party that defines the rules of the platform. 

Ripple was created as a system that can be used by banks. Most people have a misconception about Ripple that it was designed to be just another cryptocurrency. Ripple is much more than that. It is a payment protocol that is used by banks and other financial institutions. The platform also has its native cryptocurrency called XRP. The platform allows its users to process instant transactions anywhere in the world. It makes currency exchange, remittance, and real-time gross settlement possible. All transactions are recorded on a public ledger and are accessible to anyone who wants to scrutinize the transaction history. Ripple has partnered with over a hundred financial institutions allowing seamless cross-border payments. 

A Brief History of Ripple 

Although Ripple was founded in 2012, the idea of Ripple can be traced back to 2004, four years before Bitcoin. In 2004, a Canadian web developer, Ryan Fugger, developed RipplePay. In 2005, RipplePay.com was released. It acted as a decentralized monetary system and enabled secure online payment options for online communities. RipplePay was almost like a precursor to blockchain/cryptocurrencies. However, RipplePay did not gain traction and didn't see widespread adoption. Fugger was approached by Jared McCaleb and Chris Larsen, who wanted to create a digital currency system that utilized community consensus to verify transactions. 

Ripple's development started in 2011, intending to create a decentralized digital currency that did not use mining or blockchain. The members verify transactions on this network through a consensus mechanism. The Ripple protocol wanted to achieve quick transactions using traditional currencies without the long wait times and high transaction fees of traditional payment processing systems. The protocol also created a token called XRP to provide additional liquidity. 

Ripple was launched in 2012 and started to gain traction with banks and other financial institutions because it enabled them to settle remittances faster and more cost-effectively. Ripple currently has over 100 partners that utilize its protocol for seamless cross-border transactions. The founders of Ripple raised funding through institutional investors and venture capital. 

How Does Ripple Work? 

Ripple does not use traditional consensus mechanisms like proof-of-work (PoW) or proof-of-stake (PoS). Instead, transactions on Ripple rely on a consensus protocol to validate all transactions on the network. The consensus protocol also prevents double-spending and improves the integrity of the network. For example, if a user initiates a transaction with multiple gateways and sends the same amount to all gateways, all the transactions except for the original transaction will be deleted. Transactions are confirmed almost instantly, and because there is no centralized authority to influence the network, it is described as decentralized. 

Ripple's consensus mechanism requires that every member of the network has the exact copy of the ledger. The transactions are validated when the majority of the members reach a consensus. If the network members fail to reach a consensus, then the validation process begins again until an agreement is reached. 

The Ripple network keeps track of all IOUs. The transaction history is available publicly on the Ripple ledger. Although the transaction history is publicly available on the blockchain, Ripple cannot link the ledger's contents to any individual or business. The Ripple ledger is managed by servers that continuously compare the transactions and reach a consensus. A new ledger is created, and each contains a perfect record of accounts and transactions. The platform offers cryptographically secured and algorithmically verified transactions within seconds. 

Ripple has its native currency called XRP. XRP is referred to as a bridge currency as it does not discriminate between other cryptocurrencies or traditional fiat currencies. This makes exchanging one currency for another extremely simple. The XRP ledger allows only pre-approved miners to validate transactions. There are 100 billion XRP in existence, all of which were pre-mined and distributed through giveaways. Out of the 100 billion XRP in existence, almost 47.5 billion are in circulation while the rest are in the custody of Ripple Labs. The XRP stored with Ripple Labs are released periodically as per demand and supply. 


RippleNet is Ripple's currency exchange and remittance system, which helps carry out secure, frictionless cross-border payments. RippleNet has partnered with payment processors, banks, and financial institutions, totalling over 200 partners. These partnerships make Ripple the world's most accessible payments network. Ripple's partnerships with financial institutions are critical to RippleNet's adoption. Financial institutions have stayed away from blockchain technology. However, they see Ripplenet as a project that helps with cross-border remittances. 

Major financial institutions that have partnered with Ripplenet are: 

  • American Express 
  • Barclays 
  • Bank of America
  • Merrill Lynch 
  • JP Morgan
  • Santander
  • Moneygram
  • TD Bank
  • Accenture 

Ripplenet also has several enterprise payment software solutions. 

  • xRapid - xRapid allows financial institutions to use XRP to find low-cost liquidity.
  • xVia - xVia allows for seamless communication between financial institutions. 
  • xCurrent - xCurrent uses Interledger Protocol (ILP), which lets banks process transactions almost instantly. ILP allows interoperability between financial networks.


Difference Between Ripple And XRP 

Ripple is a payment system through which currency exchanges and remittances are carried out, operating on an open-source, decentralized peer-to-peer platform that enables users to transfer funds in the form of cryptocurrencies or traditional fiat currencies. XRP is Ripple's native cryptocurrency that is used to pay transaction fees on the network. Users have to pay a minimal transaction fee when using the Ripple network to complete transactions. 

XRP is a bridge currency that makes currency exchange quick and easy. There are 100 billion pre-mined XRP, out of which almost 46.88 billion are in circulation while the rest are in Ripple Lab's custody. XRP's value has seen quite a bit of volatility, hitting a peak of $3.00 in 2018. 

How Can You Buy XRP? 

how to buy ripple xrp

It is straightforward to buy XRP. You can buy XRP through cryptocurrency exchanges using the following steps. 

  • Set up your digital wallet - To buy XRP through a cryptocurrency exchange, you will first have to purchase and set up a digital wallet. 
  • Once you have set up your wallet, you will need to set up your account with an exchange that supports XRP. There are several exchanges like eToro support XRP. 
  • Once your account is set up with the exchange, you will have to verify your account before trading. Most exchanges require details like identity proof, which will be verified. Once the verification process is completed, you can start trading. 
  • Once your account has been verified, you can log into your account and search for the cryptocurrency (in this case, XRP) and purchase it. Once purchased, you can withdraw your XRP and store it in your digital wallet. 

What Are The Features Of Ripple? 

  • Ripple is known for its digital payment protocol, its native cryptocurrency called XRP. XRP acts as a bridge currency making currency exchange quick and straightforward. 
  • Ripple does not use mining to validate and complete transactions. Instead, it uses a consensus mechanism where the network members reach a consensus before validating each transaction. If the members cannot reach an agreement, then validating a transaction starts all over again. 
  • Ripple's payment settlement asset exchange and remittance system is similar to the SWIFT payment system. Banks and financial institutions use the SWIFT system for international transactions. 
  • Transactions on the Ripple network are energy efficient, have low transaction fees, and are confirmed in seconds. Compared to other cryptocurrency transactions, which take longer, have high transaction fees, and utilize a lot of energy to process. 


What Are The Uses Of Ripple? 

Ripple operates differently from other cryptocurrencies, which aim to remove financial institutions from being a party to transactions. Instead, Ripple works with financial institutions and banks to make cross-border transactions quicker, cheaper, and transparent. Today, most banks and financial institutions use SWIFT (Society for Worldwide Interbank Financial Telecommunication) to conduct secure, cross-border payments. The SWIFT network acts as a messaging platform that allows banks to send payment orders to each other securely. Twenty-four million messages are dispatched on the SWIFT network every day. SWIFT only acts as a channel of communication between financial institutions and does not, at any point, hold any money that is part of the transaction. However, the importance of the SWIFT network cannot be understated as a large volume of international transactions relies on it. 

Ripple improves on the technology that SWIFT uses and can be considered a direct competitor to SWIFT. Ripple's network is being used and tested by banks and financial institutions to transact and settle payments quickly and securely. It has already partnered with several financial institutions and plans to partner with several more to ensure the adoption of Ripple in the financial markets. 

Ripple has also partnered with Coinone, which is one of the largest cryptocurrency exchanges in South Korea. The partnership will enable Coinone to use xCurrent to launch Cross, a global remittance service. There are several other partnerships that Ripple is exploring with major institutions.


What Are xCurrent, xRapid, And xVia?

At the heart of Ripple's endeavours is that it wants to simplify the movement of money. Ripple wants instant, low-cost payments using traditional fiat currencies. Ripple works with banks and upgrades the infrastructure on which the banking system runs, resulting in cheaper and faster transactions. xCurrent is a step in this direction.  

xCurrent is Ripple's take on the implementation of a global payment verification system. It allows banks to settle transactions instantly, instead of through Nostro/Vostro accounts. It also allows banks to review and resolve any compliance issues that the transaction may have before authorizing it. Financial institutions benefit from this technology as it reduces costs and increases the speed of processing transactions. If a bank or a financial institution uses Ripple's xCurrent, it makes cross-border transactions instant and cheap. It will lead to a growth in the number of users and benefit the market for cross-border transactions. 

Ripple aims to become the industry standard for cross-border transactions. The system hopes to encompass the entire financial sector and act as an authority that sets standards for cross-border transactions. Banks could also create a similar idea to Ripple, but that would be confined to just the bank that created it. For the technology to be used by all banks in the financial system, the technology needs to be open-source. 

xRapid and xVia are Ripple's newest projects. Both are built on xCurrent's foundation. xRapid allows payment processors to enter emerging markets. It does this by reducing the amount of liquidity required to enter these markets. xVia allows easy integration between the Ripple network and banks and payment processors. 

NOTE: Ripple went through a rebranding where xCurrent and xVia were repackaged as RippleNet while xRapid was repackaged as On-Demand liquidity. 


What Are The Advantages Of Ripple?

✅ Lower transaction fees

Transaction fees on the Ripple protocol are really low. A standard transaction on Ripple costs 0.00001 XRP. Transactions are practically free. The only reason they aren't is for security reasons. The XRP used to pay the transaction fees are destroyed, leading to the value of XRP remaining constant. 

✅ Transaction speeds on the Ripple protocol are faster compared to traditional payment systems and other cryptocurrency platforms.

Ripple takes four seconds to process a transaction. Compare this with Ethereum that takes more than two minutes per transaction, and Bitcoin takes an hour or more to process a transaction. Traditional payment systems take even longer, with time ranging from three to five days. 

✅ Ripple has a capable team with a blend of expertise and experience. 

✅ Ripple has partnered with several banks and financial institutions who are piloting the technology. Such partnerships also make Ripple a sound investment and very popular among investors. 

✅ Ripple makes both domestic and international transactions quick, efficient, and cost-effective. 

✅ Payments on the Ripple protocol are processed instantly, making Ripple an excellent choice for banks and financial institutions. 

✅ Ripple's XRP acts as a bridge currency between traditional currencies and cryptocurrencies. This makes currency exchange quick and easy. 


Would you consider buying Ripple XRP?

What Are The Disadvantages Of Ripple?

Though Ripple has a lot of advantages, it does have a few disadvantages as well. 

❌ Ripple has put its focus mainly on large corporations.

Many financial institutions use Ripple to streamline their services and reduce costs. This isn't a bad thing, but if you look at individual users, Ripple does not have much to offer. Ripple's technology is designed keeping banks and large financial institutions in mind and is tailor-made for them. 

❌ Ripple also faces stiff competition from other players in the payment transfer space.

Other cryptocurrencies are also targeting the same space. Stellar is an excellent example of a competing cryptocurrency. Ripple has also only just been added on Coinbase, which is good news, but the fact that it wasn't until just this year is not. 

❌ Ripple has faced quite a bit of criticism about its lack of decentralization.

Ripple Labs exercises significant control over XRP and also approves the validators on the network. The custody of XRP also rests with Ripple Labs. Critics of the network argue that this goes against cryptocurrencies' core philosophy, which believe in decentralization and not having a central authority controlling them. 


Ripple hopes to revolutionize cross-border payment systems transactions. It is focused on solving the problems that the cross-border space faces. Ripple's technology has already piqued the interest of banks and financial institutions. This has resulted in Ripple partnering with several institutions and financial institutions, and banks are already using the network for cross-border transactions. 

Ripple dramatically improves on the shortcomings of traditional payment systems. The platform handles millions of transactions, and each transaction is completed in a matter of seconds. Conventional methods of cross-border transactions take anywhere between 3-5 days to complete. Transaction fees are also minuscule compared to the fees that are charged by traditional payment systems. A standard transaction on the Ripple network costs 0.00001 XRP. Currently, Ripple is the third-largest cryptocurrency by market capitalization, behind only Bitcoin and Ethereum.

The Ripple platform has immense potential, and it can change the way the world carries out transactions.

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