Ripple XRP has been in the top ten cryptocurrencies by market capitalization for more than five consecutive years.
Ripple is a private technology company with offices in major cities around the world and based in San Francisco, California, USA. The company, formerly known as OpenCoin, changed its name to Ripple Labs in 2015 and as of 2020 has over 500 employees.
What is XRP and how does it work?
XRP is a native cryptocurrency that uses the XRP Ledger, which offers secure payment services with fast throughput and cheap transaction fees worldwide. The Ripple ecosystem settles transactions using XRP tokens, as opposed to time-consuming and expensive traditional money transfer platforms like SWIFT.
Through the network’s gateway function, XRP acts as a bridging currency to other currencies within the Ripple ecosystem. Interestingly, the network supports both fiat and cryptocurrency transfers.
XRP uses the XRP Ledger consensus protocol to validate transactions, unlike other cryptocurrency networks that use proof-of-work (PoW) or proof-of-stake (PoS) as consensus methods. By downloading and using the validator program, anyone can join the network as a validator. However, the network has a special list of 35 trusted validator nodes, appointed by Ripple, who are responsible for validating transactions on the network. Each transaction must be approved by all of these auditors to be successful. Since the Ripple company seems to have a lot of control over the network, the network has been criticized for being too centralized. The network allows users to transact without using Ripple’s chosen validators. To verify transactions, users can compile their own list of trusted nodes. In this way, the network can operate without the participation or even the existence of the Ripple group.
Instead of creating blocks, the XRP Ledger creates cryptographically linked ledgers. The confirmation time for each ledger is between 3 and 5 seconds, which is significantly faster than Bitcoin’s 10-minute block time. Ripple does not incentivize the creation of new blockchain blocks. Ripple believes that incentives distort the behavior of validators, while validators’ motivation should be to maintain the security, reliability, and integrity of the Ripple network.
What is the difference between Ripple and XRP?
Global money transfers are processed through the payment processing network called RippleNet. The network sponsor is called Ripple and the token of the Ripple network is a cryptocurrency called XRP. The fact that XRP serves as the fuel for each of these solutions ties them together. XRP serves as the native currency that powers the ecosystem of digital payment services that make up Ripple.
tokenomics
100 billion tokens were mined before Ripple was created. At first, Ripple received 80 billion XRP from this stock. There are currently 50 billion XRP tokens in circulation for end users, around 50 billion are held in fiat accounts by the Ripple company. Ripple releases 1 billion XRP from its wallet every month under Ripple’s escrow policy.
Long-time XRP holders have been troubled by the shares held by Ripple and its former executives. Both active and retired executives sold their shares, causing the price of XRP to plummet. Ripple’s CEO even said in an interview that the company’s ability to sell XRP on the open market is the main reason why it is profitable. To address this, Ripple is running a buyback program to support healthy markets and its new credit line. According to a Ripple report, the company has already bought back $46 million worth of XRP tokens from the market
On July 18, 2022, former Ripple Labs founder Jed McCaleb finally ended the eight-year dump of his XRP holdings. The latest transaction marks the end of a $9 billion XRP sale after leaving Ripple Labs in 2014 to co-found rival payment protocol Stellar.
XRP is available on all major crypto exchanges including: eToro, Binance, Coinbase, and Bitvavo.
Legal dispute between Ripple and the United States Securities and Exchange Commission
The lawsuit alleging that Ripple illegally raised more than $1.3 billion was filed on December 22, 2020. Along with Christian Larsen, co-founder of Ripple, and Brad Garlinghouse, the company’s current CEO, the lawsuit against the SEC also names them as defendants and notes that they benefited greatly from the fraud.
The fact that XRP was not a registered security, but was still made available to investors around the world, led the SEC to conclude that Larsen and Garlinghouse were raising funds improperly. The SEC also claimed that Ripple Labs used market services for cashless transactions and paid them with XRP to promote sales of their tokens.
If the SEC prevails in the lawsuit, XRP will no longer be considered a currency but a security and Ripple may have to leave the United States to continue operations. This could then set a national precedent for other similar cryptocurrencies to also be classified as securities. Therefore, the lawsuit against Ripple is of great significance to everyone involved in the cryptocurrency industry, including investors, blockchain technology developers, and global lawmakers.
According to attorney James K. Filan, the lawsuit between Ripple and the SEC could end no later than March 31, 2023.
Is XRP a good investment?
Disclaimer: The information and postings are not intended to be financial advice, investment advice, trading advice, or any other advice or recommendation of any kind offered or endorsed by Blockzeit. You should consider consulting a financial adviser to determine how the information on the website relates to your personal circumstances.
There is no doubt that XRP is being “taken down” at its current pace due to the ongoing legal battle and could potentially worry investors, although the lawsuit against Ripple Labs is nearing completion. Thanks to partnerships with major banks and its credibility as a financial organization, XRP is a more reliable and stable investment than some other altcoins. Unlike other cryptocurrencies, where tokens are continually minted and mined, XRP has a limited supply of coins. Since XRP is a coin targeting established financial organizations, the native token is also a smart investment for thematic investors in the financial sector. Therefore, XRP is a great option for anyone looking to invest in the future of transactions and payments.