Top 20 Alternatives: Ripple (XRP)

Highlights, summary, review and discussion of Ripple

• Ripple was introduced late 2012 and is a distributed ledger system that relies on trusted server nodes to obtain consensus.
• XRP is the native token and bridge asset in the Ripple system.
• Ripple is also the name of the company that produced and maintains the technology.
• Ripple has a unique path-finding algorithm that enables it to find the lowest foreign exchange rate out of all the orderbooks and currency pairs in the network.

Ripple Ledger Mechanics: Ripple’s distributed ledger system relies on trusted nodes for consensus. These server nodes become part of a unique node list (UNL) and take transaction broadcasts from the network to relay them to all other nodes in the UNL. Servers on the UNL propose transactions to the network in multiple iterations until the nodes achieve mathematical certainty for consensus.

Ripple Business Model: The company has been actively developing relationships with banks and traditional finance companies for cross-border settlement and cross-currency transactions. Market makers, custodians and institutions can create asset tokens on the public network that are associated with local currencies. However these asset tokens have counterparty risk so XRP, the native asset, is used as a counterparty-free bridge currency. XRP is also used to prevent spam. Whether or not financial institutions feel the need to use XRP is debatable and some institutions may prefer a bridge currency they own and control. The Ripple company controls XRP issuance and currently has issued about 35 of 100 Billion XRP and full dilution may undermine the price. The success of Ripple depends on how many banks and institutions adopt its system and how useful the XRP is for the overall network. It is possible that banks just use Ripple technology without XRP so XRP tokens have additional risks. Competition comes from companies such as Digital Asset Holdings using Hyperledger technology, and R3 Cev among other companies that provide permission-based blockchains and ledgers with no bridge asset. Recent news suggests Ripple may plan to partner with the R3 consortium. In other recent news the UK arm of a Spanish banking arm announced a new payments app using Ripple technology.

Bottom-line: Ripple’s XRP is a native bridge asset between tokens in their network. Look for news on adoption of large bank and institutions as drivers of growth, but also keep track to see if institutions adopt XRP as a bridge currency because there may be a disconnect between Ripple technology adoption and adoption of XRP as a bridge currency.

Please respond below to add any insight or ask a question to elevate the community's understanding of Ripple. Here are some questions to consider:

• What are the main reasons why you invest or don't invest in XRP?
• What projects & applications are you most excited about?

For some background on this blog series and analysis of other currencies click below:
Top 20 Alternatives: Introduction

1. Ethereum