What is Ripple and How Does it Work!

in cryptocurrency •  6 months ago

Would you like to learn about Ripple and its blockchain because if you are like most people, you may not know that it is a lot different from the other cryptocurrencies?

What is Ripple and How Does it Work!

Thumbnail Source Pixabay.com

What is Ripple and How Does it Work!

With the astronomical rise and fall of Bitcoin (BTC), other cryptocurrencies are now hogging the limelight. One of the most notable names is Ripple (XRP).

Ripple is in a way quite different as compared to the other cryptocurrencies. That is why it is garnering more attention than others.

What is Ripple and How Does it Work!

Source Pixabay.com

In terms of market cap, Ripple ranks at the 3rd position currently. At the 1st position is Bitcoin, followed by Ethereum and thereafter, Ripple.

Thus, it is not entirely an unknown cryptocurrency.

You might have also heard about the astronomical rise of Ripple (XRP) in December 2017, when it rose from $0.25 to over $3. It has since then retracted most of those gains.

We will today go into the details of what Ripple actually is and how it exactly works.

What is Ripple?

Ripple is the name of the company as well as the protocol which uses the XRP token. The first thing which you need to understand is that Ripple and the XRP cryptocurrency are 2 different things.

The Ripple protocol can be used separately without utilizing XRP.

Now that we understand this, we will go into the details of both and how they are interrelated.

What is Ripple and How Does it Work!

Source Pixabay.com

Ripple is a protocol built by the company Ripple (formerly known as RippleLabs).

It was designed in order to provide a medium for moving money digitally from one part of the world to another.

The Ripple protocol makes it easier for financial organizations, banks as well as normal individuals like you and me to send money anywhere around the world within seconds. Transactions are almost completed in real time and the Ripple protocol was designed to use the XRP token in order to send and receive money.

How does it work?

Over the years, the developers have modified the Ripple protocol in such a way that it is not necessary for businesses to convert money into XRP tokens in order to transmit money. XRP is the cryptocurrency which is associated with the Ripple protocol.

The blockchain on which the Ripple protocol operates is known by the name of RippleNet. This blockchain currently has 3 different products that businesses, as well as corporations, can utilize.

What is Ripple and How Does it Work!

These products are:

  • xCurrent: This is the payment processing solution which is specifically designed for banks.
  • xRapid: This is the mechanism which is used by various financial institutions to minimize the conversion cost. It converts the normal Fiat currency into XRP, and then back again into another Fiat currency. Thus, the conversion cost is greatly minimized.
  • xVia: This is a mechanism which is specifically built to allow businesses to send money via RippleNet.

Therefore, the RippleNet blockchain offers 3 different solutions to businesses as well as individuals to handle their business needs.

With 3 distinct solutions based on the blockchain, Ripple has been able to tie up with hundreds of different businesses all over the world.

Moreover, the fees on the Ripple network are less than $0.20, which ensures that the transaction costs are much lower as compared to any other conventional financial and banking channels.

What is Ripple (XRP) cryptocurrency?

Now that you are aware of how the Ripple blockchain works, you may want to know more about the role of the XRP cryptocurrency in this blockchain.

The XRP cryptocurrency is the token which is associated with the Ripple blockchain and when you are trying to send money, you may or may not use the XRP token. The retail users thought, have to use the tokens whereas it is optional for banks and financial institutions.

What is Ripple and How Does it Work!

Source Pixabay.com

Many of the big financial institutions, which are tied up with Ripple, use Fiat currency rather than the XRP tokens in order to transmit their money. For the retail users, however, there is no other way to use the Ripple blockchain without using the XRP token.

About the XRP cryptocurrency

The XRP cryptocurrency can easily handle 1,500 transactions every second. Most of the transactions which are initiated can be concluded within 4 seconds. Consequently, the XRP cryptocurrency is one of the fastest cryptocurrencies which you can use.

What is Ripple and How Does it Work!

Source Pixabay.com

There are quite a few ways in which it is actually different as compared to the other cryptocurrencies.

For one, there are a finite number of XRP tokens which have been created. The number stands at 100 billion. Out of this, 60% are owned by the Ripple company.

They have deposited them in an escrow account and they release 1 billion tokens each and every month. This was done to allay the fear of XRP investors.

Investors believed that the company could flood the market with XRP tokens which would crash the price significantly. In order to avoid such a possibility, the company decided to put them up in an escrow account and release them slowly at a predetermined pace.

Can Ripple be mined like other cryptocurrencies?

Another significant difference between the XRP cryptocurrency and other cryptocurrencies is that it cannot be mined.

As we stated above, the number of XRP tokens is fixed at 100 billion.

What is Ripple and How Does it Work!

Source Pixabay.com

As a result, it is not mined like Bitcoin and other cryptocurrencies. However, this also means that the RippleNet blockchain is primarily controlled by the company rather than the individual miners.

Consequently, it is not entirely decentralized.

How to buy Ripple (XRP)?

Now that you are familiar with the working of XRP, the next question which will pop up in your mind is how you can buy XRP tokens.

The XRP tokens can be easily bought from various cryptocurrency exchanges which support it. There are no special requirements to buy XRP tokens.

What is Ripple and How Does it Work!

Source Pixabay.com

Some of the most popular cryptocurrency exchanges which currently support XRP tokens include:

The next time around you are researching more into cryptocurrencies, you will be exactly aware of how Ripple works and what is the significance of the XRP cryptocurrency.

With the help of proper due diligence, you can decide for yourself whether it is worth investing or not.

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