Beginner’s Guide To XRP

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Beginner’s Guide To XRP



  • XRP, XRPL, and Ripple are distinct entities in the crypto world.
    XRP is the native token, XRPL is the core network, and Ripple is a finance technology company.

  • XRP advantages: Fast, low-cost transactions; high throughput; environmentally friendly; acts as a liquidity bridge; reliable.

  • XRP drawbacks: Security debates; centralisation concerns; competition; vulnerability to Ripple’s software issues.

  • XRP has limited supply, combating inflation, but can face deflationary risks due to lost tokens. Majority of XRP is pre-mined.

  • XRPL offers powerful services like on-demand liquidity and Ripple Net. Ripple faced legal challenges with the SEC, but aims to reshape public digital currency sales perspective through legal appeal.

Table of Contents

What is XRP, XRPL and Ripple

After the launch of Bitcoin in 2008, there was a massive crypto hype where a lot of people started to believe in the idea of decentralisation. 2012 saw a large market demand for cryptocurrencies with numerous new tokens being launched to the market. One such token introduced during this period was known as XRP. This is the native coin of the XRP Ledger (XRPL) created by the ingenious Ripple.

Keep in mind that XRP, XRPL and Ripple are three completely different concepts and should not be confused for the other. XRP is also called Ripple at times but they are two distinct entities in the world of blockchain.

XRP is just the token currency of the blockchain but XRPL is its technological nucleus i.e. the core network. It is in itself a blockchain which uses the Ripple Protocol Consensus Algorithm (RPCA).
This protocol tackles two issues in general. 

  1. Firstly, it can execute instant transactions removing waiting time.
  2. Secondly, the blockchain ensures that the processes are green and healthy for the environment.

Ripple on the other hand is a finance technology company established in 2012 by Chris Larsen and Jed McCaleb. 

Ripple was previously known as Ripple Labs, and its main goal was to bring an easier and stable financial system to people which was innovative and did not need third party mediators. Its overarching mission is to make the global payment network swift and seamless. 

They wish to provide these services to individuals, businesses and financial institutions at a cost effective and secure manner.

Now that there has been a clear distinction between XRP, XRPL and Ripple… Let us further look into what XRP brings to the table.

Advantages of XRP

XRP has shown massive advantages that have shook the cryptocurrency industry completely.

Some of them are –

1. Lighting speed – While Bitcoin takes around 500 seconds to settle transactions, XRP does it in 3 to 5 seconds.

2. Extreme Low Cost – XRP charges a minute $0.0002/tx whereas Bitcoin charges $0.50/tx, where tx is the hash (similar to a receipt for transaction).

3. Extensive Transactions – XRP can complete 1500 tx per second, which is very high because Bitcoin itself does around 3 tx per second.

4. Sustainable – As mentioned before, XRP is far more greener as compared to the other cryptocurrencies out there. It has an imperceptible energy consumption.

5. Liquidity Bridge – As XRP is capable of providing liquidity by being a bridge currency, it thus eliminates costs during international transfers.

6. Reliability – Ever since 2012 XRP has been pushing massive outcomes and has not failed the users, making it very reliable to use.

Disadvantages of XRP

While we do see a big upside to using XRP for transactions, there are a few cardinal points that must be noted before using the cryptocurrency.

They are –

1. Security Debates – There are a lot of debates about XRP and its security and adoption. People are still talking about the extent to which XRP can be used.

2. Not Decentralised – Since XRP is held by Ripple, people are having debates about if the currency is really decentralised. Since Ripple had initial control over the entire project, a lot of people are sceptical about XRP.

3. Huge Competition – Everyday there’s new crypto projects being released which are promising something better for the future. This means that XRP will have to compete with new organisations with different ideas and the most advanced technology.

4. Project Vulnerability – As XRP is originally built on the technology built by Ripple, if there’s any issue with Ripple’s software, that could mean potential danger for XRP and the entire ecosystem.

Inflation Control for XRP

The reason that fueled the crypto era was the 2008 financial crisis and inflation.

One thing everyone hates is inflation, and crypto is continuously solving that issue. XRP does the same.

There is a limited amount of XRP, 100 billion to be exact. After that no more will be produced. This helps to preserve the value of the coin and avoid inflation.

There is a small issue that XRP is facing, and that is the threat of being deflationary. At times, XRP can be destroyed due to transaction rates or if the coin is being sent to a wallet for which the private key has been lost.
Though the chances of the XRP supply to be completely depleted is very minimal, if the rate of destruction remains the same, it would take around 70,000 years for the supply.

Another interesting fact to know is that, all the XRP is already pre-mined, the only way to get your hands on XRP is the circulation.

Out of 100 billion, the XRPL founders gifted 80 billion to Ripple. To provide a sense of predictability to XRP, Ripple locked away 55% of the supply into multiple escrows using XRPL itself.
These supplies are released into circulation every month.

As of July 2023, there is 41 billion XRP stored in escrows.

What is an Escrow?

An escrow is a feature that the XRPL provides. It allows conditional payments of XRP to be made. This means that an amount of XRP is locked in an escrow and when certain conditions are met, the escrow will open releasing the held amount into circulation.

How Did the Escrow System Come Into Play?

Since 80 billion XRP was given to Ripple, they locked up 55 billion XRP into escrows. The goal was to release 1 billion XRP at the start of every month, so in 55 months, all of the XRP would be in circulation.

The start date of release was December 1, 2017 and the end date was May 1, 2022. Though that never happened, there are still billions of XRP locked up in escrows (as of August 2023).

The twist in the story happened when legal complications halted the XRP supply and potentially inhibited its growth.

All the remaining XRP was then transferred to escrows which had a time lock. This means that 1 billion XRP would not be released at the start of every month and any unused tokens would be shifted to a brand new escrow.

When we use the word ‘unused tokens’, we are talking about tokens that  are not transferred to any other address or tokens which have not been moved to a liquidity pool on any exchanges.

Furthermore, with the term of 55 months being cancelled, now there’s about 600 million to 700 million XRP being released at the start of every month. You can also explore more powerful token in crypto space just like BDT.

To learn more about escrows, visit this link.

Powerful XRPL services

1. On demand liquidity – As XRP itself can provide liquidity, it is used to supply liquidity when performing cross border transactions. Making these long processes quick and cost efficient.

2.Ripple Net – Using the traditional system, if you’d want to send money across borders, you would need to have a pre funded account on both sides of the border. With Ripple Net, that situation is completely avoided as you do not need a funded account. You can simply transfer your funds wherever you wish. This saves money, minimises risk and makes the process very fast.

Due to services like this that Ripple provides, they had partnerships with very important companies such as American Express and Bank of America.

Clashes with the SEC

XRP as we discussed has multiple quirks and features but having that they got in trouble with the U.S. Securities and Exchange Commission (SEC). This happened due to its origin and a few other factors. 

The SEC filed a lawsuit on the company due to allegations regarding the executives selling XRP to investors without registering a security. This means that the name of the issuer was not mentioned in the books to the entity that issued the asset.

This led to a lot of people not trusting Ripple and thus XRP. The company reputation was tarnished and this led to a price fall. Even though most people were out of the game, huge investors believed that this fall was an amazing opportunity and that they could buy at a great price, thus storing for the long term.

As of August 2023, The SEC alleges that XRP sales breached securities laws. A recent twist saw a judge ruling that sales to major investors broke the law, but sales through online platforms to regular individuals were lawful. 

The SEC aims to challenge this ruling through an appeal, potentially avoiding a second trial. Ripple has until August 16, 2023, to respond. If allowed, the appeal process could commence on August 18. This isn’t the first hint of such an appeal from the SEC. In essence, the SEC seeks to reshape the perspective on Ripple’s digital currency sales to the public using a legal appeal.

Is XRP a Crypto at All?

Here’s the thing, all the 100 billion XRP have already been generated which means that there is no mining going on to obtain XRP.

So unlike Bitcoin, there is no Proof of Work (PoW) or Proof of Stake (PoS). There is no way of actually validating transactions, but only rely on RPCA.

There’s debate about whether XRP can be considered a coin or not due to this fact.

With regards to validating transactions, the RPCA does it in a different way. At least 80% of the validator nodes (computers which validate transactions) must agree to the exchange on the blockchain. Once consensus is reached, then only will the transaction be approved.

Just like Bitcoin, the RPCA also makes sure that all the nodes have the same version of the ledger to avoid any tampering. 


XRP being the indigenous currency of the XRPL has a massive chance to replace all the conventional financial systems with processes that are fast and cheap.

When talking about XRPL, yes it does host XRP but it also does a variety of different activities such as DeFi and Web3. It contains DApps, Gaming and NFT applications which run on the XRPL and were developed using the ledger and programming languages such as Python, Java and JavaScript.

In the near future, CBDC’s will be a regular currency in all countries. Ripple being an experienced and a long time player in the CBDC industry is able to provide support to financial institutions and banks in managing, moving and eradicating CBDC’s. Thus Ripple has a big chance to impact this industry.

Is XRP a good investment to make? Along with a lot of strong points there are a lot of allegations and fluff that Ripple is dealing with. Due to this there is no saying how far Ripple will go. Since the value of the coin is always fluctuating, one must be aware of how they invest their money.

Even though a lot of parameters are unclear, there is a huge ray of hope for XRP. With current issues, it is a game of wait and watch.

Will you invest in XRP?

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