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What Is Ripple and How Does It Work?

What is Ripple (XRP)? 

Ripple is one of the most innovative money transfer solutions of this day and age. A money transfer system is simply an electronic system that allows you to transfer your money from one bank account to another. The one thing that is an ideal benefit about money transfer systems is that you don’t need the direct intervention of any bank staff. 

Ripple serves the essential needs of the financial services industry. What a ripple token does is that it focuses on the migration of transactions from databases that are controlled by conventional financial institutions. In fact, the XRP ecosystem functions in a way that cuts costs for you significantly. 

The XRP ledger is the key software that ensures that the entire process functions adequately. Nowadays, a ripple token is what you need to ensure that you maximize convenience for your seamless money transfers. XRP crypto is by far a game-changing solution that everyone should be taking more advantage of. 

History of Ripple Coin

The history of your ripple coin doesn’t go that far back. When you consider the fact that it was only launched in 2012. Ripple labs is the main founder of ripple and it’s headed by Chris Larsen and Jed McCaleb. 

However, the history of Ripple isn’t as straightforward as you think. It’s a bit complex because there were a few individuals who were responsible for making it a reality. The three notable individuals aren’t the only people who were involved in the creation of this phenomenal system. There were other people involved such as the former technology officer and the current one. 

When Ripple first launched, there were 100 billion XRP tokens that were given to certain individuals. At first, this raised concerns because it meant that it was launched as a system that had a few people with majority control over it. In addition, there was public outcry about how the entirety of the XRP ecosystem relies on Ripple That, a for-profit company that’s controlled by Ripple labs. 

While these remain the most open and known concerns, XRP continues to grow. 

How Does Ripple Work? 

RippleNet is the blockchain infrastructure that controls Ripple. The main focus of this infrastructure is to ensure that banks and other financial institutions provide you with seamless, rapid and cost-effective international transactions. Even though most banks offer you an option for money transfers, Ripple provides you with an efficient alternative system to benefit from. There are various benefits that you get from using Ripple to conduct your money transfers, such as the verification of your proposed payments before you complete them. 

There are different payment solutions that businesses can rely on when they use Ripple XRP besides a reduced ripple transaction fee. The following three are what you should consider. 

  • xCurrent which is a bank payment system.
  • xRapid helps to reduce liquidity costs for banks when they have to do transactions between fiat currencies as it acts as the necessary bridge. 
  • xVia allows businesses to conduct a ripple transaction with RippleNet to minimize liquidity costs. 

Difference Between Ripple and XRP

Have you noticed that the words ripple and XRP are often used interchangeably? First things first, you should understand that these are two different things. It’s important for you to understand what the main difference is for both. 

Ripple is a for-profit company that has undergone a few name changes over the years. In 2012, it was known as OpenCoin, which was changed to Ripple Labs a year later once the XRP ledger was created. But, in 2015, the founders eventually settled on naming the company Ripple. 

On the other hand, XRP is the core crypto technology that the company Ripple develops and promotes. It’s technically a digital asset that the company prides itself in for its scalability, fastness, and cost-effectiveness. As a result, it’s a separate entity from the for-profit company since it’s a primary technology that the company created. 

The company further states that it aims to transform the global payment process by enhancing the utility of ripple. It’s an innovative system that should keep on improving. 

Advantages & Disadvantages of Ripple

Advantages of Ripple

1. Low fees

The one thing that you’ll enjoy about ripple is that your ripple transaction cost is by far the lowest. You’re likely to pay a small fraction of your penny with each payment that you make. 

2. Fast Settlement

Your ripple transaction time will take seconds when you compare it to the average five days that your bank takes to clear settlements. 

3. Versatile Exchange Network

The ripple network is versatile because it not only conducts your XRP transactions only, but it also does transactions for other cryptocurrencies and fiat currencies. 

Ripple Disadvantages 

1. Somewhat Centralized

Ripple centralized its system slightly because it has a default list of validators. This goes against the main popularity point of cryptocurrencies because they took control from conventional banking institutions through decentralization. 

2. Large Pre-Mined XRP Supply

Most of its supply is held in ripple escrow for later introduction. Critics feel as though this could impact the value of XRP. 

3. SEC Action Against XRP

The ongoing SEC vs Ripple lawsuit has caused a stir. This has raised a number of questions and forced some investors to pull out of ripple. 

Is XRP a Good Investment?

The answer isn’t as straightforward as you think. As with any other investment, you’re taking a risk if you invest in XRP. It’s better to ensure that your risk is calculated at best. 

It all depends on whether you think that your business will gain advantage by using ripple as an alternative payment, then it’s worth an investment. The most important thing is for you to ensure that you use money that you can afford to lose. 

Martin K Verified

I am a bitcoin and crypto currency writer. I also work as a professional trader, and I have experience with stock trading and bitcoin trading. In my work, I aim to provide clear and concise information that helps people understand these complex topics.

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