What is Ripple?

A frequent misunderstanding is that Ripple is a cryptocurrency, but in fact, Ripple is not a cryptocurrency. Instead, Ripple has its own cryptocurrency called XRP.

What is Ripple?

What is Ripple?

Ripple is a digital payment protocol that facilitates fast and secure cross-border transactions. It is an open-source platform that was created in 2012 by a company called Ripple Labs, which is now known as Ripple.

Ripple's main goal is to make it easier for financial institutions to transfer money across borders quickly and at a low cost. The Ripple protocol is based on a decentralized network of servers that validate and process transactions. This network is known as the XRP Ledger.

The XRP Ledger uses a digital asset called XRP as a bridge currency to facilitate cross-border transactions. This means that when a financial institution wants to transfer money from one country to another, it first converts the money into XRP and then sends it to the recipient institution, who then converts the XRP back into their local currency. This process reduces the time and cost of traditional cross-border transactions.

Ripple also has a product called xRapid, which uses XRP as a liquidity solution for payment providers and financial institutions. It allows them to settle cross-border payments in real-time, without the need for pre-funded nostro accounts.

Ripple's technology has been adopted by several large financial institutions such as Santander, American Express, and Standard Chartered. Ripple has also been working to expand its use case beyond cross-border payments by developing solutions for remittances, micropayments, and e-commerce.


Ripple, the cryptocurrency and blockchain project, was first created by software developer Ryan Fugger as RipplePay in 2004. The platform allowed people to extend credit to others in their community and predates Bitcoin, making it a rare crypto project that existed before the advent of Bitcoin.

Even Bitcoin's anonymous creator, Satoshi Nakamoto, mentioned Ripple once in an email. In 2011, programmer Jed McCaleb began developing the XRP cryptocurrency and blockchain, and in 2012, he approached Fugger about using the RipplePay network. Fugger agreed to hand over control of RipplePay and McCaleb's team launched the XRP cryptocurrency and the company, originally called NewCoin, which later changed to OpenCoin, and finally to Ripple.

Ripple has since established partnerships with various financial institutions, and in 2019, announced that over 300 financial institutions in more than 45 countries were using its RippleNet payment network. This success can be seen as a point in favor of the cryptocurrency as a potential investment.

Understanding Ripple

Ripple is built on a decentralized, open-source, and peer-to-peer platform that enables the smooth transfer of various forms of currency, including dollars, yen, euros, and cryptocurrencies such as litecoin or bitcoin. It is a worldwide payments network and has several major banks and financial services companies as its clients. XRP is utilized in Ripple's products to make the conversion of different currencies faster.

How Ripple Works?

How Ripple Works

Unlike bitcoin which uses proof-of-work (PoW) or NXT (an open source cryptocurrency and payment network launched in 2013 by anonymous software developer BCNext) which uses proof-of-stake (PoS), the Ripple network utilizes a consensus protocol to validate account balances and transactions. This protocol enables the network to maintain the integrity of the system and prevent double-spending.

Compared to bitcoin, Ripple transactions consume less energy, are quickly confirmed and have low transaction fees, while bitcoin transactions are energy-intensive, take longer to confirm and have higher fees.

When a user initiates multiple transactions to different gateway systems on the Ripple network, all but the first transaction will be rejected. The consensus among the individual distributed nodes determine which transaction was made first. The confirmation process takes around 4-5 seconds. The absence of a central authority that controls the establishment of nodes and the confirmation of transactions makes the Ripple platform decentralized.

Ripple Advantages

Ripple offers several advantages over other forms of digital currency and traditional banking methods:

  • Rapid settlement times, with transactions typically being confirmed within 4-5 seconds.
  • Extremely low transaction fees, at just 0.00001 XRP per transaction.
  • A versatile network that supports not just XRP but also fiat currencies and other cryptocurrencies.
  • Wide adoption by large financial institutions, such as Santander and Bank of America.

Ripple Disadvantages

Ripple has some disadvantages that should be considered:

  • It is somewhat centralized, as it uses a default list of validators that goes against the decentralized philosophy of cryptocurrencies.
  • It has a large pre-mined XRP supply, which could impact the value of XRP if large quantities are introduced at inopportune times.
  • In December 2020, the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, alleging that XRP should have been registered as a security since the company can decide when to release it. Ripple has denied the allegation.

Related Articles


What is XRP?

XRP is a digital asset that serves as a native currency on the RippleNet network. RippleNet is a decentralized global network of banks, payment providers, and digital asset exchanges that enables...


What is Proof of Work (PoW)?

Proof of work (PoW) refers to a system that demands a considerable amount of effort to discourage malicious uses of computing power, such as sending spam emails or launching denial of service attacks.


Proof of Stake (PoS)

Since cryptocurrencies are not under a centralized authority to track transactions and balances, their underlying systems require a method for users to agree on who owns what.