What is Ripple (XRP) is one of the most curious questions in the cryptocurrency field.
What is Ripple (XRP)?
XRP is Ripple Inc., a payment solutions company that also manages the RippleNet cross-border payment network. is a partially managed cryptocurrency issued by
Ripple started selling XRP in 2012, but this company has recently turned its attention to a cross-border payment network rather than cryptocurrency.
How does Ripple work?
Unlike Bitcoin or Ethereum, Ripple does not refer to a blockchain with a local cryptocurrency asset. In fact, Ripple has a history of re-framing XRP in line with its business model: first to embrace it as a fuel that runs cross-border payment technology, then other payment networks xCurrent, xRapid, and more for cheaper and faster international payments Putting xVia at the center because of its focus
Towards the end of 2019, xCurrent and xRapid rebranded as RippleNet, RippleNet was a network focused on fast and cross-border transfers between financial institutions.
In addition to RippleNet, Ripple also oversees XRP Ledger, a blockchain-like network that facilitates payments in XRP, the cryptocurrency issued by Ripple. Like other cryptocurrencies, it can be sent and received in a wallet that is independent of international borders. When launched in 2012, Ripple marketed XRP as a cryptocurrency that was cheaper and faster than Bitcoin because transactions took only seconds. The XRP network was able to achieve this speed because it has centralized the infrastructure and does not use the proof of work algorithm, which is the consensus algorithm used by Bitcoin to process transactions.
What is Ripple UNL, how is XRP different from Bitcoin?
A committee of validators works for XRP as both miners and full node operators by maintaining the trading ledger. These validators interact with the most recent transactions every 3-5 seconds when they publish a new version of the trading ledger.
When anyone runs these codes to be XRP validators, that doesn’t mean the validator will be trusted by other networks. To gain this trust, they must create Ripple’s unique node list (UNL), a record of trusted validators curated by Ripple.
Currently, there are 35 active XRP validators, six of which are run by Ripple itself.
At the same time, Ripple offers software called RippleX to developers and business people. The platform includes tools and programs to interact with XRP Ledger and PayID and Interledger, two protocols developed independently of XRP.
The difference between RippleNet and XRP is that Ripple’s corporate network, RippleNet, is not required for XRP to work.
According to Ripple’s website, banks from Santander to PNC used RippleNet’s banking-focused “blockchain” to make remittance payments and exchange currencies. The company claims to have processed nearly half a billion worth of transactions and serves 6 continents. The service supports more than 55 countries and 120 exchange rates.
RippleNet’s On-Demand Liquidity service is the only network feature that uses XRP and is available in Australia, the Eurozone, the United States, Mexico and the Philippines.
Bitcoin and XRP
Unlike Bitcoin, XRP is not processed. Ripple suppressed the entire supply when the network was launched, and Ripple intermittently releases some of the supply from an escrow wallet and sells them on the open market. More than 45 billion of the total 100,000,000,000 XRP supplies are currently in circulation.
XRP’s design compromises decentralization for speed. Because Ripple is not based on Bitcoin’s proof of work-oriented consensus mechanism, the network is arguably less secure, but can also process transactions faster than Bitcoin because the validators’ UNL is very central so they can agree on consensus and share data quickly.
Mining and XRP
XRP can facilitate faster transactions as there is no mining in the transaction process.
In this process, instead of miners competing for block rewards and transactions being ordered to the ledger, validators validate transactions without promising rewards.
These validators have been vetted and trusted by Ripple, and this trust is necessary for XRP to be designed to prevent double-spending (in addition, this trust pattern is no different from the way credit cards or other digital payment networks work today).
Ultimately, the centralization of XRP makes it less censorship-resistant and unauthorized than other open source blockchains such as Bitcoin and Ethereum.
Anyone can run a Bitcoin node and participate in network consensus, but only Ripple-approved UNL nodes can join the consensus model of XRP.
Similarly, XRP validators could theoretically collaborate easily to censor a transaction, while Bitcoin’s proof of work system makes it impossible for miners to sneak into censorship transactions.
Perhaps the difference between XRP and Bitcoin can best be summed up as the difference between a company and an economy.
The supply of XRP is given by a company as well as at a rate determined by its managers, and transactions are processed by a pre-approved committee of stakeholders.
The supply of Bitcoin is mathematically given through the mining process at a predetermined rate, and transactions are processed by the global, decentralized mining industry.