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XRP aims to revolutionize the way we send money around the world.
This is a bold statement, but that is why XRP is now the second largest cryptocurrency by market capitalization.
But do not get carried away. XRP and its closely connected society, Ripple, have divided the cryptocurrency community by collaborating with some of the world's largest banks.
So, what is Ripple and the XRP cryptocurrency? Why is it so revolutionary and why is Ripple criticized? More importantly, where can you buy XRP and how to store it safely?
Content:
Part 1: What is the difference between Ripple and XRP?
Part 2: Understanding the Ripple blockchain
Part 3: Exploration of Ripple & # 39; s Bank partnerships
Part 4: Why is Ripple so controversial?
Part 5: How to buy XRP and store it safely
Part 6: What are the prospects for Ripple and XRP?
PART 1: What is the difference between Ripple and XRP?
Ripple vs XRP
Before diving, let's clarify some things:
Ripple is a company
Ripple aims to simplify the way we send money around the world using blockchain-inspired technology. The company has over 100 banking partners that use its services.
XRP is the cryptocurrency
XRP is a token created by the same people behind Ripple. Ripple is trying to convince banks to use XRP to make international payments more efficient.
The term "Ripple" is often used interchangeably to refer to both the company and the cryptocurrency. But it is not strictly correct.
So from here on, if we mention Ripple, we're talking about the company. If we mention XRP, we are talking about cryptocurrency.
Done. So What Is Ripple (The company?)
"The vision is to make an international payment as simple and cheap as opening a web page, something you would like to do without even thinking about mechanics or cost, it's so automatic and cheap … It's almost invisible." Ripple CTO David Schwartz.
Have you ever tried to send money abroad? Wait days for the transfer and the bank charges you a fortune for the privilege.
This current method is extremely obsolete, slow and expensive. It was created over the years & 70s & 80s (and it has not changed much since then).
Ripple offers its blockchain-inspired software to banks to help change this.
Ripple aims to make money for what the Internet has done for communication. that is, make it instant and free. They call it "internet of value".
Ripple has collaborated with over 120 banks
Here's where Ripple is different from most other projects in the world of cryptocurrency. Instead of building an alternative to the traditional banking system, Ripple actively collaborates with the largest banks in the world.
They are trying to convince banks to convert their old system into the Ripple network.
Ripple now has over 100 partnerships with banks and financial services such as Santander and American Express. They are using (or testing) each a version of Ripple's technology.
But wait. How exactly does XRP fit this equation?
What is XRP?
XRP was created by the same people who created Ripple.
There are 100 billion XRP tokens and they have all been created at once (known as "pre-mints").
This makes XRP completely different from bitcoin and ethereum, where tokens are slowly extracted by its users.
The fundamental characteristic of XRP is speed. It allows significantly faster payments than bitcoin and ethereum.
What is XRP used for?
Ripple plans to use XRP as a "bridge currency" for the exchange of money abroad.
Let's say you live in Britain and you want to send money to your family in Mexico.
Normally, this would take days and incur a huge fee using current payment systems.
Worse, you can not always make a direct exchange. Your bank may need to first convert the pound into a "reserve currency" (US dollars), then convert it into Mexican pesos. This adds another level of fees and delays.
Instead, Ripple aims to use XRP as a "bridge".
In this example, the pound is instantly converted into XRP, then instantly converted to pesos.
It might seem like a small change, but since you're trading through a digital currency, it's instantaneous and almost completely free.
How is XRP different from Bitcoin?
XRP and bitcoin are both aimed at transferring money. In this sense they share a similarity.
However, it is precisely here that confrontations end. XRP and bitcoins are very different in almost every other way.
XRP is faster – An XRP transaction takes 3.5 seconds. Bitcoin could take hours or even days at high volume.
Each XRP token already exists – Tokens were simply coded into existence all at once, unlike the bitcoin being extracted.
There are 100 billion XRP tokens – Bitcoin, on the other hand, has a capitalization of 21 million. In other words, there are almost 5,000 times more XRP token than bitcoins.
Ripple contains half of all XRP tokens – Ripple currently owns about 60% of all XRP tokens. 55 million of those tokens are stuck in the effort, with a billion released to Ripple every month.
Bitcoin and XRP both have a hard cap – Ripple states that no additional XRP tokens will ever be created, giving it a maximum limit of 100 billion.
The XRP is aimed at banks – Of course, the biggest difference is the target audience. Bitcoin was created to provide an alternative to the banking system. It is a monetary system or a store of value that cuts off banks. The XRP is created as a form of liquidity for banks to transfer money.
"While it is contrarian and unpopular in the crypted space, in retrospect it is very clever" – Ripple CEO, Brad Garlinghouse.
The Ripple Team
Ripple originally dates back to 2004 when Ryan Fuger created an IOU system for credit exchange.
But Ripple, as we know it now, really began when founders Jed McCaleb, Chris Larsen and Arthur Britto took control in 2012. They established the company as "NewCoin", before renaming it "OpenCoin", and eventually turned it into Ripple Labs in 2013.
If the name Jed McCaleb seems familiar, it is because he was also the founder of the Mount. Gox, the infamous exchange that suffered a cut of $ 850 billion in 2014. (Although McCaleb was no longer involved when the hack took place).
McCaleb also founded Stellar, the sixth largest cryptocurrency. He is a serial entrepreneur in cryptocurrency.
Chris Larsen was the CTO founder of Ripple. He is considered the richest person in the crypt due to his first participation in Ripple and his XRP participations.
Brad Garlinghouse he is the current CEO of Ripple e David Schwartz it's CTO.
PART 2: Understanding the Ripple Blockchain
The Ripple system is nothing like the Bitcoin blockchain …
Ripple uses a "ledger of distributed consent".
They call it the Led XRP register.
To explain, we have to go back to the bitcoin for a minute.
The bitcoin blockchain is fed and managed by miners.
Let's say that Bob sends a bitcoin to Alice. To confirm the payment, a network of miners from around the world competes to validate the transaction. They do this by solving a complex mathematical puzzle with the power of calculation.
(If all this seems extraneous to you, first read our Bitcoin eBook to understand how the traditional mining encryption system works).
This system is called "proof of work".
This does not happen in the Ripple system. There are no miners involved.
Instead, it uses a "consent" system.
Let's say Bob sends 100 XRPs to Alice this time.
Instead of the miners processing the transaction, XRP Ledger has about 150 "validators" of computers all over the world. Some validators are managed by individuals, some by companies, some by exchanges. 7% of these validators is managed by Ripple itself.
When Bob makes his transaction to Alice, there is a simple poll between the servers and the validators on the Ripple network. If a "consent" from the servers is agreed, the transaction is carried out and stored in the ledger.
XRP Ledger users can also modify their settings to "trust" certain validators in the network. So if a "trusted validator" approves one transaction, another will automatically follow the decision.
Pro of the Ripple system
It's fast. Really fast.
The extraction of bitcoins takes a long time and a huge amount of energy. The competition to solve the mathematical puzzles on the Bitcoin network drains huge amounts of computer energy.
Getting rid of that process makes Ripple transactions much faster.
We must also consider that the Ripple network is designed for banks.
If you think this is good or bad, Ripple needs a simpler system with more control to put the banks on board.
Against the Ripple System
It is arguably more centralized. Without active miners who believe every responsible transaction is a topic that is a more centralized system.
Ripple challenges this by stating that the Ripple system is less centralized compared to Bitcoin because Bitcoin mining is dominated by a handful of vast mining pools, largely based in China.
PART 3: Exploration of the main Ripple banking partnerships
We know that Ripple is working closely with the banks, but let's get to know how their relationships work.
120+ banking partnerships
Ripple has announced a series of high-profile partnerships. They are working with Santander, American Express, SBI, Western Union and many others.
While this sounds awesome, there are some things we need to explain. When Ripple claims to have over 100 banking partnerships, this does not mean that everyone uses the XRP token.
At least four financial companies actively use the XRP token to make international payments. The rest is piloting XRP technology or using one of Ripple's other blockchain solutions.
To explain, here's a breakdown of how Ripple works with banks.
Ripple xCurrent
xCurrent is Ripple's main software package. It is still impressive as it allows banks to settle cross-border payments almost instantly.
xCurrent also provides banks with a real-time messaging service. Check the details of the payment before the transaction is carried out and confirm the exchange when it arrives.
It's fast and cheap, but does not use the XRP token to pay off payments.
When Ripple talks about banking partnerships, they usually talk about xCurrent.
Ripple xRapid
The main objective of Ripple is to migrate banks from xCurrent to xRapid.
xRapid uses the XRP token as a "bridge currency" to execute cross-border transactions.
In recent tests, banks reported between 40-70% cost savings and almost instant transfers.
Because the old system is so inefficient
To understand why xRapid is so revolutionary, we need to understand how inefficient the existing system is.
Let's go back to our UK-Mexico transaction to explain. Maria wants to send 1,000 pounds to her family's bank account in Mexico.
To make the transfer, your UK bank needs an "account of ours" in Mexico. That account is pre-funded with Mexican pesos, so the bank can exchange currency.
Banks have these pre-financed accounts in each country (well, every country with a different currency – for example, the bank will have only one account in the euro area).
This is what banks call "liquidity". They need "liquid" money available in every country to exchange currency.
"That is the capital sitting in hibernation and not used." – Garlinghouse.
It is estimated that $ 10 trillion is inactive in our accounts. It is wildly inefficient.
Now imagine if they did not need pre-funded accounts all over the world. What would happen if they had a liquid stock of digital currency in one place?
Like XRP …
Do banks use xRapid (and therefore XRP)?
At least four financial companies are using xRapid commercially.
They include Catalyst Corporate Credit Union (a finance company), Cuallix, MercuryFX and Viamericas (money transfer services).
The rest of Ripple's banking partners are not yet using the XRP token. Ripple hopes to push them to xRapid as they grow better with technology.
PART 4: chain controversy
Ripple has been engulfed in controversy for years in the encrypted space. There are few coins and projects that attract so much animosity and criticism as Ripple. Here are some of the biggest:
Centralization
In general, all criticisms of Ripple and XRP revolve around centralization. In other words, too much control in Ripple's hands and too many relationships with the current banking sector.
"The banker's currency"
Many in the cryptocurrency community challenge Ripple's banking partnerships. They claim that bitcoins and cryptocurrencies have been designed to reduce the influence and reliance on banks. Ripple's involvement with some of the world's largest banks makes some people unconformable.
Ripple contains 60% of XRP
Critics point to the fact that Ripple has more than half the supply of XRP and can theoretically demand control over it. Of these holdings, 55 million are blocked in escrow, with one billion issued to Ripple each month.
Ripple & # 39; s Involvement in XRP
Unlike bitcoin or ethereum, which is exploited by its users, XRP has simply been created all at once. Ripple has distanced himself from the creation of XRP, calling it an independent resource.
They say their part of XRP has been "donated" by the open source developers who created it. In a hearing of the UK Parliament, Ripple's Director of Regulatory Relations stated:
"XRP is open source and was not created by our company, therefore [XRP] it existed as open source technology. We created a company interested in modernizing payments and then we started to use that open source technology to do it … We did not create XRP … What we have is that we own a significant amount of XRP, we were given by some of the open source developers who created it. But there is no direct connection between Ripple, the company and XRP. "
Critics point out, however, that the same registered company that became Ripple Labs also created the XRP token.
XRP is a security, not a currency?
There is a thesis according to which the XRP should be classified as a "security" (as a company) not a currency.
Critics say that if XRP was created by Ripple, and a majority is held by the company, it should not be classified as currency.
Ripple is currently fighting a lawsuit for this problem. The lawsuit claims that Ripple has tricked people into expecting a return from their XRP investment.
Ripple denied that XRP is a security, saying: "We are 100% clear, not a security, we do not meet the standards."
The US Securities and Exchange Commission (SEC) has yet to make a decision on XRP status. The SEC has indicated that bitcoin and ethereum are not titles. But they are still calm on XRP.
If XRP is considered a security security, Ripple will be subject to much stricter regulations and requirements.
So, is Ripple centralized?
In the most recent statement on the matter, Ripple's CEO, Brad Garlinghouse, said:
"It is very clearly decentralized, I, as the company's CEO, can not control the XRP register, I can not change a transaction … Anyone can participate in the XRP ecosystem and if Ripple does something that is not in the best interest of the ecosystem, the rest of the ecosystem can ignore us. "
Even the Ripple CTO has entered a crisis, stating that XRP is less centralized than bitcoin and ethereum. He stressed the fact that only four mining groups control more than 50% of the bitcoin and ethereum network. Ripple, he says, checks only 7% of the validators on the XRP register.
Part 4: How to buy and store Ripple XRP safely
How to buy XRP
You may have noticed that XRP is not currently available for purchase on Coinbase or Gemini, the two largest encryption exchanges in the United States.
Why not?
Coinbase and Gemini claim to be reluctant to add XRP because of the ongoing debate on classification as security. As mentioned, there are more rings to jump when you list a security in a bag.
Until this problem is solved, we may not see XRP available on Coinbase.
With this in mind, there are two options for buying XRP:
1. Buy XRP directly from a participant exchange
Exchanges that facilitate US dollar transfers include Bittrex, Bitfinex, Kraken, BitStamp, Bitsane, Gatehub, CEX.io.
Just create an account in one of these exchanges and exchange USD directly for XRP.
2. Buy Bitcoin on Coinbase, then convert to XRP on another exchange
This second option is more complicated. However, it could be the best route based on the local currency.
For example, it is difficult to buy XRP with the British pound due to the lack of available trade and low liquidity.
In this case, you will need a round solution:
1. Buy bitcoin or ethereum on your favorite and trusted exchange, such as Coinbase.
2. Next, register with a crypto-cryptographic exchange that allows you to exchange bitcoins for XRP. (Binance it is perhaps the best known, but there are many others out there).
6. Return to Coinbase. Select "send funds" and enter the deposit address from Binance.
7. Send (this may take a couple of hours during rush hours)
8. Back on Binance, you should now see your transferred bitcoin funds.
9. Buy XRP on Binance. Using the trading screen, you can now exchange your bitcoin funds for XRP.
How to store XRP safely
Once you've purchased XRP, we highly recommend moving it to a cold storage wallet (in other words, a wallet not connected to the Internet).
There are exceptions. For example, if you intend to negotiate XRP regularly or use it for live transfers. In that case, you may want to keep a small part in a "hot wallet" connected to the Internet or leave it in the stock exchange.
But suppose you want to keep XRP for the future as safely as possible. This means cold storage.
Hardware portfolio – A hardware portfolio is like an external hard drive or USB stick, but optimized for cryptocurrencies. Except for the short time when coins are transferred, the hardware portfolios are almost always offline. This makes them safe from hackers.
The only risk here is to lose or damage your hardware portfolio. If this happens, the XRP tokens have disappeared forever.
The most popular hardware portfolios are Ledger and Trezor. However, Trezor does not yet support XRP.
BitGo also offers a refrigerated custody service for those who have large amounts of XRP.
Wallet for desktop – A desktop wallet stores your cryptocurrency keys on your computer using a software package. On the plus side, they are more convenient for use and regular trading. But on the other hand, they are a little more vulnerable to hackers.
One of the most popular XRP desktop wallets is Toast. It is an open source software available for Mac, Windows, iOS and Android.
Portfolios online – Online portfolios do exactly what they say; store your XRP online. While this is super convenient and easy to use, they are less secure. If you want to follow this path, Coinpayments is a popular option that supports XRP.
Part Six: What are the prospects for Ripple XRP?
The fact that four of Ripple's partners are using XRP is a huge step forward.
However, there is a long way before XRP is widely adopted by banks and money transfer companies.
Ripple has two main tasks to achieve. Firstly, they have to work together with the encrypted exchange all over the world. So far, Ripple has partnered with Bittrex to facilitate transfers through USD, Bitso for Mexican pesos and Coins.ph for Philippine pesos.
But Ripple will need collaborations like this around the world for XRP to become a world bridge currency.
Secondly, Ripple has to convince banks to switch from xCurrent to xRapid. In other words, they have to convince banks to actually use cryptocurrency.
As a Ripple executive said, the narrative has always been "Good blockchain, bad crypto". Thus, while xCurrent's blockchain technology is easier to sell, xRapid's cryptocurrency product is more difficult.
Ripple calls this 800-pound gorilla into the room.
Progress has been made. Many banks are experimenting with the XRP service and are reporting good results.
Brad Garlinghouse claims that "dozens" of banks will use xRapid by the end of 2019. Block Explorer will update you as we listen to others.
Xpring
Ripple is also working on a project called Xpring (pronounced "spring"). It aims to encourage technology startups to use the Led XRP registry.
Xpring will see Ripple support startups with grants and investments that use XRP in innovative ways.
It aims to open the XRP register to new use cases, not just global money transfers. Xpring is currently supporting music projects with Scooter Braun (the manager of Justin Bieber, yes, really), and a technology startup called Omni, which allows you to rent or store anything.
Conclusion
Ripple is building a new standard in global money transfers. With hundreds of banking partners, it has the potential to lift the entire financial sector.
However, this does not mean that XRP cryptocurrency is a sure thing. Making sure that banks adopt blockchain technology is one thing. Convincing them to transfer money using a digital currency is the next big challenge.
Look at this space.
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