June 8, 2022 9:06 am in Alt Coin

Ripple (XRP) for Beginners

Ripple (XRP) is increasing in popularity, although it can be difficult to know what sets it apart from similar cryptocurrencies available. It’s considered to be one of the leading cryptocurrencies and is proven to be a lot quicker and more efficient than international wire transfers.

The Basics of Ripple (XRP)

Ripple (XRP) is fully controlled by a privately-held company with its development. Formerly known as OpenCoin, it’s expected that Ripple will not be a competitor of similar types of cryptocurrencies with its main purpose being to connect banks and host digital asset exchanges in real-time. It’s unique because it’s more than a blockchain and has a longer history as a cryptocurrency than Bitcoin, as it was originally created in 2004. However, it differed because it’s not run by a peer-to-peer network. In 2012, it was acquired by the founders of Open Coin and named Ripple Labs. Although other types of cryptocurrencies are designed to focus on the individual, Ripple Labs is made to serve payment providers and banks.

RippleNet is based on a set of rules and uses validators that are located in different parts of the world to ensure there’s a shared ledger that is maintained. It’s made for financial institutes as a bridge currently. It has patented technology, known as, “The Ripple Protocol Consensus Algorithm.” It’s recommended that only trusted participants are involved in the transaction of Ripple, making it necessary to utilize the Unique Node List, which validates the transactions and has its own UNL. Different nodes can send transactions to other nodes and require an agreement in advance before the transaction is performed.

Although HTTP is commonly used, Ripple relies on RXTP to move money around the world. The creation of RXTP is to create the internet of value to ensure money can move as much as information can in the modern world. This is also available at a cost-effective price as settlements are expedited instead of waiting for several days for the money to be transferred.

xCurrent is the enterprise solution of Ripple but doesn’t use the same technology as XRP and is specifically built around Interledger Protocol, which connects different payment networks and ledgers. Users can take advantage of the messenger system, which makes it possible to quickly exchange information that is related to risk and compliance, FX rates, fees, delivery times, and payment details. The success or failure of each transaction is confirmed by Validator. Third-party validators can also be used, depending on each financial institution’s preference.

ILP Ledger is another option that is considered to be a sub-ledger and can be incorporated into the current ledgers that are already in use by different financial institutions. This tracks debits, credits, and all of the equity that is moved between two different parties. The funds are instantly transferred. Users can also rely on FX Ticker to obtain similar services.

The Ripple products that are available include xRapid, xVia, and xCurrent, which provides users with transparent solutions.

How to Use the Ripple Network

There are many types of currencies that can be sent when using the Ripple Network. Ripple offers two separate currencies, which include XRP and IOUs. IOUs allow users to have tokens that can be kept in their wallets. This is similar to the way Ethereum tokens can be stored on an Ethereum Wallet. Different currencies can coexist on a Ripple Wallet for added convenience.

IOUs can always be issued by users on the Ripple network, but they don’t necessarily represent what you own. They’re another form of debt and mean that you owe another user something or someone owes you something. You can issue the IOU for any type of real-world asset, whether you owe someone gold, airline miles, oil, euros, or dollars. New IOUs can be issued at any time. The IOUs aren’t interchangeable for the same asset type.

Each IOU has a different credit line and isn’t an asset but is considered to be a promise by the issuer. If the issuer doesn’t follow through with their word, then the IOU doesn’t hold any value. It’s up to you, the user, to decide if you trust the issuer and believe they’ll follow through on their IOU. This is considered to be a trust line and requires trusting someone up to a specific amount of money.

XRP Supported By The Ripple Network

XRP is also supported by the Ripple Network and is used by Ripple Labs to ensure repayments can be transferred through the network. Money can easily and quickly be converted to XRP instead of having it go through multiple banks, which makes it a streamlined and efficient process. The XRP is sent to the receiving bank.

Both of the banks or financial institutions aren’t required to use XRP to transfer the money. They can create an open tab via the available IOUs. XRP is unique because it’s an asset and isn’t a liability, which means there isn’t any risk involved compared to IOUs. Once you receive the payment, the transaction is finalized, and there isn’t any trust that is needed between both the parties.

IOUs are still needed because XRPs are not respected worldwide and are still volatile. XRP is fast and scalable and only takes four seconds. Bitcoin takes an average of 10 minutes to send. Additionally, XRPs are capable of handling 1,500 transactions each second, whereas Bitcoin can only handle seven transactions every second.

Can XRP Be Mined?

Unfortunately, it cannot. The Ripple Network has a unique process compared to mining for Bitcoin, which is done to determine and confirm the different orders of transactions on the blockchain. When using Ripple, the transactions, the validators that are responsible for maintaining the network must choose to validate the transactions that are attempting to go through. This involves a voting process.

Once the transaction is received by a validator, it needs to consult with the other validators to determine if there are enough votes to confirm it’s a valid transaction that can be processed. At least 80% of the validators need to vote for it to be valid to make it updated in the Ripple Ledger.

Validators aren’t compensated for the work they perform compared to Bitcoin miners that receive new coins. When Ripple Labs first began, the developers issued 100 billion XRP. The Ripple Protocol states that there isn’t any more XRP that can be created in the future.

Is Ripple Centralized?

Many people don’t agree about if Ripple provides users with a centralized platform. Although Ripple Labs isn’t responsible for controlling RTXP, they still have the ability to maintain it. The validators are the ones that are responsible for running all of the codes. This is a similar restructure to Bitcoin’s core development team with how they maintain Bitcoin but aren’t able to control the different nodes that manage it.

Ripple Labs is still able to significantly influence RXTP. It has the freedom and ability to decide if it wants to produce more coins.

RXTP is also an open source, but Ripple products are not an open source. If Ripple Labs no longer exists, the validators are still capable of running the network. Although there aren’t a lot of validators compared to those that run Bitcoin, this increases the risk that the Ripple users can be defrauded.

Who Owns the Pre-Mined XRP Coins?

The Ripple founders are currently in possession of 20 billion XRP coins. These founders include Arthur Britto, Chris Larsen, and Jed McCaleb. 7 billion XRP is in the hands of Ripple Labs, and companies and individuals in the public sector have purchased 40 billion XRP.

The remaining XRP coins are protected in a smart contract, which must release 1 billion XRP directly into Ripple Labs on a monthly basis. This will continue to occur until the 100 billion XRP cap is met.

XRP is designed to be divided into six separate decimal points. Those who are interested in holding XRP are required to acquire a wallet that is capable of supporting this type of currency. You must deposit at least 20 XRP into the wallet to get started, which prevents the Ripple Network from becoming scammed.

The Future of XRP

XRP supply will continue to decrease in the coming years, which is how it’s designed to continue to increase in value. All of the transaction fees are destroyed and can’t be used again.

If you choose to acquire the currency, you’re believing that banks and financial institutions will begin using it in the future, which will increase its overall price. Banks will have the option of using IOUs instead, which would cause the price of XRP to remain stable.

Payment providers and banks will need to use the currency and move away from their current infrastructures, which can make it a gamble for those who obtain XRP.