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What Is Ripple? XRP Overview and its Use Cases | Notum

By Notum

Aug 17, 20226 min read



Ripple is one of the most famous and capitalized crypto projects. Despite the controversy surrounding it, the project still has a lot of adherents. And this is easily explained. The project is unlike other digital coins, either in technology or idea. This review will dive deeply into the Ripple project and learn about its features and prospects.


The basic concept of the Ripple protocol appeared a long time ago, several years before the Bitcoin launch. The first version of the system was launched in 2005. It was designed to organize secure online money transfers. 

At the beginning of 2011, 3 developers, David Schwartz, Jed McCaleb, and Arthur Britto, got carried away with Bitcoin but noticed that mining involves high energy consumption. Their first observations about Bitcoin’s high energy consumption and scalability issues were accurate. In 2021, according to Ripple estimates, BTC mining will consume more energy resources than Argentina. 

In 2012, a trio of developers founded a company specializing in payment solutions — OpenCoin, which was rebranded to Ripple in 2015. In the same 2012 year, XRP Ledger (formerly known as Ripple Consensus Ledger (RCL)), along with the new XRP cryptocurrency, was introduced to the still young crypto market. 

What Is Ripple?

Ripple is a private company that provides a payment and exchange network (RippleNet) on top of a distributed XRP Ledger. The project's main goal is to form a chain of asset transfers, providing a cheaper, faster, transparent, and secure alternative to existing transaction methods, for example, SWIFT. The project functions as a global network for cheap and fast cross-border payments. Ripple is built on a system of gateways that serve hundreds of servers in different parts of the world. That is, the company uses distributed ledger technology, but its architecture is radically different from a typical blockchain.

XRP Ledger

XRP Ledger is a public blockchain that hosts the native XRP currency. The task of XRP Ledger is to provide a swift and cost-effective exchange of assets between users without needing a central intermediary. The blockchain can process about 1500 TPS, with an average confirmation time of 3-5 seconds and a network fee of $0.0002. All this makes XRP a convenient tool for international peer-to-peer payments, remittances, and microtransactions. The architecture of Ripple is utterly different than in Bitcoin. Without going into technical details, we can briefly say that its network allows you to conduct transactions with any currencies and assets.

Initially, XRP Ledger was developed exclusively for payment use cases. Still, the project team has also focused on implementing new features such as NFTs, Federated Sidechains, and smart contract functionality. Therefore, XRP Ledger can be used by developers for executing various projects, for example:

  • building of cryptocurrency wallets and exchanges;
  • issuing stablecoins, NFTs, and CBDCs;
  • building various services where microtransaction support is needed (game projects, content monetization, and so on).

XRP Ledger Consensus Protocol

XRP Ledger doesn’t utilize traditional Proof of Work or Proof of Stake consensus algorithms. All XRP coins have already been issued in the amount of 10 billion. However, less than half of the coins are in circulation, and the company keeps most of them at its escrows, gradually releasing them.

The designated servers (validators) are responsible for accepting and processing transactions. Any member of the network can become a validator, but this does not mean that he will take part in reaching a consensus. Each network participant has the right to choose which validators to trust independently. A set of reliable validators, called Unique Node Lists (UNLs), are published by Ripple, the XRP Ledger Foundation, and Coil. However, network participants have the right not to follow the recommendations of the listed publishers and choose trusted validators themselves.

A consensus scheme with validators provides a cheap, reliable, decentralized, and fast solution to the problem of double-spending. In addition, the XRP consensus protocol is environmentally sustainable since it consumes negligible energy.

At the time of writing, more than 150 validators are active, most of which are operated by universities, businesses, and exchanges. However, anyone can operate the validator, as it does not require any investments. A noticeable feature is that, unlike PoS or PoW networks, validators in XRP Ledger do not receive any financial incentive. The main benefit of running a validator is ensuring the network’s security and stability. Thus, businesses using XRP Ledger can run validators to ensure the reliability and stability of the platform.


RippleNet is a global payment system that enables participants to make payments and transfers in more than 40 currencies and serves more than 300 financial organizations worldwide. The platform provides three main solutions:

  • Cross-Border Payments

This solution helps organizations reduce costs and speed up the cross-border payment flow. The solution is based on the “On-Demand Liquidity” system. The system uses XRP coins as a “connecting bridge” to exchange between fiat currencies. To put it simply, suppose that a USA-located sending institution sends $100 to its Turkish-located customer:

  1. The dollar amount is converted into XRP;
  2. XRP Ledger processes the transaction and charges a small network fee;
  3. The receiving institution gets Turkish lira.

This dramatically reduces the fees for cross-border transfers inherent in traditional systems and increases the speed of the transaction. In addition, this is convenient for financial companies as they do not need to store money in different local currencies and worry about liquidity.

  • Crypto Liquidity

Ripple Liquidity Hub will be built on Ripple’s existing infrastructure to integrate with multiple liquidity platforms, including exchanges, OTC desks, and market makers, allowing businesses to receive digital assets at optimized prices. This will enable Ripple partners to offer their customers the opportunity to buy, sell and store cryptocurrencies at the most competitive prices. Initially, this product will only support BTC, ETH, LTC, ETC, BCH, and XRP, but the list will expand in the future.

  • Central Bank Digital Currency

Ripple provides a platform for minting, managing, and destroying CBDCs. CBDC is digital money issued and backed by the Central Bank. CBDC has the official status of a means of payment and is regulated by the state. CBDCs are needed to make the entire banking system easier. Now only commercial banks work with Central Banks — they make settlements with each other through CB’s correspondent accounts (that’s why senders from different banks have to pay such hefty fees). CBDC also assumes that commercial banks (or their clients) can directly settle with each other, bypassing commercial banks and the Central Bank, just with CBDCs. Thanks to Ripple, banks get the opportunity to issue, distribute, and destroy CBDCs. Banks can send minted CBDCs directly to authorized accounts, and CBDCs holders can make almost instant transactions. At any moment, holders can redeem CBDCs for fiat, and banks can destroy CBDCs.

Ripple VS SEC

At the end of 2020, the company had an unexpected problem. The U.S. Securities and Exchange Commission (SEC) launched an investigation and later referred the case to the court. Representatives of the regulator insist that the nature of XRP assets refers to securities. The management of Ripple calls these claims “unjustified extortion” and confidently declares that according to American laws (the company is based in San Francisco), XRP is not a security. As of August 2022, the situation has not been finally resolved. It is not yet known what decisions the judges will make. However, if XRP is equated to securities, the project’s future will be questioned, and the company may suffer huge losses from fines.

Closing Thoughts

Ripple is one of the most well-known companies in the crypto market. Since 2014, Ripple has been actively developing partnerships with banks and financial companies worldwide. During this time, hundreds of financial organizations have joined Ripple as partners, including Bank of America, NIUM, Azimo, MoneyMatch, Sentbe, and BitPay.

However, Ripple has a chance to become popular not only among banks and individuals but also at the state level. The company is also working to ensure that its platform can support NFTs and smart contracts capabilities. This can significantly expand the scope of application and cause an increase in the price of coins.

The company's future largely depends on the outcome of the Ripple VS SEC lawsuit. Ripple has repeatedly stated that it has hundreds of potential customers waiting for the dispute to be resolved — they need a clear legal status of XRP to start using the company’s products. Suppose the court agrees with the SEC’s arguments. In that case, the company will face millions in fines, obligations to return over $1.3 billion received during the initial sales of XRP, and a ban on working with most financial companies.