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What Is Ripple (XRP) & How to Use It? I Notum

By Notum

Jul 26, 202310 min read



The cryptocurrency world has never been as popular and diverse as today. Users can not only store their assets in crypto but also invest and receive regular income. Moreover, now cryptocurrency can also be applied in the financial sector, making transactions faster, more accessible, and safer.

One example of digital money affecting how funds are transferred is the XRP token. It is gaining more and more attention in the crypto industry because the token has multiple unique features that may change the payment system. The key point of XRP is its role in the Ripple network ecosystem, where it works not only as a digital asset but also as a tool for providing fast, efficient, and reliable payments.

In this article we take a closer look at XRP, how it works, its use cases, unique features, and how safe it is to buy and use the token.

What Is Ripple (XRP) Token?

Ripple (XRP) is a digital currency and payment technology that was created to ease interbank transactions and money transfers. Unlike most other cryptocurrencies, Ripple is not a decentralized system but is based on a distributed registry XRP Ledger. "In 2012, the team behind Ripple launched the XRP ledger, which included XRP, which would serve as the native token." - Investopedia.

Thus, XRP can be used to make international payments with low fees and high speeds. However, it is important to mention that Ripple and XRP are two different things. While Ripple is a blockchain-based payment network, XRP is its native token. Thus, the main goal of Ripple is to provide fast and low-cost cross-border payments without intermediaries such as banks. One of the key Ripple advantages is the ability to make payments in any currency, be it fiat money or other cryptos.

How Does XRP Work?

As said, XRP token runs on XRP Ledger that uses the Ripple Protocol Consensus Algorithm (RPCA). As the XRP Ledger is a distributed ledger, it is not stored on a single central server, but copies of the ledger are kept and updated by independent network members known as nodes. RPCA, in turn, is used to reach an agreement between nodes on the state of the registry. Unlike PoW and PoS, RPCA uses the consistency between trusted nodes to validate transactions and update the ledger.

XRP has a fixed total supply of 100 billion XRP. Since the token’s launch, most of it is currently owned by Ripple Labs Inc. In addition, the company has implemented a burning mechanism, which means that a small amount of XRP is burned with each transaction. XRP can be used to make payments on the Ripple network, so it can be sent and received in any currency, be it fiat money or other cryptocurrencies. Also, XRP provides fast and low-cost transactions, making it attractive for global money transfers and interbank operations.

XRP Token Use Cases

At the moment, the XRP token can be used in several areas and thereby has multiple options for use:

  • International payments. XRP can be used for fast and low-cost international payments. It can operate as an intermediate currency when transferring funds from one currency to another. Thus, XRP reduces the time and cost of cross-border payments, especially when compared to traditional payment systems.
  • Liquidity and pre-financing elimination. Financial institutions can use XRP to provide liquidity and eliminate account pre-funding. Instead, they can use XRP to instantly pay and make transactions between different currencies.
  • Micropayments. XRP is also a good option for transactions with small amounts. It can be used, for example, in digital content payments, micropayments, as well as for instant and low-cost payments on the Internet within the IoT ecosystem.
  • Asset tokenization. The XRP Ledger supports the creation and issuance of tokens representing various assets, including securities, commodities, and digital assets. Thus, XRP can be used as a medium of exchange and settlement in the trading and transfer of such tokenized assets.
  • Development and innovation. XRP can be used by developers to create new apps, integrate payment systems, and build innovative financial and blockchain solutions. Thus, developers can use XRP in their projects to facilitate payments and settlements.

How Secure Is XRP?

The XRP token has several security measures that make it pretty safe to use. First, it runs on the XRP Ledger, which uses a consensus protocol and a decentralized network of independent validators. This not only provides high stability but also protects against censorship or manipulation. Second, XRP uses cryptography to secure transactions and protect the private keys of the network’s users. The cryptographic protocols used in XRP guarantee the data is safe and confidential.

In addition, Ripple Labs Inc., which created and maintained XRP, is actively working to ensure the security of its systems and products. They invest in developing security and implementing best practices to make sure their payment solutions and infrastructure are safe to use. Thus, in general, with proper security measures, the XRP token can provide a relatively secure environment for transactions.

What Makes XRP Unique?

  1. Speed and efficiency. XRP is known for providing high transaction speed and low fees. Thus, transactions with XRP can be completed and confirmed in seconds, making it one of the fastest tokens in the crypto space. Moreover, XRP transaction fees are pretty small, making it attractive for micropayments and international transfers.
  2. Distributed ledger and consensus protocol. XRP runs on XRP Ledger's own distributed ledger and uses a consensus protocol based on agreement between trusted network participants. This allows you to achieve high performance and ensure that the network is secure and reliable.
  3. Probability to eliminate pre-funding. XRP can serve as a bridge currency to make the instant exchange between different currencies easier. Moreover, pre-funding in different currencies becomes optional through the XRP use. This can increase efficiency and reduce costs for financial institutions in processing payments.
  4. Ripple Labs Support. Ripple Labs itself is actively working on payment solutions and blockchain technology development. The various products and solutions offered by Ripple Labs include payment protocols and options for banks and financial institutions where XRP can be actively used.

Where Can You Buy Ripple?

XRP can be purchased on various exchanges and platforms:

  • Crypto exchanges. Binance, Coinbase, Kraken, Bittrex, Huobi, and other exchanges offer XRP trading pairs with other digital money such as Bitcoin (BTC) or Tether (USDT), as well as some fiat currencies, depending on the platform. Also, some platforms, such as Coinbase and Bitstamp allow you to buy XRP directly with fiat currencies such as USD or EUR. This can be a convenient option for beginners who want to purchase XRP without buying another coin or token first.
  • Decentralized Exchanges (DEXs). Some platforms, such as SushiSwap or Biswap,  offer the XRP exchange directly through smart contracts with no need to register on a centralized exchange (CEX).

When choosing a platform to buy XRP, pay attention to reputation, reliability, fees, availability for your country, as well as security measures such as two-factor authentication and storing assets in secure wallets.

What to Consider Before Buying XRP?

There are several potential risks connected to buying and using an XRP token. For example, there are issues related to the legal status of XRP, that have raised legal controversy and regulatory issues. In December 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs Inc., claiming that XRP is an unregistered security. It’s important to note that in June 2023 the dispute was resolved and XRP is not officially a security. However, the lawsuit situation may still affect the  use of XRP.

Also, like many other cryptocurrencies, XRP is subject to volatility and price fluctuations in the crypto market, which can lead to a value loss of your investment. Moreover, when buying XRP on exchanges or exchange platforms, there is always a risk of possible hacker attacks or platform security breaches.

Another XRP risk is dependence on Ripple. Since XRP is closely associated with the company that is the main holder of XRP, this creates additional risks, such as the impact of the decisions and actions of the company on the XRP price and use. Moreover, while the XRP Ledger was designed with security in mind, there are potential technical vulnerabilities that could be exploited by hackers to attack the network or user wallets.

Closing Thoughts

With its fast and efficient technology, the XRP token is of significant importance to the crypto world and offers potential solutions for cross-border payments, liquidity, and micropayments. It can greatly reduce the time and costs associated with traditional financial transactions and bring new levels of efficiency and accessibility to the global financial system.

However, it is worth noting that issues related to legal status and regulatory risk cause uncertainty around XRP. The decision of the lawsuits and further developments of the situation may affect the future use and acceptability of XRP in many countries.

Regardless, XRP still continues to garner attention as a payment token and tool for financial innovation. Token’s technology and potential applications continue to attract interest and improve the efficiency of global financial transactions. Together with regulatory development and adoption, XRP can influence the future of digital payments and global financial infrastructure.

Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.