Buy XRP (Ripple)

No, XRP is a cryptocurrency, whereas Ripple is a company.

XRP and Ripple are deeply connected and so the two are often used interchangeably. However, XRP and Ripple are not the same. XRP refers to the digital currency, while Ripple is a for-profit company to create solutions for fast global financial settlements.

Ripple utilises XRP and XRP Ledger to facilitate fast and cost-efficient cross-border payments, but the company doesn’t own the crypto or its blockchain. Rather, Ripple is merely a contributor to the network with the same rights as other contributors. The XRP Ledger Foundation is the independent entity that develops and maintains XRP and XRPL.

XRP and the blockchain it runs on were created by three developers – Jed McCaleb, Arthur Britto and David Schwartz.

At the peak of Bitcoin's popularity, Jed McCaleb, Arthur Britto, and David Schwartz became fascinated with the first cryptocurrency but found mining to be wasteful. As such, the three of them started working on a more sustainable system with the goal of being used by financial institutions.

In 2012, they succeeded in creating the XRP Ledger along with its native currency XRP. Soon after, Chris Larsen joined the team and opened a company called OpenCoin, which eventually rebranded to Ripple Labs.

Despite being created by the same team, Ripple is a different entity from XRP. However, the fintech company uses the XRP Ledger to process transactions quickly. They also hold a substantial amount of XRP, which they release to the public periodically.

XRP is designed for international payments and currency exchange.

Like any crypto, XRP can be used as an investment. However, its main use is for international payments and currency exchanges. The XRP token is used to transfer payments across borders quickly. In comparison, traditional financial networks can often take from several hours to several business days. That’s because XRP does not utilize the “proof of work” algorithm used by other cryptocurrencies — like Bitcoin — for validating payments. XRP is mostly used by Ripple’s on-demand liquidity (ODL) service, which allows financial institutions and their customers to experience faster transfer of fiat currencies between countries.

Additionally, XRP is also used for currency exchange at a lower commission. Currencies can’t be directly swapped for another. It requires an intermediary currency like the US dollar before being exchanged for another currency. With XRP, it will be sent directly to any XRP Ledger address, making it easier to trade currencies, whether it’s fiat currency or crypto.

XRP is a pre-mined currency, meaning it can’t be mined.

Several cryptocurrencies, like Bitcoin, generate new coins through mining. This process involves a vast decentralised network of computers verifying transactions and maintaining the blockchains. Miners receive coins as a reward in return for contributing their processing power.

In contrast, XRP is pre-mined. Before its launch, 100 billion XRP tokens were already minted. A large portion of these coins was locked by Ripple in an escrow to be released at one billion per month. Upon release, Ripple sells as much as it needs in order to raise funds and then puts the unsold tokens into a new escrow.

Ripple, or Ripple Labs, is a private enterprise that uses XRP and XRPL to boost its offerings.

Cost and efficiency issues plague the financial services industry. Since many intermediaries are involved, cross-border transactions involve lengthy processes with hefty fees. In an age that values speed and convenience, the Ripple network provides a solution to these pain points by providing a quick, simple, and low-cost option with its different products.

Ripple offers xRapid, xCurrent, and xVia to provide seamless transactions worldwide. Except for xCurrent, these products utilised XRP to improve their services. As a result, they can quickly settle cross-border transactions, whether it’s traditional money or cryptocurrencies.

Eventually, Ripple unified its previous products into RippleNet. This rebranding widened the usage of XRP by using it with on-demand liquidity to send low-cost payments almost instantly without needing to pre-fund the destination account.

No, XRP is a decentralised currency.

Decentralisation is one of the main appealing aspects of cryptocurrencies. However, critics assume that XRP and the blockchain where it runs, XRPL, are controlled by Ripple because of its list of validators and stored XRP.

List of Validators.

The XRP Ledger currently has over 150 unique participants. Ripple, the XRP Ledger Foundation, and Coil maintain the Unique Node Lists (UNLs) that participants can select from to verify their transactions based on validators’ past performance, proven identities, and responsible IT policies. Ripple issues a recommended UNL, a list of validators who maintain and run the XRP Ledger network.

This led many to believe that Ripple chooses and controls who can oversee transactions. However, the company claims that a large portion of validators on their UNL are independent.

Participants aren’t forced to follow its UNL either. They can still choose a list from another publisher, like XRP Ledger Foundation and Coil. Users can also construct their own list of trusted validators. As a result, the network can continue to approve transactions even if Ripple shuts down or acts maliciously.

Holding supply.

Another concern pointed out by critics is Ripple holds a large portion of XRP in circulation. This portion of XRP was locked in a series of escrows to provide additional predictability to the digital coin’s supply. The stored XRP is released into the market through sales. This has caused concern as the company could manipulate the price of the cryptocurrency. For instance, if they release large quantities of XRP it can dilute the value of the current circulating supply.

The decision to move 55 billion XRP to escrow comes with conditions to maintain the public's or users' trust. This includes not flooding the market, selling OTC to institutional investors to incentivise the XRP ecosystem, and returning unused funds every month to a new escrow.

In addition, Ripple publishes quarterly XRP market reports to add transparency to the use and sale of XRP. It includes the amount released and returned to the escrow.

SEC alleges that XRP is a controlled asset that should be registered as a security.

In 2020, The Securities and Exchange Commission (SEC) filed a lawsuit against Ripple for allegedly violating the registration provisions of federal securities laws. The SEC claimed that XRP is a security which must be registered with the regulatory body. By failing to register XRP as a security before selling them, Ripple has been accused of violating the securities law.

Assets are considered as a security based on the established four-prong Howey Test. The SEC determined that XRP satisfies the Howey Test’s requirements since the company financed their platform by selling XRP tokens. Moreover, investors who purchased XRP assumed that they were investing in a joint venture. They also believed that they were making a profit from XRP because of Ripple’s marketing efforts and supply manipulation.

Most companies targeted would have opted to avoid the trial and comply with the SEC’s demands, but Ripple decided to contest the lawsuit. They argued that XRP doesn’t meet all the requirements in the first place since XRP is a currency and not an investment contract. It doesn’t meet an aspect of the Howey Test that it must be an investment of money. According to Ripple, the SEC is biased in classifying virtual currencies as securities since their operations are not much different from other platforms that were given a pass.

The legal battle between Ripple and SEC will change the nature of crypto regulations.

CFTC regulations are currently the basis for regulating virtual currencies, which are less heavy-handed than SEC’s rules. SEC’s victory means they’d have regulatory oversight over many of the virtual currencies being traded today, which can stifle blockchain technology development.

On the other hand, Ripple winning would mean that CFTC’s lighter regulations would likely apply, and blockchain technology would be free to develop further.

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