Ripple (XRP) - Spotlight by Bitpanda


Ripple (XRP)

The Ripple Network and its cryptocurrency XRP were launched in 2012. The company Ripple has close ties with banks and other institutions. Their goal is to act as a global settlement network to enhance existing infrastructure and services. Unlike Bitcoin, which is run by a decentralized peer-to-peer network and controlled by no single entity, the cryptocurrency XRP was created by one single company called Ripple.

The main goal of Ripple is to establish a network that allows as many transactions as possible to simultaneously run as fast as possible. Ripple aims to attract companies like large banks, remittance services, and payment providers who are interested in the technology.

Keeping this in mind, it’s easy to see that Ripple is more of a competitor to established financial infrastructure services such as SWIFT than to other cryptocurrencies. 

Ripple does not use a blockchain
The Ripple network does not run on a blockchain and its native cryptocurrency XRP doesn’t depend on a Proof-of-Work algorithm like Bitcoin or Ethereum. For this reason, it doesn’t need as much energy and computing power, while allowing for faster transaction speeds. 

Instead, transactions on the Ripple network run through validating servers, which constantly compare the information they receive and process with a common ledger. 

Ripple’s validating servers use a consensus mechanism called HashTree. The main difference between the Ripple network and a proof-of-work blockchain is that consensus is reached by comparing not all the data, but only a single value, which is derived by summarising the ledger’s data. These independent validating servers are either run by individuals or by banks and institutions. 

According to 👉the Ripple Technical FAQ, the electricity required to run a validator is comparable to that which is needed to run an email server.

Ripple is more than just the cryptocurrency XRP
While Bitcoin and other cryptocurrencies are positioning themselves as independent alternatives to traditional currencies and (central) banks, the goal of Ripple is more or less the exact opposite. 

Ripple wants to act as a global settlement network and hence works closely together with banks, payment providers, and other financial institutions. 

The goal of Ripple is to serve as a flexible middleman currency in order to facilitate the exchange of any unit of value. 

Ripple is even older than Bitcoin
Another interesting aspect of Ripple is that the company is older than Bitcoin. A predecessor of the Ripple protocol was developed in 2004 which, back in those days, was called “Ripplepay”.

For instance, some cryptocurrency payment processing platforms already offer XRP as pay-in and pay-out options. Ripple has set out to revolutionize the payment industry while working towards some measure of standardization of international transactions using financial technology. Ripple also encourages regulators around the globe to introduce blockchain into traditional payment operations. 

The XRP Ledger 1.6 was released in August 2020 including several updates that aim to improve overall performance. Along with several bug fixes and optimizations, the consensus mechanism became more robust by setting offline validators aside while they are not connected to the network. Furthermore, the hardened validations that were introduced allowed servers to detect Byzantine behavior more easily - a significant problem in the XRP space.

In 2020, allegations of the SEC against Ripple also caused turmoil. According to the U.S. Securities and Exchange Commission, XRP is a security and was not declared as such. The reasoning behind the claim is that about 50% of the total XRP tokens are owned by Ripple. In its official reply, Ripple defended itself by stating that the XRP network is completely decentralized and that holding XRP does not mean receiving a portion of Ripple’s revenues or profits.

Furthermore, Ripple Xpring is an ecosystem initiative for investing in, incubating, acquiring, and providing grants to projects and companies that could play a role in realizing use cases of XRP outside of international transactions, such as crypto solutions for debt and derivatives.  

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