Ripple is considered a dino-crypto project that sets itself apart from others, as it aims to work alongside banks rather than replacing them. Along with facilitating ‘swift’ and efficient cross-border financial transactions through their own Ripple network, we take a look at what Ripple is offering and how it is positioning itself in the grander scheme of crypto things.
To know what Ripple is, we have to look at who founded it. Initially founded as RipplePay in 2004 by Ryan Fugger and later revamped as Ripple Labs in 2012 by Jed McCaleb and Chris Larsen, their primary goal was to create the “Internet of Value” 
This is a concept where value can be exchanged as quickly and easily as information is shared on the internet, all enabled by blockchain.
One of the genius minds behind Ripple is David Schwartz, the CTO of Ripple and the co-creator of the XRP Ledger. He is widely regarded as a thought leader and known for his deep insights into the state of blockchain.
The company behind Ripple wants to target the challenges that international money transfers such as the Belgian-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) system faces, which was in fact developed in 1973 in order to form a better communication line between different banks.
Today, 11,000 institutions across 200 countries use it to wire all of their international financial transfers and according to SWIFT they handle approximately six trillion dollars daily, but do this too slowly and with “too damn high” fees.
“If you needed to get £10k to London from New York, the fastest way would be to buy a plane ticket from JFK and fly it there.” — Brad Garlinghouse, CEO of Ripple
Therefore, Ripple Labs created a network called RippleNet, also known as xCurrent, which enables banks to process cross-border payments in real-time without using its own digital currency XRP. On the other side, they have xRapid which is strongly connected to the cryptocurrency XRP.
Ripple’s network supports two types of currencies: IOUs and XRP.
IOUs on the Ripple network are tokens that represent debts or obligations and indicate that the issuer owes something to the holder, which is mostly a specific asset like currency, gold, or any tangible or intangible product.
Each IOU is unique to its issuer and cannot be interchanged with IOUs from different issuers, even if they represent the same type of asset. They are in a way non-fungible.
XRP is their digital currency that facilitates fast cross-border payments and acts as a liquidity solution for banks, which can use XRP as a bridge currency between fiat and other currencies. In an ideal scenario, banks use XRP to move large sums of money quickly and without the need for intermediary banks.
XRP can be divided up to six decimal places, with the smallest unit referred to as a “drop.” One drop is equivalent to 0.000001 XRP.
This review of Ripple (XRP) was created for informational purposes. This article is not intended for promotion.
With a decade of uptime, the XRP ledger has been a reliable backbone of their operations. In a way, it operates as a decentralized public blockchain that is managed by a peer-to-peer network and that is accessible to everyone.
Unlike traditional mining-based blockchains, the XRPL achieves consensus through validators—servers that ‘anyone’ can operate in theory. These validators work together to agree on the order and outcome of transactions.
If you’re looking to submit transactions, access ledger data, or participate in the network in other ways, your application will need to connect to one of these nodes.
Each validator node is responsible for checking whether transactions follow the rules of the network, and then tries to reach consensus.
After checking transactions, validators will propose a list of transactions (also known as a ‘ledger’) to be included in the permanent history of the network. Other validators that trust this validator will then compare the proposed ledger against their results, sending out revised proposals in response.
Once a supermajority (80%) of the network agrees on a proposed ledger, it is validated and included as part of the permanent history.
In theory, anyone can run a validator to maintain the Ripple network and currently, the network has over 120 active validators, including universities, exchanges, and individual contributors.
You may be thinking, this sounds interesting, can I earn as well, while validating the Ripple network? The answer is ‘no’, as there is no direct financial reward, such as mining fees or staking rewards we know of from other protocols.
This lack of financial incentive raises questions about the motivation of those that run these validators, especially since the possibility to approve fraudulent transactions is still on the table.
Ripple also introduces federated sidechains that operate parallel to the main blockchain. This allows for real transactions that can handle real financial stakes but more importantly, it opens them up for complete customization. Meaning it can be tailored for any institution that wants their own network.
Connected through a two-way peg that facilitates the transfer of assets between the XRPL and the sidechain, it also supports a broad range of applications, including those requiring the Ethereum Virtual Machine (EVM). Think of it as a L2 to the layer 1 Ripple net. This could mean ‘smart contracts’ on Ripple or as they call it: ‘hooks’.
One of the key developments is the introduction of Hooks, which are designed to provide smart contract functionality on the XRP Ledger.
Hooks are small, efficient pieces of code being defined on an XRPL account, allowing logic to be executed before and/or after XRP Ledger transactions.
Hooks would allow small, efficient pieces of code to run before and/or after transactions are processed. Unlike Ethereum, which supports a wide range of Dapps but can suffer from high and unpredictable fees, Hooks offers a more streamlined approach.
Hooks are not Turing-complete, which means they can’t run any conceivable program like Ethereum can, but they are more optimized for efficiency and decentralized finance applications on the XRP Ledger in the future.
While Ripple Labs does not control the protocol directly, it maintains significant influence as the organization responsible for its maintenance. This could be confusing because the centralization aspect and the small number of validators compared to the vast number of Bitcoin nodes suggest it’s more centralized than other networks.
While some critics argue that XRP is too centralized, it’s essential to understand that according to Ripple Labs, after launching the XRP protocol, it does not control the network. They can maintain and propose updates, much like how developers contribute to Bitcoin or Ethereum.
This means XRP operates independently, although Ripple Labs’ other products rely heavily on XRP.
Ripple faced a few lawsuits throughout the years, the biggest is still ongoing after an appeal of the SEC after Ripple was fined $125 million.
It started in 2020, when the Securities and Exchange Commission (SEC) initiated a high-profile lawsuit against Ripple Labs, alleging that the company had illegally raised over $1.3 billion by selling XRP, which the SEC classified as an unregistered security.
The core of the lawsuit is that Ripple failed to register XRP as a security and did not provide adequate disclosures to investors, which is required by federal securities laws.
The defendants in the case include Ripple Labs Inc. and two of its top executives, Brad Garlinghouse and Christian Larsen. The SEC argues that these individuals were fully aware of the legal requirements yet chose to ignore them, thus violating securities laws.
In defense, Ripple Labs contends that XRP is not a security but a currency that facilitates international and domestic transactions. They also emphasized that XRP is decentralized, arguing that its use does not constitute an investment contract and therefore should not be subjected to securities regulations.
In August 2024, Judge Analisa Torres issued an injunction to prevent Ripple from violating securities laws in the future. However, she denied the SEC’s request for Ripple to disgorge the profits gained from its sales of XRP, which were sought to be over $876 million.
Ultimately, Ripple Labs was ordered to pay a $125 million civil fine, significantly less than the nearly $2 billion penalty the SEC had sought.
Other lawsuits were settled and were about failing to follow internal “know your customer” requirements.
XRP has a fixed supply of 100 billion coins, all XRP tokens were pre-mined, which means there’s no need for mining activities.
Ripple Labs has implemented a structured schedule for releasing XRP tokens from escrow, initiating this system in 2017 to stabilize the market and manage supply effectively. On the first day of each month, 1 billion XRP is unlocked, with the recent December 1, 2024 unlock involving three transactions totaling 1 billion XRP.
This release pattern is consistent, as seen in the November and October unlocks, where Ripple re-locked a portion of the tokens to maintain future token availability. For investors, these unlock events are significant as they can affect market dynamics and the price of XRP.
The XRP Ledger has proposed NFTs through the NonFungibleTokensV1_1 amendment that lets NFTs exist on its network, which could represent anything. Typically completed in just 4 seconds, Ripple offers a trading functionality to buy and sell an NFT to be made in any asset available on the XRP Ledger, including issued assets like dollars, euros, bitcoin, and XRP.
Ripple’s stablecoin, RLUSD, initially announced on August 10 and in private beta on the XRP Ledger and Ethereum, was set to launch on December 4 after nearing approval from the New York Department of Financial Services. Designed to enhance cross-border liquidity and fully backed by US dollar assets, RLUSD has not yet been approved for public trading, with Ripple cautioning against fraudsters.
Bitcoin and Ripple differ significantly in their underlying technology and purpose. Ripple cannot be mined like Bitcoin; instead, Ripple Labs created 100 billion XRP tokens at its inception.
Ripple is considered more sustainable than Bitcoin, as BTC mining requires a big usage of electrical power. It uses the term ‘decarbonization’ which means that the energy used in the operations of the XRP Ledger is offset or counterbalanced by green energy sources. We take a look at some other differences:
What Ripple is, is a network that wants to work directly with banks instead of against them. This could be something interesting if we look at how big institutions are using crypto and wanting to align themselves with the unstoppable digital economy.
Some critique remains the same, the smaller group of validators could theoretically collude, and lawsuits could tell something more is going on behind the scenes of Ripple.
With the current landscape and crypto becoming mainstream we could just see XRP push to new highs, but the violent price history has taught us to not get caught up in the hype and use it but never marry to the coin.
The future of Ripple and XRP remains both promising and complex. While Ripple’s vision of revolutionizing cross-border payments and its partnerships with traditional financial institutions set it apart in the cryptocurrency space, it continues to navigate regulatory challenges and centralization concerns.
The platform’s technological advantages – including fast transaction speeds, low costs, and energy efficiency – make it a compelling option for institutional and retail adoption. However, investors should remain mindful of the ongoing regulatory landscape and Ripple’s unique position as a bridge between traditional finance and crypto innovation.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.
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