What is XRP?

Written by

Alyx T.

Senior Writer

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If you’ve ever wondered “what is XRP?”, then get ready for the only guide to this exciting cryptocurrency you'll ever need. 

In our guide to XRP, we're going to tell you everything you need to know about this currency, including how it started, how it works, the pros and cons of using XRP in the real world, and what the future looks like for this coin.
 

XRP Explained 

Simply put, XRP is a cryptocurrency. It’s also the native coin used by the blockchain-based payment platform Ripple. 

Ripple Labs is a for-profit company whose goal is to fix the problem of slow and expensive international money transfers. If you’ve ever sent money abroad, you already know that it is generally very costly, and the process can take several days. 

Ripple Labs created their own coin, XRP, to perform peer-to-peer financial transactions between users in different countries, as a decentralized alternative to traditional systems.

Decentralized finance, or DeFi, is a financial system that uses currencies and protocols outside the usual centralized systems we’re used to, like banks. 

Therefore, DeFi transactions are usually cheaper and faster, as they cut out the middleman and let people send and receive money directly between one another. 

If you understand DeFi, then understanding XRP is easy. If you imagine sending money overseas, but without banks charging high fees and shafting you on the exchange rate, you’ve pretty much got XRP! 
 

XRP History in Brief 

XRP is already an established cryptocurrency with over 10 years of trade under its belt. But when did XRP start and who created  XRP?

XRP was created in 2011 by three engineers who were fascinated by the invention of Bitcoin but wanted to improve on it. 

David Schwartz, Jed McCaleb and Arthur Britto began to develop the XRP Ledger (XRPL), which was designed to iron out what they saw as problems with Bitcoin, and create a more usable and sustainable cryptocurrency.

Shortly after XRPL first launched in 2012,  angel investor Chris Larson joined the group, and it began trading as New Coin, before quickly rebranding itself as OpenCoin. It eventually became  Ripple Labs, the name it holds today. 

As Ripple Labs, the company introduced its own native digital asset, originally called Ripples and now known by the currency code XRP. Users can send and receive XRP via the RippleNet payment network. 

Ripple Labs itself is a for-profit organization. However, in 2020 the group also introduced the XRPL Foundation as a non-profit entity. The two now work side-by-side, promoting the use of peer-to-peer foreign money transactions. 
 

How Does XRP work? A Look at XRP for Beginners

What is XRP crypto? As we’ve seen, XRP is the native coin created by Ripple Labs. Therefore, it falls under the category of a cryptocurrency. 

The XRP Ledger is a system where transactions take place on a blockchain, similar to Bitcoin and other popular cryptocurrencies.  This means that in order to use XRP you need to set up a digital wallet with which to send and receive XRP, as well as gain access to the RippleNet platform. 

But what is an XRP coin, and how does the average person use it?

The main purpose of XRP coins is to replace the usual fiat currencies that we use to send and receive money abroad. 

For example, if you live in the United States and want to send money to your friend in the UK, you usually have to send USD and pay a high fee to send it to Britain, converting it to GBP on the way. 

These types of payments usually go through your bank via the protocol known as Swift.  The fees associated with converting currency and sending it to another country are high. Plus, you can expect to wait at least 2-3 working days for the transaction to be completed. 

On the other hand, by using a DeFi currency, like XRP, you can bypass your bank and avoid Swift altogether. This peer-to-peer transaction not only reduces the fees to a miniscule amount, but these XRP transactions are pretty much instant. 
 

Real-world Benefits of XRP

Let’s take a look at just some of the many benefits of XRP, so that you can decide if it’s the right coin for you, especially in the future.
 

Lightning-fast Transactions and Minimal Fees

The most obvious benefit of using XRP is that it provides a much faster and cheaper way to send money overseas. 

The average transaction takes just 5 seconds, and the fee is 0.0001 XRP. Even at the coin’s all-time highest value, this is still less than a fraction of a cent. 

Therefore, if you send and receive funds regularly, it's clear that this will save you both time and money every time you use XRP instead of fiat currencies. 
 

Solid Reputation 

The RippleNet platform has gained a solid reputation over the last 10 years, and is therefore considered reliable and safe. 

Some of the world's biggest financial bodies use Ripple, including Santander in the UK and American Express.

This means that the Ripple name is trusted throughout the industry, which improves its overall confidence among users. 
 

A Popular Choice for Small Businesses 

While big businesses and global brands can generally suck up the fees associated with fiat currency cross-border transactions, it's smaller businesses that will feel the pinch every time they send or receive money from overseas. 

Therefore, XRP and the RippleNet platform offer a more cost-effective solution for these smaller businesses, especially as more and more companies move their products and services online and into a multinational setting. 

With instant processing times and minimal transaction fees, start-ups and small business owners have the freedom to interact with their international customers, giving them a far wider reach.
 

A ‘Greener’ Cryptocurrency 

XRP is a “pre-mined” coin. That means that, unlike most blockchain currencies like Bitcoin, it does not need to be mined, so no energy is wasted in the transaction process. 

XRPL itself claims that it offers “faster, cheaper, green money”, making it a far more sustainable currency in the long-term. 

As more cryptocurrencies are coming under fire for their wasteful processes and energy used for mining coins, XRP stands out as a green alternative, which also makes it very attractive to the more conscientious investor. 
 

Real-world Drawbacks of XRP

As with everything in life, it isn't always plain sailing when it comes to XRP. With that in mind, let's take a look at some of the possible drawbacks of using XRP and the RippleNet platform.
 

Too Centralized

There are two sides to the centralized finance coin (pun absolutely intended). 

As we noted in our benefits of XRP, having partnerships with huge industry names like Santander and American Express can work wonders for a coin's reputation. But on the flip side, one of the main complaints people have about XRP is that it is simply too centralized. 

The whole idea behind decentralized currencies is to get away from big institutions like banks and lenders, who typically add fees and waiting times to your transactions. 

Therefore, the fact that XRP is very popular with worldwide banks and credit card providers also serves to shoot the popularity of this cryptocurrency in the foot. 

So if you’re someone looking for a completely decentralized currency, then XRP is probably not your best option.
 

Doubts Over XRP’s Future  

A couple of years ago, XRP and Ripple Labs were thrust into the limelight of the crypto world. And while you may believe that there is no such thing as bad publicity, this may not be the case when looking at which digital coins to invest in. 

In 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs Inc, alleging that Ripple and some related defendants “violated sections 5(a) and 5(c) of the Securities Act of 1933 by engaging in the unlawful offer and sale of securities in exchange for cash and other consideration worth over $1.38 billion.” 

The outcome of this lawsuit is due in December 2022 but, regardless of whether the SEC wins the case or not, this public display does not bode well for the future of the coin. 

In fact, at the time the lawsuit was put forward, XRP was one of the top cryptocurrencies by market capitalization, worth approximately $27 billion. But by the end of December 2020, when the complaint was filed, Ripple’s capitalization dropped by a staggering $11 billion. 

It’s fair to say that anyone looking to invest in the coin should wait for the results of the lawsuit first. 
 

Highly Volatile 

As a rule of thumb, any coin that banks and centralized institutions invest in heavily should usually be considered a secure investment. 

However, XRP is a cryptocurrency, and therefore volatile by its very nature. Plus, throw in a lawsuit from one of the USA’s biggest government bodies, and you’ll see XRP’s value yo-yo like a kid in the 80s. 

Furthermore, there's still a huge percentage of XRP which isn’t yet in circulation, and the release of these coins into the market in the future will almost certainly lead to inflation.  

All of these elements combined mean that XRP and Ripple are highly volatile investments. 
 

Is XRP a Good Investment in 2022?

Many people ask themselves “is Ripple XRP a good investment” and the answer is…probably.

Even if you take into consideration the recent controversy, Ripple Labs and their native XRP coin have a long history, solid reputation and the backing of some of the biggest banking institutions in the world. 

Cryptocurrencies will always be volatile, but Ripple's mission to eliminate high transaction fees and processing times makes it a very tantalizing prospect. 

There will always be people in the world who want to send their money overseas, and XRP is a great way to cut out the middleman and save yourself a lot of time and money. 
 

What Is the Future of XRP?

Like any cryptocurrency, the future of XRP is a little difficult to predict. That said, we believe that this particular coin will stand the test of time. 

It already has more than 11 years under its belt, along with the support of international banks and other global enterprises.

But before you think about investing in XRP, we would suggest keeping an eye on the market and considering things such as: what is the price of XRP? Also, what is XRP worth?

You can also perform some basic searches on things like 1 XRP to USD, to find out how much bang you'll get for your buck at the present time. 

Of course, these figures will go up and down with every day that passes, but the XRP coin and its truly unique selling point will continue to be, at the very least, a very interesting prospect.