What is Ripple and XRP? A detailed and helpful guide

Ripple is a technology that offers two things – a cryptographic digital payment network called RippleNet and a cryptocurrency called XRP. It is a real-time gross settlement system (RTGS), currency exchange and remittance network developed by Ripple Labs and has been operational since late 2013. Their main aim to work closely with banks and financial institutions and positively disrupt cross-border transactions.


What problem does Ripple solve?


Traditional financial institutions like banks are still using the 70s’ technologies (like SWIFT or Western Union) for transferring money across accounts. When it comes to cross-border payment settlement, it becomes very costly for the users due to high transaction fees and takes days to resolve.


The way it works is while a domestic bank needs to have an account at a foreign bank, that foreign bank also needs to have an account in the domestic bank. The reconciliation process between the two banks is often done by a third-party. However, if the banks don’t have the required accounts, then they will have to use a common currency, like the US Dollar, as a mediator currency. This raises the complexity and costs further. Also, there is no one established standard for such international payments. Every bank has its own method for verifying incoming foreign transactions as well as has to abide by the regulation of its native country. Additionally, not all banks are connected via the same network.


Given that cross-border transaction is a $155 trillion market, it’s the natural choice for Ripple to solve this issue while others are focused on individuals.


A little detour – How do IOUs work?


The reason we are starting with IOU first is to make it simple to understand how Ripple function.


IOUs are tokens that any participants in the Ripple network can issue and store it in any Ripple wallet. But what differs is IOU doesn’t represent something you OWN rather what you OWE. IOU literally stands for I Owe You i.e. a token of a debt you need to pay back sometimes later. If John issues an IOU of $100 to Bruce, it means John owes Bruce $100. Instead, if John holds an IOU of $100 from Bruce, it means Bruce owes John $100.


Each IOU follows a naming convention consisting of two parts – who issued it and what it represents. For example, ETH.Binance is an IOU issued by Binance promising to pay back in Ethereum coin.


So IOU is not an asset. It’s instead a promise by the issuer to pay back the asset. That means an IOU receiver has to trust an issuer. The way it works in RippleNet is what is called establishing a trust line or credit line recorded in the network.


Now, an IOU can be issued for any real-world asset such as crypto coins, fiat currencies, gold, silver, cattle, a bag of grains, you name it. But IOUs for the same asset type if issued by two different entities are not interchangeable or tradable. Each IOU has a separate credit line making it redeemable only from the original creditor. For example, if John issues a 100 ETH.Binance IOU to Bruce that can’t be added to a 100 ETH.Hitbtc IOU that Bruce may own. Bruce has to collect it from John directly.




The RippleNet is an open-source project. It is an alternative to the usual banking system offered to various businesses including banks. It uses Ripple Transaction Protocol (RTXP) to move around ‘values’ around the network.

Ripple Lab is a privately held company but yet Ripple is called decentralized. This is because though Ripple Labs controls the XRPs, inside RippleNet there’s no central authority that decides who can set up a node and confirm any transaction.

How does RippleNet work?


The underlying cryptography of Ripple is different from other crypto projects. XRP doesn’t have a blockchain like Bitcoin or Ethereum. Instead, it uses a public ledger secured by blockchain tech.


The Ripple network consists of computers spread around the world that share this public ledger and maintain it. This ledger keeps permanent records of “who owns what and to whom” across the whole network. These computers are known as ‘validators.’


Just like Bitcoin, anyone can run a validator node and help maintain the Ripple network. However, companies who want to access the network need to use gateways. These gateways, generally run by banks and financial institutions, serve as entry points to the RippleNet for a network outsider.


Each node verifying a transaction compiles its own version of the next block based on the received transactions. They compare their proposed blocks and when most of the nodes agree on the block’s contents, a new block is verified.


Whenever an individual wants to make a payment, the relevant gateway accepts the deposits from him and issue balances on the Ripple ledger. Since these gateways are financial firms like banks, they can ask for identifiable information in the form of Know Your Customer (KYC) or Anti-Money Laundering (AML) or both about the people involved in transactions.


Once the banks accept the deposit and start the process, RippleNet manages the payment transfer and records this in the public ledger. Though financial history is recorded in the blockchain, the data is not linked to the ID or account of those individuals or businesses.


The Ripple algorithm updates every node about every transaction to prevent any duplicate transaction. If a user manages to send the same $100 to multiple gateways after initiating transactions with all of them, the RippleNet will only allow the first-ever initiated transaction and delete the rest. All the nodes running the consensus also will decide which transaction is the first by checking the majority vote through a pole. The consensus pole takes around just 4-5 seconds.


Ripple keeps track of all the IOUs made in a given currency for any gateway or user. All the IOU transactions taking place between Ripple wallets are publicly available on the Ripple consensus ledger.


The RPCA algorithm


Before we understand how Ripple Consensus Algorithm (RPCA) works, there are some terms that you should familiarize yourself with:


  • Server: Any entity that runs the Ripple Server software and participates in its consensus process is called a server.
  • Unique Node List (UNL): UNL is a set of other servers that is maintained by each server. These members are responsible for voting and determining consensus.
    The RPCA occurs in rounds.

  • Each server takes all the transactions available at the beginning of the consensus process.
  • The server then sends this transaction set to all the servers in its UNL, who vote on its validity.
  • When at least 80% of the members of a UNL agree on the validity of a transaction, it gets added to the ledger.

    Professor David Mazières from Stanford and co-founder of Stellar Development Foundation suggested that there are some flaws in the RPCA.


    Firstly, he claims that the Fischer Lynch Paterson (FLP) impossibility result stated that any deterministic asynchronous consensus system can only have two of the following three properties:


  • Safety.
  • Guaranteed termination or liveness.
  • Fault Tolerance.

    According to him, the Ripple Consensus Algorithm was sacrificing Safety over the other two. He concludes, “This means it prioritizes ledger closes and availability over everyone actually agreeing on what the ledger is—thus opening up several potential risk scenarios.”


    Secondly, he researched the entire system and found out that the algorithm fails to be safe under all circumstances.


    Note: Ripple has responded to Professor Mazières’ research, which you can read here.


    How Fast is RippleNet?


    The gateways on the network do not mine or stake their Ripple since all XRP tokens are pre-mined. This allows RippleNet to offer very quick transaction times. The total payment process completion between gateways in the RippleNet usually takes just 4 seconds. The RippleNet can process 1,500 transactions/second (TPS), much higher than Bitcoin’s (4-5 TPS) or Ethereum’s (15 TPS).


    How much transaction fee does RippleNet charge?


    The transaction cost on RippleNet is about 0.00001 XRP. Given XRP price has been between about $0.6 and $0.19 lately, this practically means near zero. The reason for having a fee ensures the network doesn’t get bogged down due to DDoS attacks.


    Note that the XRP token thus collected as the fee is destroyed, therefore increasing the value of the existing coins (though still very low).


    What is XRP


    XRP is a digital currency, also known as Ripple, which is used to power the XRP ledger. The ledger is an open-source product created by Ripple, which aims to connect banks in a network to enable fast and efficient international payments with minimal extra costs.


    The Value Curve of XRP


    The maximum supply of XRP coin is a staggering 100 billion (though expected). However, the total supply stands at 99,991,104,396 XRP out of which 43,675,903,665 XRP coins are in circulation. This volume commands a market cap of $9,586,102,358 USD i.e. a market cap dominance of 4.21%.


    XRP is currently the third-largest coin by marketcap, after BTC and ETH. Like the other two, it’s the price has also experienced ups and downs over the years. The token price took its lowest dip on Jul 7, 2014, valuing at just $0.002802 and at its highest at $3.84 USD on Jan 4, 2018, i.e. about two years back. Since mid-2019, the price has somewhat seemed to be stabilized a bit compared to the past years. As of the time of writing, XRP coin is being traded for $0.219483 and offers an ROI (Return on Investment) of 3,636.61%.


    XRP Trading


    As mentioned before, XRP is tradable with both cryptocurrencies as well as fiat currencies. This is why you can find XRP in about 113 crypto exchanges ( about 190 are there), including the major ones.


    When scanned through the xrpcharts.ripple.com we found the following. XRP is traded the most in Binance, with 22.8% trades in the last 7 days. It is followed by Hitbtc (17.5%), Bitrue (9.9%), Zb (9.4%), Huobi (9.3%), Bitstamp (8.4%), Upbit (5.5%), Bitbank (4.2%), Kraken (3.1%), Polonex (2.4%), Bitfinex (2.2%), etc.


    Though XRP can be traded for any crypto or fiat pairs, the coin is mostly traded in USDT (67.45% in Binance) and BTC (32.37% in Binance), then closely followed by USD, and then by ETH, Litecoin, and others. Apart from USD (39%), other popular fiat pairs are KRW – 27%, TRY – 19%, JPY – 7%, while others account for 9%.


    Which banks support Ripple?


    Ripple claims that over 300 banks and financial institutions support Ripple and have joined the RippleNet. The list includes major players like Axis Bank, Santander, Yes Bank, American Express, PNC, SNi Remit, Union Credit, Westpac, NBAD, InstaReM, UBS, Ria, Pontual, and others. A full list of RIpple’s partners can be seen here.


    Which wallets support Ripple?


    There are plenty of wallets where you can store your Ripple Coin (XRP). However, we think the following can serve you the best –


  • Desktop Wallets – Toast Wallet, Atomic Wallet
  • Web Wallets – Cryptonator, Wirex, Exarpy
  • Mobile Wallets – Edge, Cryptonator, Ethos, Abra, Toast, Wirex
  • Hardware Wallets – Ledger Nano S and X

    Ripple’s services


    Ripple Labs offers three main products, namely xCurrent, xVia, and xRapid to companies as solutions for worldwide money transfer. But in the last quarter of 2019, the firm has removed any mention of these from their website.


    NOTE: Recently, Ripple has rebranded their products. Clients will now have to directly connect to RippleNet on-premises or through the cloud instead of purchasing xCurrent or xVia and clients will use On-Demand Liquidity instead of buying xRapid.


    Still, we think it is necessary to explain the three products in brief to have an idea about Ripple’s service range.




    xCurrent is an enterprise software on RippleNet that allows banks to settle transactions instantly. It is built around an open, neutral protocol called Interledger Protocol (ILP) that enables interoperation between different ledgers and networks.


    With xCurrent, banks can review the details of any payment request and resolve any compliance issues before initiating and authorizing a transaction. If Bank A wants to send money to Bank B, they’ll send a message to Bank B to confirm the details of the sender and the receiver. After the transaction is initiated, the validator verifies the data and either approves or denies it.


    This allows for high straight-through processing rates and lowered overhead on fixing or reversing bad transactions.


    Both xRapid and xVia are built on xCurrent’s foundation.




    XRapid aims to help various payment processors enter emerging markets by reducing the amount of liquidity required for entry.


    For example, if a payment processor wants to expand its operations into a foreign country in Africa, then it needs to accept deposits in that country’s native currency and must have enough of that stored to cover any withdrawals.


    Now xRapid uses XRP as liquidity value to make that cross-border remittance. So instead of the local currency, the firm and Ripple partners with local financial institutions will both use XRP to complete the conversion to their respective local currencies.


    XRapid offers real-time transactions since the platform stores pre-converted XRP/fiat pairs, which is then sent to the payout bank or provider to give to the receiver.




    xVia is basically an API that is offered to act as a unified payment interface for RippleNet. xVia allows payment providers to send payments as well as exchange information such as invoices, rule books, or any other supporting documents.


    It is designed to make it easier to use xCurrent and xRapid


    How Ripple is Different than Stripe or PayPal?


    This is a question you may have asked while reading through. So, what are the differences?


    RippleNet is not dependent on Ripple Labs for functioning. If Ripple Labs shuts down, the RippleNet will still work fully since the gateways here are the banks. But that’s not the case with PayPal or Stripe – if the firms close, so do their payment services.


    PayPal depends on older technologies such as ACH to process transactions which offer fast speed of operation and much lower transaction fee. However, Ripple relies on its own patented technology that directly integrates with banks and other partner gateway institutions. Thi enables Ripple to complete a transaction with even faster and with lower fees than PayPal.


    The People Behind Ripple


    The Ripple Labs founders


    Chris Larsen – Larsen is an angel investor, business executive, and privacy activist. He is considered to be the richest person in cryptocurrency space. Chris is best known for co-founding several startups in the field of online financial services, starting with an online mortgage lender E-loan back in 1996.


    Jed McCaleb – Jed is an entrepreneur and a well-known programmer. In May 2011 McCaleb founded Ripple, a cross-border payment system that enabled a decentralized cross-border system without depending on mining. However, things quickly turned sour between McCaleb and Ripple. He realized that there was some fundamental misunderstanding between the two parties, which was past redemption. In 2014, along with Joyce Kim, they forked off from the Ripple protocol and founded The Stellar Development Foundation


    The Ripple Team


    Ripple is led by CEO Brad Garlinghouse, CTO David Schwartz, and CFO Ron Will.


    The Ripple Investors


    Ripple is funded by about 35 investors. Following are some of them –

  • Angel Investors – Google Ventures, IDG Capital Partners, Andreessen Horowitz, Lightspeed Venture Partners, FF Angel LLC, Pantera Capital, Vast Ventures, and Bitcoin Opportunity Fund.
  • The Series A Investors – IDG Capital Partners, AME Cloud Ventures, Seagate Technology, China Growth Capital, Core Innovation Capital, Venture 51, etc.
  • The Series B Investors – Standard Chartered, Accenture, SCB Digital Ventures, SBI Holdings, Santander InnoVentures, CME Group, Seagate Technology, Accenture, etc.
  • Series C Investors – SBI Investment, Tetragon Financial Group Limited Tetragon Financial Group Limited, Route 66, etc.

    Concerns Over Ripple


    Ripple offers several advantages in terms of speed, low transactional cost, immense flexibility, partnership, and the team which has been discussed in earlier sections. However, there are a few major concerns that exist with Ripple.


  • Centralization – Ripple is centralized. Since the tokens are already mined, the Ripple developers have full control over the token supply in the network. They can decide when to release it, how much, or if release it at all. Consider that if the firm went away, the RippleNet will exist, and therefore even then the developers can control the supply, thus limiting the network’s viability without a controller.
  • Ripple’s possible vulnerability – Ripple network is highly secured, otherwise, the banks and financial institutions across the world wouldn’t have opted for it. But there are some vulnerabilities present, according to the researchers from Purdue University. They have found that certain nodes can be attacked due to the inherent structure of the Ripple Network. This may lead to the vanishing of gateways that Ripple uses for transactions, leaving some 50,000 wallets at immediate risks of being locked out of their own accounts.
  • Ripple is a Private Firm – Through RippleNet is open-source, the company is not. Ripple remains a privately held company and as per their revenue model, it is certainly into profit-making. When it holds almost all the cards, nobody can stop it from eventually making decisions in favor of its clients (banks) over the needs of their users.



    Though there are numerous concerns over Ripple, RippleNet’s success says volumes about its potential to capture the market. Having identified the weakness in the network, Ripple developers are very much likely to fix those as soon as they can.


    Ripple has brought transparency to the payment systems that have traditionally been quite opaque. Also, the complexity and time associated with the usual payment system have been vastly reduced using RippleNet. An increasing number of banks and financial institutions have noticed these, and that’s the reason RippleNet has over 60 major financial institutions around the world in its net. Ripple has a solid market lead with digital payments of major banks yet to become a reality.


    Ripple’s issue with decentralization has been voiced by many and it seems that it’s bee heard, as Ripple team has started to take action towards making it decentralized. Though the future of XRP is something to be observed, RippleNet is here to stay and likely to lead the payment landscape for years to come.

    Rajarshi Mitra
    Blockchain Researcher