XRP is one of the largest digital currencies worldwide and the native token of the XRP Ledger, its blockchain. XRP was designed to represent an alternative to Bitcoin by offering cheap and instant cross-border payments and facilitating trustless transactions. Ripple functions with the help of a Hash Tree that doesn’t involve a Proof-of-Work (PoW) consensus mechanism or a Proof-of-Stake (PoS) model.
Individuals will continue investing in digital currencies to gain profits and diversify their portfolios as the world becomes more interested in digital coins. Ripple will be a good alternative, as the XRP price prediction shows that its price will go upward. However, to understand Ripple’s full potential, we must also examine its past, which is what we will discuss in this article. Keep reading to find out more.
The History Of XRP
Arthur Britto, David Schwartz, and Jed McCaleb started to develop the XRP Ledger back in 2011 as an alternative to the constant limitation of Bitcoin. The XRP Ledger was launched in 2012, together with the native token, XRP, and the three developers were also joined by Chris Larsen. XRP was designed to function similarly to Bitcoin, enabling faster, easier, and more secure transactions globally. The original open-source project was named Ripple, and it included the Ripple Transaction Protocol, the Ripple Consensus Ledger, and the Ripple Network.
Although some use the word XRP interchangeably with Ripple, it is important to know that the cryptocurrency is independent of the company Ripple, which offers tech and crypto services. Ripple uses XRP in its operations as it provides an efficient, fast, and reliable solution, and XRP has a decentralized and open-source blockchain, the XRP Ledger (XRPL). XRP has a limited supply of 100 billion, which has been distributed in several ways over the years.
For example, 80 billion XRP coins were initially allocated to Ripple, and to maintain a stable supply, the organization locked 55 billion XRP. Then, the other team members shared another amount, and the rest of the coins were released gradually.
The primary idea behind XRP was to function as a peer-to-peer network and represent a cheaper, faster, and more energy-efficient solution that could consume less energy and process transactions in seconds. Ripple uses XRP as a settlement layer with its own platform, and the digital currency is also traded as a cryptocurrency on numerous exchanges.
How Does Ripple Work?
Ripples function on peer-to-peer and open-source decentralized applications that allow people to benefit from seamless transfers. The basics of Ripple lie in blockchain technology, which provides an unchangeable and permanent record of transactions. XRP Ledger is the blockchain that keeps track of all the information on XRP, including balances, accounts, and transfers.
XRP uses a quorum-based consensus mechanism, in contrast with the other digital coins, which mainly use the Proof-of-Work and Proof-of-Stake alternatives. This consensus method allows validators to participate in the consensus and agree on a set of transactions in a ledger. The information is then written in the blockchain, and no one can change it anymore.
Additionally, XRP has a unique node list with 35 validators based on past performance, where every user can choose their own list of validators. This particular list, called UNL or Unique Node List, is specific to each node.
A Comparison Between XRP And Bitcoin
To realize XRP’s full potential, we should compare it with the crypto king, Bitcoin, as there are various differences between the two coins. For example, the consensus mechanism to validate transactions differs, as XRP uses a unique consensus mechanism that relies on UNL or trusted validators. To make transactions valid, the trusted validators need to agree, while in the case of Bitcoin, validators need to solve complex mathematical problems to add new blocks.
Additionally, Bitcoin uses a Proof-of-Work consensus mechanism to validate its transactions.
Compared to Bitcoin, XRP authenticates transactions cheaper and faster, using less energy. Bitcoin has been highly criticized over the years because of its huge electric consumption, so the other digital coins have started to look for solutions to this problem and solve some of its issues. Regarding scalability, XRP allows about seven transactions per second, which is the same as BTC but is lower than Ethereum, which maintains about 12 transactions per second.
What Is XRP Used For?
XRP founders developed this project to allow participants to make transactions reliably, cost-efficiently, and quickly.
This is why XRP has become a viable solution for institutions, businesses, and governments worldwide. XRP is mainly used for crypto liquidity, border payments, and Ripple’s primary services. Additionally, XRP can be exchanged for fiat money, which can be bought from crypto exchanges and held in virtual wallets.
Is XRP A Good Investment?
XRP is a cryptocurrency, a volatile asset that can pose significant risks. This is why it is important to research the market before investing to experience gains, not losses. So, knowing all the risks and other information that might help you in your crypto journey is essential. Additionally, investors should consider diversifying their portfolio and opt for more cryptocurrencies to navigate this space’s volatility better.
XRP is a good player in the crypto space, as it has robust security protocols, lower fees, and energy efficiency. In the crypto space, XRP is the perfect blend of practicality and innovation, which can become a competitor to the largest cryptocurrencies by market cap, including Ethereum and Bitcoin.
We hope this article provides you with all the information you need to decide whether XRP is a suitable option for your portfolio.
