Key Takeaways
- XRP is a cryptocurrency for cross-border transactions, developed by Ripple Labs and powered by the XRP Ledger.
- Ripple is the company behind financial solutions like RippleNet, and XRP is the native token of the XRP Ledger, an independent decentralized blockchain.
- The legal battle with the SEC began in 2020 when the SEC alleged that XRP was an unregistered security.
- XRP offers speed, low fees, and institutional adoption but faces challenges like regulatory uncertainty, centralization concerns, and competition.
In a world of instant transactions like credit card payments, Amazon purchases, and PayPal transfers, it seems the banking system got left behind. Cross-border bank transfers rely on the SWIFT network: it’s expensive to use, relies on an intermediary, and takes a terminally slow 3-5 days. Surely, there must be a better alternative?
This is where Ripple’s XRP Ledger comes in. Blockchain company Ripple offers an alternative to sluggish legacy banking systems. Their public XRP Ledger uses blockchain technology to make near-instant, low-cost settlements between banks and enables your money to move across borders without friction. With a market capitalization in the billions and partnerships with major financial institutions, XRPL is the world’s 6th largest blockchain and plays a valuable role in traditional finance.
However, its success has been overshadowed by Ripple’s long-standing legal battle with the U.S. Securities and Exchange Commission (SEC). After more than 4 years of rancorous public dialogue, the case now looks to be nearing a resolution following Gary Gensler’s resignation. In 2025, the future looks bright for XRP Ledger – and it’s worth getting familiar with this mammoth project, which connects blockchain technology with traditional finance.
In this article, we will break down what XRP is and how it’s distinct from Ripple, along with its use cases, challenges, and storage options.
What Is XRP?
XRP is a digital asset created to facilitate fast, cost-effective international money transfers. It operates on a decentralized, open-source blockchain called the XRP Ledger. Unlike many cryptocurrencies designed primarily for peer-to-peer payments or smart contracts, XRP was built with a specific purpose: to bridge currencies for cross-border transactions.
Consequently, financial institutions, payment providers, and individual users have looked to XRP as a liquidity tool for large global money transfers. XRP is not mined and all tokens were pre-mined at launch, with a significant portion allocated to Ripple, the company behind much of its development.
What Is Ripple?
Ripple is the company behind XRP and XRP Ledger. In other words, it’s a financial technology company that provides solutions for global payments and remittances. Founded in 2012 by Chris Larsen and Jed McCaleb, it’s currently headquartered in San Francisco, USA. Ripple’s primary goal is to improve the inefficiencies of traditional banking systems by offering a fast and cost-effective alternative to SWIFT.
One of Ripple’s main contributions to crypto is the XRP Ledger, an open-source, decentralized blockchain technology that facilitates instant and nearly free cross-border transactions. As a result, Ripple has positioned itself as a strong alternative for financial institutions looking to modernize their existing payment infrastructures.
Ripple has secured partnerships with major financial institutions, including Santander, American Express, and SBI Holdings. On the other hand, in 2020, the United States Securities and Exchange Commission brought a case against Ripple, claiming that XRP is a security. This legal battle would continue for years and has led to much uncertainty around the project’s future. We’ll cover the topic in more detail shortly.
XRP vs Ripple: What’s the Difference?
- XRP is the native cryptocurrency of the XRP Ledger
- Ripple is the company that created the XRP Ledger and promotes the use of XRP
Although often used interchangeably, XRP and Ripple are not the same thing. It’s important to make the distinction between the two. Ripple is the company that developed RippleNet, a network designed to facilitate instant cross-border transactions.
XRP, on the other hand, is the digital currency that operates on the XRP Ledger (XRPL), an open-source blockchain that Ripple utilizes in some of its financial solutions. Essentially, Ripple is the company, and XRP is the cryptocurrency.
Ripple plays a key role in developing blockchain-based payment solutions, but XRP functions independently on the decentralized XRP Ledger. While Ripple holds a significant portion of XRP in escrow, it does not control the currency’s decentralized ledger, ensuring that XRP remains a standalone digital asset.
How Do XRP and XRP Ledger Work?
To understand XRP’s functionality, we must examine its underlying network and its token. Let’s break each of them down individually.
XRP Ledger Explained
The XRP Ledger (XRPL) is a decentralized blockchain designed for speed, scalability, and low-cost transactions. It supports thousands of transactions per second with settlement times of just 3 to 5 seconds and minimal fees. XRPL is primarily used by banks, payment providers, and other financial institutions to handle large settlements between banks.
Unlike Bitcoin’s proof-of-work or proof-of-stake on Ethereum, XRP uses a Unique Node List (UNL) Consensus Protocol. This method relies on trusted validators, chosen by the community, to confirm transactions. As a result, it offers benefits such as:
- Faster Transactions: Settlement in seconds instead of minutes or hours.
- Low Energy Consumption: No mining is required, thus making it eco-friendly.
- High Security: Resilient against attacks due to distributed validation.
To understand how it works, let’s look at an example. Imagine that John in the USA wants to send $1,000 to Jin in Japan. With traditional banks, this process could take 2-5 days and cost $5-$50, or more, in fees. Instead, by using XRP:
- John purchases XRP on an exchange and sends it to Jin’s wallet address.
- The transaction settles in less than 5 seconds with a fee of just a few cents.
- Jin can instantly convert the XRP into Japanese Yen in a local exchange.
This efficiency is why banks and remittance companies are adopting Ripple’s technology, and it’s also why many are fighting it fervently.
XRP Native Token
XRP is the native token of the XRP Ledger. It is used to pay for transaction fees and serves as a bridge currency in cross-border transfers. Its low transaction cost and high throughput make it ideal for real-time financial applications.
Each transaction on the XRP Ledger requires a tiny amount of XRP to prevent spam and ensure network reliability. This mechanism adds value to the token by ensuring its constant utility.
What Is XRP Used For?
The native XRP cryptocurrency sits at the core of the XRPL network. You can think of XRP as the lifeblood of the XRP Ledger, which serves multiple key functions, such as:
- Transaction Fees: XRP is used to pay for transaction fees on the network, preventing spam attacks.
- Bridge Currency: XRP facilitates cross-border transactions by serving as a bridge between different fiat currencies.
- Liquidity Support: Financial institutions use XRP to improve liquidity and enable faster settlements.
- Decentralized Exchange Utility: XRP can be used to trade digital assets on the XRP Ledger’s built-in exchange.
- Escrow Mechanism: To prevent excessive inflation, a significant portion of XRP is held in escrow and released in a controlled manner.
Why Does XRP Have Value?
XRP holds value due to its utility in cross-border payments, network efficiency, and growing market demand. Its ability to enable nearly instant international transactions with low fees has made it attractive to financial institutions looking for real-time liquidity. In addition, XRP’s role as a bridge asset eliminates the need for multiple currency conversions, streamlining global remittances.
Investors and institutions value it as a liquidity tool that can replace outdated financial rails. At the same time, it draws traders with its price movements and market potential as a speculative asset. Furthermore, its integration into emerging use cases like NFTs and DeFi platforms on the XRPL adds layers of utility that continue to support its value proposition.
XRP Tokenomics
One major factor that makes XRP attractive to investors is the project’s tokenomics:
- Total Supply: 100 billion XRP (fixed supply)
- Circulating Supply: Around 52 billion XRP (subject to escrow releases)
- Transaction Speed: ~3-5 seconds per transaction
- Average Transaction Cost: Less than $0.01
- Security Features: XRP’s design prevents excessive inflation or manipulation, ensuring long-term stability.
SEC vs. Ripple Explained
In December 2020, the SEC filed a lawsuit against Ripple Labs, alleging that XRP was an unregistered security and that Ripple had illegally raised over $1.3 billion through its sales. This lawsuit significantly impacted XRP’s price and led to its delisting from several major exchanges, affecting its market liquidity and adoption.
In July 2023, a U.S. court ruled that XRP was not a security when sold on exchanges. This was a major victory for Ripple. However, institutional sales of XRP were deemed securities, requiring compliance with certain regulations.
Consequently, this ruling restored confidence in XRP, leading to its relisting on major crypto exchanges and renewed institutional interest. The court ruling also set an important precedent for other cryptocurrencies facing similar regulatory scrutiny.
Advantages of XRP
When we compare XRP to some of its competition in the crypto world, it offers some notable advantages. These include:
- Fast and Low-Cost Transactions: Transactions take ~3-5 seconds and cost less than $0.01.
- Scalability: The network can handle 1,500+ transactions per second.
- Eco-Friendliness: There’s no mining, so the energy use is low.
- Strong Institutional Adoption: Banks and payment providers are already using XRP.
- Built-In Decentralized Exchange: XRP supports DEX functionality on XRPL.
- Regulatory Clarity: The recent court ruling provides legal clarity for retail transactions.
- Reliable Liquidity Mechanisms: XRP supports cross-border transfers efficiently.
Disadvantages of XRP
At the same time, XRP is far from perfect. It suffers from the same problems as many other cryptocurrencies on the market:
- Regulatory Uncertainty: Despite winning the SEC case, future regulations may impact XRP.
- Centralization Concerns: Ripple holds a large portion of XRP in escrow.
- Limited Smart Contract Capability: XRP’s smart contracts are not as advanced as those on Ethereum.
- Adoption Challenges: There’s growing competition from alternative financial solutions and blockchains.
- Dependence on Ripple’s Success: Ripple’s business strategy and legal status influence XRP’s adoption.
How To Store XRP
Storing XRP safely requires a compatible cryptocurrency wallet that supports the XRP Ledger. There are two main types of crypto wallets: hot wallets and cold wallets. Hot wallets like MetaMask and Trust Wallet must connect to the internet, making them convenient for daily transactions but more vulnerable to hacking.
On the other hand, cold wallets such as Ledger and Trezor provide offline storage, offering maximum security against cyber threats. When choosing a wallet, consider factors like security, ease of use, and private key control. Lastly, always enable two-factor authentication (2FA) and keep your private keys secure to prevent unauthorized access to your XRP holdings.
Closing Thoughts
XRP continues to be a major player in the cryptocurrency space, offering fast, cost-effective transactions and institutional adoption. Despite facing regulatory challenges, Ripple’s recent success in the SEC case has restored confidence in XRP. As a result, XRP has turned into an essential asset in global financial solutions, positioned for long-term adoption.
