What Is XRP, and How Is It Related to Ripple?

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XRP is a digital currency which is issued and partly managed by Ripple Inc. a payment solutions company that also manages the RippleNet cross-border payment network.

Ripple began selling XRP in 2012, though the company has turned its attention away from the digital currency and toward its cross-border payment network in recent years.

How does Ripple work?

Unlike Bitcoin or Ethereum, Ripple does not refer to a blockchain network with a native cryptocurrency asset. In fact, Ripple, the company, has a history of reframing how XRP fits into its business model, first embracing it as the fuel that powers its cross-border payments technology, then setting it to the side as it focused on xCurrent, xRapid and xVia – still other payment networks for cheaper and faster international payments.

In late 2019, xCurrent, xRapid and xVia were rebranded to RippleNet, a payment network focussed on quick, cross-border transfers between financial institutions.

In addition to RippleNet, Ripple also oversees the XRP Ledger, a blockchain-like network that facilitates payments in XRP, the digital currency issued by Ripple. Like other cryptocurrencies, XRP can be sent to and from a digital wallet irrespective of international borders. When it was launched in 2012, Ripple marketed XRP as a faster, cheaper alternative to bitcoin because transactions settle in seconds; XRP’s network can achieve this speed because its infrastructure is centralized and it does not utilize proof of work, the consensus algorithm used by Bitcoin to process transactions.

What is Ripple’s UNL, and how is XRP different from Bitcoin?

A committee of validators acts both like miners and full node operators for XRP by maintaining the transaction ledger. These validators reach consensus every 3-5 seconds when they publish a new version of the transaction ledger with the latest transactions.

While anyone can run the code to be an XRP validator, that doesn’t mean any validator will be trusted by the others in the network. To earn this tust, they have to make Ripple’s unique node list (UNL) , a registry of trusted validators curated by Ripple.

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There are currently 35 active XRP validators, six of which are run by Ripple itself.

Ripple also offers a software suite called RippleX for developers and businesses who are building on XRP. The platform includes tools and programs to interact with the XRP Ledger and PayID and Interledger, two protocols that are developed independently of XRP.

The difference between RippleNet and XRP

Ripple’s enterprise-facing network, RippleNet, does not require XRP to function.

According to Ripple’s website, banks from Santander to PNC have used RippleNet’s banking-focused “blockchain” to settle remittance payments and swap currencies. The company claims to have settled nearly half a billion worth of transactions and serves 6 continents. The service supports more than 55 countries and 120 currency pairs.

RippleNet’s On-Demand Liquidity service is the only network feature that uses XRP, and this service is only available in Australia, Mexico and the Philippines.

Bitcoin vs. XRP

Unlike bitcoin, XRP coins are not mined. Ripple minted the entire supply when the network was launched, and Ripple intermittently releases portions of the supply from an escrow and sells them on the open market. Out of the total 100,000,000,000 supply of XRP, over 45 billion is currently in circulation.

XRP’s design sacrifices decentralization for speed. Because Ripple scrapped Bitcoin’s proof-of-work consensus mechanism, the network is arguably less secure, but it can also process transactions more quickly than Bitcoin because the UNL of validators is so centralized, so they can agree on consensus and share data quickly.


Bitcoin XRP 
Proof-of-work XRP Ledger Consensus Protoco
Hard cap of 21 million units, gradually mined Fixed supply of 100 billion units, minted in advance of network launch
Miners order transactions into blocks to maintain transaction ledger, node operators keep copies of the digital ledger Validators both maintain transaction ledger and keep a record of transactions; only UNL approved validators are trusted by the network
Permissionless node network Permissioned node network (UNL list)
Not controlled by a central authority Overseen by a private company
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XRP can facilitate faster transactions because there is no mining involved in the transaction process. Instead of miners competing for block rewards and ordering transactions into the ledger during this process, validators verify transactions without promise of reward. These validators are vetted and trusted by Ripple, and this trust is necessary to XRP’s design to prevent double spending (additionally, this trust model is not unlike how credit cards or other digital payment networks operate today).

Ultimately, XRP’s centralization makes it less censorship-resistant and permissionless than other, open-source blockchains like Bitcoin and Ethereum. Anyone can run a Bitcoin node and partake in network consensus, but only UNL nodes that are approved by Ripple can partake in XRP’s consensus. Similarly, XRP validators could, in theory, easily collude to censor a transaction, while Bitcoin’s proof-of-work system makes it impractical for miners to collude to censor transactions.

Perhaps the difference between XRP and Bitcoin is best summed up as the difference between a company and an economy. XRP’s supply is issued by a company at a rate determined by its executives, and transactions are processed by a committee of pre-approved stakeholders. Bitcoin’s supply is issued through the mining process at a mathematically predetermined rate, and transactions are processed by the global, decentralized mining industry.

Hoa Nguyen contributed to this article.

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