What is XRP? Understanding Ripple’s Digital Currency

Albert Bogdankovich

XRP which is developed by Ripple Labs is an electronic currency that is designed to enable efficient and cheap cross border payments. Due to its efficient consensus algorithm and cooperation with the leading financial institutions, XRP is an essential component of the global financial system that contributes to the process of facilitating transactions and decreasing their costs.

XRP Coin


Ripple or XRP is a digital currency developed by the Ripple Labs with the main aim of providing a means of making cross border payments at a cheap cost. While many other cryptocurrencies aim for decentralisation and particular applications, XRP is intended for use in the current banking environment to enhance the process of transferring funds across borders for financial institutions.

Ripple Labs, the developer of the Ripple payment protocol, launched XRP in 2012 as a digital asset within the RippleNet that has RTGS and other capabilities in fiat and other assets’ exchange. The idea was to develop a digital asset that would enable the conversion of one type of currency to another and enhance the process of transferring funds across fronts. The consensus algorithm applied in XRP, known as the Ripple protocol consensus algorithm, is more efficient than the proof-of-work used in Bitcoin as it involves a network of validating servers and thus, transactions are cheaper and faster.

XRP also has one of the fastest transaction speeds of all the cryptocurrencies in the market. Normal cross border transactions can sometimes take days to complete but with XRP it takes only a few seconds. This speed is very important for the financial institutions that deal with large number of cross border payments and needs fast settlement to address liquidity and operational risks.

Still another important characteristic of XRP is that transactions within the network are cheap. Cross border transactions of the conventional mode renders the services of many middlemen who charge a commission for their services. Intermediaries are not required in Ripple’s technology, which greatly decreases the expenses. This efficiency in cost makes XRP fit for use by banks and payment providers who wish to cut down expenses in the cross-border payment system.

Another feature that also cannot be ignored is the use of XRP as a bridge currency. The conventional financial system is characterized by the conversion of one currency to another when transferring funds from one country to another and this process takes time and is expensive. XRP is used as a bridge currency which means it provides fast and cheap conversion of one fiat currency to another. This capability helps banks to avoid the need of carrying large numbers of foreign currencies in their reserve and hence enhance on liquidity.

The collaborations that Ripple Labs has made with many financial institutions across the globe has also boost the credibility and use of XRP. As a result, Ripple (XRP) collaborates with such giants as banks and payment systems to become a part of the world’s financial system and offer a better and faster way of transferring money across the globe.

Nonetheless, XRP has not been without its problems, especially concerning the law, especially in the United States. This is due to the ongoing legal battle with the U.S Securities and Exchange Commission (SEC) which has clouded the status of XRP as a security thus affecting trading rates. But Ripple Labs still supports clear regulation and is still focused on its goal of changing the cross-border payment system.

Therefore, XRP is an electronic currency intended for the improvement of the process of cross border transactions. This is because it has quick deal processing time, low charges, and is useful as a converter currency in the international market. Here are some basics about XRP that can help one get a better picture of the currency and its possibilities of revolutionalising the cross border payments. Understanding the advancements that are taking place in the world of XRP and Ripple’s technology will be very important for people who are interested in the cryptocurrency market.

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