Ripple is one of the best performing cryptocurrencies. It currently ranks fourth after Bitcoin, Ethereum and Tether. With thousands of digital currencies on the market, it takes real value to rank this high.

In this guide, you will find everything you need to know about Ripple and the cryptocurrency XRP. You'll learn all about the currency's features, market solutions and how it works. You will also understand if it is a worthwhile investment;

What is Ripple?

Ripple is an open payment network that focuses on international financial services. It is both a network and a digital currency. Its developers use an open-source protocol to provide several benefits to holders.

Ripple comes in two main forms: XRP and IOU. XRP is the native currency of the platform. It helps in transferring money within financial service providers. IOU is a representation of debt. It can be used as a representation of any asset.

Ripple has faced some backlash in the cryptocurrency community. This is because Ripple enables the current financial systems, while the other cryptocurrencies want to do away with them. Ripple is trying to bridge the gap between these two sides.

Ripple was first released in 2012 before the stable version came out in February 2018. The brains behind this cryptocurrency are Arthur Britto, Ryan Fugger and David Schwartz. The Ripple protocol, on the other hand, is the work of Chris Larsen and Jed McCaleb.

McCaleb has also founded other crypto-based start-ups such as Stellar and Overnet.

Banking problems and Ripple's solution

The technological age has been great for most sectors, except for the financial sector. Here, not much has happened over the years. The biggest problem is the international money transfer systems.

• Expensive

One of the biggest challenges in the banking world is the cost. Every cross-border money transfer costs a lot of money. Bank transfers have been known for this for years.

Worse, even modern inventions like PayPal face similar challenges. For example, an international money transfer via PayPal costs about 2.9%. Moreover, customers lose more money in currency conversion.

Ripple reduces the cost of transactions by up to 60%.

• Slow

In the world of the internet, almost everything else is instant. However, international money transfer still lags behind. Some payment options can even take up to 5 days to complete.

The waiting time is no pleasure for customers.

The Ripple payment system increases the transaction speed from days to 5-10 seconds.

• Payment default

Not all cross-border money transfers are successful. The error rate is around 4%. A failed transaction is time-consuming and inconvenient for both the sender and the recipient.

Ripple solves the problem of failure by tracking all transactions through the blockchain. This limits the possibility of a transaction failing.

• Other use cases of Ripple

Besides banking, Ripple also offers other use cases. These include currency transactions, real-time gross settlement and payments for digital services. It can also be used for voting and P2P purchases.

• How does Ripple work?

The Ripple network operates based on a set of rules known as the Ripple transaction protocol. It also has a chain of computers within the system called validators. They are distributed throughout the protocol to maintain the blockchain.

The validators are responsible for ensuring that all transactions are executed. They make sure that all transactions follow the rules of the network. The Ripple network is open to anyone who runs the validators to maintain it.

The Ripple network allows access to other businesses through getaways. Banks run them to give access to businesses that are not part of the network.

Ripple works like any other banking service. It allows businesses to access a form of banking called Ripple Nets. Businesses can then use one of the Ripple products such as xCurrent, xVia and xRapid.

Ripple also provides for a single currency: XRP. Instead of banks dealing in fiat currencies for cross-border transactions, they deal in cryptocurrency. For example, a US bank sending money to the UK would exchange the USDXRP. The receiving bank would then exchange the XRPGBP. This may seem time-consuming, but it only takes about 5 seconds.

Ripple services have no influence on how banks offer their services. Customers do not even need to know when their bank will switch to the Ripple platform.

• Ripple mining

Mining is one of the most important factors in the crypto world. Bitcoin and Ethereum rely on mining to ensure the security of the platform. They use it as a means to validate transactions.

Ripple works differently. There is no form of crypto mining here. Instead, Ripple relies on validators to validate transactions. The validators verify the transaction by voting.

A transaction is valid if more than 80% of the validators approve it. The transaction is then displayed in the Ripple ledger.

The system has a way of finding impartial and honest verifiers. They then become part of a Unique Node List. After that, each verifier can decide which list they prefer for a transaction. The system also has a list of trusted verifiers by default.

Unlike Bitcoin and Ethereum, where miners are compensated, there is no compensation for validation in Ripple.

Ripple partnerships

RippleNet is a progressive community with financial institutions, banks and professionals. These are mostly companies that want to use Ripple's advanced blockchain system for financial solutions.

Ripple's success in revolutionising cross-border money transfer has led it to attract several big names. Some of the notable partners are;

• Standard Chartered Bank

Standard Chartered Bank has been working with Ripple since 2016. Together with other investors, it invested $55 million in the development of Ripple technologies.

• Bank of America

Bank of America officially announced that it would join Ripple in 2020. It later emerged that the bank had been testing the Ripple protocol for some time before this announcement. This means that the bank is convinced that the technology works.

• Royal Bank of Canada

The Royal Bank of Canada is another financial institution that took the time to test the Ripple protocol. It then published a report entitled "Imagine 2025".

The report found that RippleNet would reduce the cost of banking transactions by 46%. It also increases transaction speed to 3 to 5 seconds. Ripple technologies were seen as an improvement over the current banking system.

• MoneyGram

MoneyGram is one of the most popular money transfer services in the world. The company has also struggled with the challenges of banking in terms of transaction costs and speed. The partnership with Ripple will expand its cross-border money transfer offering.

• SBI holdings

This was one of the first and most influential partnerships with Ripple. The agreement came about in 2016 to enable the bank to integrate Ripple technologies into its services. This improved remittances and ensured instant cross-border transactions. It opened up the possibility for other banks to use Ripple services.

Trade Ripple

Investing in Ripple is quite simple. It's similar to investing in any other digital currency. All you need is a reputable crypto exchange and a wallet to shop Ripple in. Some of the main crypto exchanges for Ripple are Binance, eToro, Bittrex, KuCoin and Poloniex.

Once you have selected an exchange, create and verify an account. Identification documents are required for verification. If you already own cryptocurrencies, you can transfer them to the exchange.

Most exchanges also allow deposits in fiat currencies. First, you need to link your bank account or debit/credit cards to the exchange account. The platform sends verification to the bank and you also need to prove ownership of the bank account. Only then can you exchange fiat currencies for XRP.

The setup takes a few minutes (or days for banks), after which you can start trading. You can trade cryptocurrencies as you like. Buy, sell and purchase according to your trading strategy.

Advantages of Ripple

• Low transaction fees of 0.00001XRP per transaction. This is equivalent to about $0.29 per 1XRP. That's pretty cheap, almost free.
• High transaction speeds of about 3-5 seconds. This is faster than most traditional financial services.
• A wide range of partnerships with reputable financial institutions and professionals.
• A competent team with a mix of experience and expertise.

Ripple disadvantages

• Ripple is a centralised company. Ripple Labs controls most of the stock and therefore has more influence on transactions and developments.
• Ripple is mainly for large corporations. The ordinary consumer and retailer do not have much to gain from cryptocurrency.
• Ripple competes with other cryptocurrencies for financial services like Stellar.

Ripple competition

Ripple continues to battle several competitors in the crypto sector. The most important of these challenges are;

• Ethereum - the second-largest cryptocurrency poses a threat to Ripple. It is a platform and programme for developers to create and distribute decentralised applications.
• IOTA - It is a cryptocurrency designed to provide secure communication and payment options within IoT machines. It will spread as the machine world takes over.
• Stellar - Stellar has a similar goal to Ripple, which is to transform cross-border payments. Stellar allows users to quickly send money across borders. It also aims to facilitate the exchange of assets on the network.

The future of Ripple

For a long time, the future of Ripple seemed assured. Most top banks and financial institutions had picked it up. Currently, however, Ripple is in an uncertain phase. The reason for this is complaints from the Securities and Exchange Commission about the developer Ripple Labs. (read the complaint by clicking here)

The complaints have led to several crypto exchanges taking the product off their platforms. Some of the exchanges that have discontinued the service are Coinbase, OKCoin and Crypto.com. 

Whatever happens to Ripple, it will continue to exist. It is already integrated into most financial systems. It might just lose value. 

Ripple Overview Bottom line. 

Ripple is one of the most successful cryptocurrencies. It has helped revolutionise cross-border transactions. It improves speed and lowers costs. Even though it is not yet fully mature, it will catch on.