What Is Ripple?

By Mohan Garikiparithi Published : November 15, 2017
Ripple price forecast
Credits: istock.com/allanswart

What You Need to Know

While the world and its brother is going gaga over Bitcoin, a little-known challenger is making waves among banks and financial institutions. These institutions have the analytical knowledge to see beyond the hype surrounding Bitcoin, but they are not blind to the potential of digital currencies. In fact, they are particularly keen on this one cryptocurrency called Ripple (XRP). And for good reason: Ripple is the only digital asset specifically designed for banks.

Ripple Wiki

ripple logogThe three most common questions that pop up while researching this cryptocurrency are:

  1. What is Ripple Coin?
  2. What is Ripple?
  3. What is XRP?

For the record, Ripple Coin is a digital currency, whereas Ripple is an entire system (Internet protocol) used for cross-border financial transactions. And XRP is the symbol for Ripple Coin, just as BTC is the symbol for Bitcoin.

Another question that frequently pops up is: Who invented Ripple? Ripple was actually the brainchild of two Bitcoin evangelists who very early on saw the shortcomings of the existing cryptocurrencies.


Ripple is an open payment network that enables reliable cross-border currency transfers. The network is aptly named Ripple Transaction Protocol (RTXP) and the digital currency is called Ripple (XRP). The goal of the Ripple system is to enable people to do away with insane transaction fees and processing delays.

While Bitcoin, Ethereum, and other cryptocurrencies sought to displace financial institutions using blockchain technology, this “different player” rests its strategy on revolutionizing financial services. In fact, Ripple’s intrinsic value is boosted because of this disruptive strategy.

Ripple wants to do for money what the Internet did for all other forms of information. In fact, that was the ultimate goal for the people who invented Ripple.

Who Invented Ripple?

Jed McCaleb
Credit: jedmccaleb.com

When Chris Larsen, an online financial guru, started brainstorming with Jed McCaleb, a digital currency junkie, the idea sprang forth. And since then, there has been no looking back. The early years were all about setting up the digital infrastructure, but along the way, the system proved so successful that the venture has recently picked up serious funding from Andreessen Horowitz, FF Angel IV, Lightspeed Venture Partners, Vast Ventures, Google, and even the Bitcoin Opportunity Fund. These investors clearly see the advantages that Ripple has over the competition.

As more and more venture capitalists start funding Ripple, the Ripple demand is bound to shoot up. Will this have an effect on the Ripple supply? The answer is yes, and no.

Ripple Supply

As with other cryptocurrencies, there is a huge doubt over the Ripple supply. Despite their five-year track record, there are concerns in the market that Ripple might sell its 61.68-billion XRPs in the market at any time. To remove this uncertainty, the company has committed to place 55.0-billion XRPs into a cryptographically-secured escrow account by the end of 2017.

The lockup is being hailed by industry experts. Spencer Bogart, Head of Research at Blockchain Capital, feels it provides a level of predictability about the XRP supply that is favorable for market demand. (Source: “Ripple to Place 55 Billion XRP in Escrow,” Ripple, May 2017.)

Mike Belshe, co-founder and CEO of Bitgo, adds that “Ripple’s lockup of its 55 billion XRP with a cryptographic supply schedule is a clear signal that they are serious about building and maintaining a long-term, healthy ecosystem for XRP based applications.” (Source: Ibid.)

In fact, the Ripple supply is so well planned out for the next four years at least, that if I were investing in cryptocurrencies, I’d much rather focus on the Ripple advantages and how it scores over the other cryptocurrencies.

Ripple Advantages

The most outstanding feature of the Ripple protocol is that it is immediate and distributed. By getting rid of the middleman, the system cuts out all the cost of sending cash electronically.

For instance, if you need to send cash for an installment to another person by means of PayPal, the recipient would be charged three-percent for the expense. With Ripple, the recipient pays almost nothing. I say “almost,” because 1/100,000th of one Ripple unit is used for security purposes for every transaction.

ripple advantages

But that is just one the many Ripple advantages.

Another advantage of Ripple is that the system is geared to exchange various currencies (including Bitcoin). So whatever currency you have can be converted into any other form of currency. You can trade dollars for yuan, Bitcoin for pounds, and so on and so forth.

Say, for example, you’re sending cash to another nation. You could send it in dollars and they could get it in any currency of their choice with no charges for money trade.

If you ask me, the fact that even Bitcoin can be exchanged on Ripple to and from different currencies is pure genius on the part of the inventor of Ripple. The other Ripple advantages are as follows:

Payment Speed: Ripple settles payments in four seconds. Compare that to the two-minutes-plus that Ethereum boasts of and the one-hour-plus that Bitcoin averages around, and you’ll know why this is clearly going to be the cryptocurrency of the future.

And just so you know, traditional banking systems take anywhere between three and five days.

Scalability: The 1,500 transactions per second that XRP handles 24/7 is just a fraction of its potential. It can scale up to 50,000 transactions per second. This is a huge leap from Ethereum’s 15 transactions per second and Bitcoin’s three-to-six transactions per second.

Stability: This is the biggest advantage of Ripple. Unlike other cryptocurrencies, it has a five-year track record of stable technology and governance maintained by a dedicated team of world-class engineers. The system operates on negligible energy consumption, and since its inception, all of its ledgers closed without issue.

Ripple Drawbacks

I’m not sure whether this could be termed as one of Ripple’s drawbacks, but given that Ripple was originally claimed as a system that would allow ordinary people to make money transfers around the world, its focus on banks raises a few unanswered questions.

Ripple vs. Bitcoin vs. Ethereum

Being the pioneer, Bitcoin has had the early-mover advantage. Today, every cryptocurrency worth its salt will inevitably be pitted against the supposed leader. But when you break it down to actual digital currency benefits, Ripple is clearly raising the bar. In fact, it’s currently the fastest and most scalable digital currency, enabling real-time global payments anywhere in the world.

Currency Scalability (transactions per second) Supply Transaction speed Mainstream Decentralized
Ripple 1,500 TPS 80B 4 seconds No No
Ethereum 15 TPS unlimited (at present) 2.5 minutes Yes Yes
Bitcoin 3-6 TPS 21M 10 minutes Yes Yes

Looking at the Ripple vs. Bitcoin vs. Ethereum chart above, it doesn’t take a rocket scientist to figure out why this cryptocurrency is all set to be the real leader. After all, in today’s business climate, time is money and every second counts as a clear advantage. And while this clear advantage is one good answer, it is not the only answer to the all-important question: Why do banks use Ripple?

Why Do Banks Use Ripple?

According to Stefan Thomas, Chief Technology Officer at Ripple, “Ripple is an enterprise solution cryptocurrency and it was designed for banks from day one.” (Source: “Ripple and XRP are More Stable Than You Think,” HuffPost, May 18, 2017.)

One of the biggest Ripple advantages for banks is its speed. The system is designed to automatically and continuously update the ledgers. What this means is that the Ripple protocol reaches consensus across the globe within seconds after changes are made.

But all this would mean nothing if the banks don’t stand to gain, and therein lies Ripple’s biggest advantage. Thanks to its platform, banks can save an average of $3.76 on each transaction with Ripple. Given that banks carry out thousands or even millions of transactions per year, this is a very significant saving.

But the real reason for banks to choose Ripple over all the other cryptocurrencies has to do with simple business relationship skills.

In a recent interview with Bloomberg, Brad Garlinghouse, the CEO of Ripple, has gone on record saying, “We are almost the opposite end of some of the bitcoin community who have said – down with banks, down with governments and down with fiat currency. We take the view that banks can be at the heart of this internet of value where value can move the way information moves today. We think governments aren’t going away.  Same with Fiat currency. While there is a role for digital assets like bitcoin and XRP, we don’t think that’s the end-all be-all.” (Source: “Ripple CEO Bloomberg Interview,” YouTube, February 16, 2017.)

With that kind of inclusive thinking filtering down from the CEO himself, it’s little wonder that banks are keen to do business with Ripple. Already, Ripple’s global settlement network has more than 150 banks including the third-largest bank in India and the largest bank in the Middle East. As for the other big banks, the question is not if they will support Ripple, but when.

However, one question is clearly answered. Though Ripple is far removed from the grand vision of blockchain technology, it is solving the real-world problem of slow and expensive cross-border transfers of money. Having been able to deliver on its promise of reducing an international wire from four days to four seconds, it is at the forefront of the change and innovation that the cryptocurrency revolution is heralding.

This year alone, Ripple’s price has gone up by over 40 times. And Ripple’s market cap has shot up so exponentially that it is now the fourth-largest cryptocurrency by market cap, behind Bitcoin (BTC) at the top spot, Ethereum (ETH) second, and Bitcoin Cash (BCH) third. Like I said, this Ripple is creating a wave. And at $0.21 per Ripple, the time is right to catch the wave.