What is ripple, and what is XRP?

Senior Writer
Yahoo Finance

The value of XRP, which is a settlement token used by the company Ripple in one of its software products for banks, rose by 32,377% in 2017. You read that correctly: thirty-two thousand percent. That shatters the rise this year of bitcoin (1,221%) litecoin (4,841%), or ether (8,978%).

At the outset of 2017, one XRP was .01 cents, or one hundredth of one cent. At the end of December, one XRP is above a dollar.

The multitude of different cryptocurrencies now on the market can be overwhelming. If you’ve only just begun to educate yourself about bitcoin, you may now be wondering: What is Ripple? What is XRP? How is it different from bitcoin? How can I buy some?

Here are your answers.

What is Ripple?

Ripple is a San Francisco-based software company (originally called Opencoin), that sells products to banks and financial services companies enabling them to send and receive international payments and settle transactions more quickly and more cheaply than their existing systems. The company offers two main products for banks: xCurrent and xRapid; the settlement token of xRapid is XRP.

But most people refer to all of those things (the company, its products, and the token) as “Ripple,” which can be confusing.

Ripple’s network of nodes is akin to the bitcoin blockchain. And although Ripple’s network did not launch until 2012, the concept originated in 2004, which predates bitcoin, as Ethereum creator Vitalik Buterin wrote in 2013.

As Ripple CTO Stefan Thomas puts it, “Since its creation in 2012, XRP Ledger has been operating as a next-generation alternative to the proof-of-work concept that was originally introduced by Bitcoin. As the root ledger for the digital asset XRP, XRP Ledger is an enterprise blockchain supporting the institutional use case of cross-border payments.”

Remember it this way: XRP is to Ripple what ether is to Ethereum, or what bitcoin is to the bitcoin blockchain.

But there’s an important difference between XRP and bitcoin. XRP was never intended to be a public digital currency the way that bitcoin was. It is merely a utility: the banks or financial institutions that use xRapid conduct their transactions in XRP. The company calls XRP a “settlement token.”

Ripple has no mining like the bitcoin blockchain, where more bitcoins are created every time a miner uploads transaction data—instead, Ripple transactions are verified by multiple parties to achieve consensus.

There will never be any new Ripple coins created. Ripple owns 60 billion of the 100 billion XRP in existence (when you look up XRP’s market cap, those 60 billion are not included). And the success of Ripple as a payment network does not necessarily rely on the price of XRP.

The appeal of Ripple to banks is the ability to move large amounts of currency quickly and cheaply: XRP transactions clear in under 4 seconds on average, the company says. Compare that to the bitcoin blockchain, where transactions are now frequently taking around an hour to go through.

Why has XRP risen so much? Where can you buy some?

Looking to buy XRP? Coinbase, the most popular mainstream brokerage for buying crypto, does not yet offer it. Coinbase only trades in bitcoin, ether, litecoin, and bitcoin cash. If you want to buy XRP, some of your options are Kraken, Bitstamp, ShapeShift, Bitso, or GateHub.

(Caveat: cryptocurrencies are extremely volatile, with big swings up and down, week in and week out; Yahoo Finance is not dispensing investing advice, just giving you information on how to buy if you wish.)

So why is XRP rising in value so quickly?

Price of ripple (XRP) in 2017, through Dec. 28
Price of ripple (XRP) in 2017, through Dec. 28

Ripple has made a lot of news in the past year or two as it rapidly expands its list of high-profile partners.

Last year, Ripple announced a slew of new bank partners at once, including Santander and UBS. Last month, Ripple added American Express, a big buzzy name that renewed attention on Ripple and boosted XRP.

More recently, Bloomberg added XRP, litecoin, and ether data to its terminals last month. And this week, SBI Holdings, a financial firm in Asia, and SBI Ripple Asia, a joint venture created last year by SBI Holdings and Ripple, announced that a number of Japanese credit card companies will use Ripple.

But XRP’s recent rise is likely not any one piece of news. Almost every day now, a different cryptocurrency soars, and experts debate the cause. More generally, there is widespread excitement (or mania, depending on your opinion) over the crypto space, and investors are quickly learning the differences between each coin, and putting money into some or many. Never mind the fact that XRP is merely a back-end settlement token.

Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.

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