Anyone who has the slightest idea about the crypto space has heard of Ripple, Ripple Labs, and XRP more than once

What is Ripple?



8 min

Anyone who has the slightest idea about the crypto space has heard of Ripple, Ripple Labs, and XRP more than once. The fact is that this triad is closely related to each other, but basically refers to very different things, and now we will take a closer look at them.

The Ripple Protocol

When we talk about Ripple, we mean the payment protocol. The first version of the protocol was introduced in April 2013 by Jed McCaleb. Its developers are OPENCOM, which later changed the name to Ripple Labs. The development of the Ripple protocol began in 2004. It was based on the principle of the Hawala system.

The Hawala system first appeared in ancient Southeast Asia and is still used today by immigrants living in developed countries who want to send money to their families back home, where formal banking is expensive or difficult to access. Each transfer involves at least four participants: the sender, the recipient, dealer A, and dealer B.

  • Step 1: The sender transfers the cash to dealer A. Dealer A gives the sender a code.
  • Step 2: Dealer A tells dealer B how much money has been transferred and the secret code for the recipient.
  • Step 3: The sender reports the code to the recipient, and also indicates the amount of cash.
  • Step 4: The recipient informs dealer B of the code, and they in turn transfer cash to the recipient.

Ripple works similarly to the Hawala system, except that Ripple gateways are used instead of Hawala dealers. These gateways (validators/servers) are usually financial institutions such as Bitstamp and TheRockTrading. The Ripple network is a relatively large network where not everyone who uses Ripple knows and trusts each other. This is where the idea of the Ripple protocol (then RipplePay) is born.

Within RipplePay accounts, a profile was created that indicated how much you trusted other accounts by assigning them credit limits. Whenever a user needed to make a transfer, the service would find a sequence of intermediaries who connected to the desired recipient of the payment and recorded the mentioned payment in each account throughout the sequence. In this way, you would end up owing one “friend” who was owed by another, a process similar to that of financial promissory notes.

A few years later, Ripple Labs, then called Opencoin, adopted the RipplePay system and completely redesigned the protocol. While the basic concept still has a lot in common, which mainly revolves around the concept of debt receipts, it includes the characteristics of a digital monetary system and the XRP token.

The XRP cryptocurrency

In 2013, Ripple Labs issued the XRP coin. It is an open-source cryptocurrency that uses cryptography that is traceable and accessible to everyone, reducing transaction costs.

Ripple is one of the most polarizing cryptocurrencies. Its supporters point to a large number of partnerships, real-world use cases, and high market capitalization, while opponents point to its lack of decentralization and its desire to help rather than destroy the banking sector. Today, XRP is the fifth-largest cryptocurrency by market capitalization at $43,2 trillion.

For the XRP cryptocurrency, it was decided to develop its own verification system called the RPCA protocol. This consensus algorithm is based on a distributed ledger technology, or DLT, rather than a blockchain. XRP's main function is its role as an intermediary currency. It can be used in cases where no direct exchanges are available between two currency pairs.

Ripple's global goal is not to establish itself as an alternative currency, but instead to facilitate trade between currencies. XRP can be considered as a Joker card, that is, a card that can take the form of any other card.

The XRP cryptocurrency does not use the usual mining technology. Instead, it relies on validators in the form of nodes to protect and maintain the network, using its consensus protocol. Ripple must be fast, and therefore cannot use the Proof-of-Work mining algorithm.

Ripple Labs

Ripple Labs is the private company that created the Ripple protocol and the XRP cryptocurrency. It was founded in 2012 by Jed McCaleb and Chris Larsen along with Arthur Britto but has its origins in a 2004 project founded by Ryan Fugger. He was developing various software solutions for the banking sector and payment providers to facilitate fast transactions and move from the current expensive system (which is resource-intensive and extremely slow) to a simplified system that is flexible and very low-cost.

Ripple Labs' current project promises to make global transactions instant, reliable, and profitable. To that end, Ripple offers three components: xCurrent, xRapid, and xVia, which will enable cross-border transactions with very low fees and structural costs. All of these transactions are executed in seconds. These tools use the XRP token as an intermediate coin. This allows, for example, to send dollars from the United States and receive the equivalent in yen in Japan.

So, Ripple technology consists of three main components. Let's look at them in order:


xCurrent is a platform that helps in cross-border transfers and is used by banks. It applies a protocol that takes the necessary payment information and passes it on to the institutions involved in the transaction.


In cases where the traded pair is illiquid, xRapid handles the transfer better than xCurrent. The transfer process is as follows: the initial funds are converted to XRP, where the token is used as a means of buying the recipient's currency.


xVia is an interface designed to simplify work with xRapid and xCurrent. xVia's simple API allows users to easily perform cross-border transfers.


RippleNet is a network of banks and institutional payment systems that use solutions developed by Ripple to efficiently send and receive transactions around the world.

For example, if you use a credit card to pay for dinner, you owe the bank money, and the bank in turn owes the restaurant, even though the transfer has not actually happened yet. The bank has not transferred the money yet, and you have not paid the credit card bill yet. The actual movement of money is called “settlement” and will happen within 3-5 banking days, and RippleNet allows you to do it all in real time.

Ripple's main goal

The main goal of the project is to help the financial sector by providing a more efficient system that transfers assets instantly, unlike what banks use today, such as SWIFT, for example.

Ripple has many partnerships with the global banking sector and financial institutions using xRapid or xCurrent. Some of its best-known xRapid partners are Santander, MoneyGram, Western Union Barclays, Royal Bank of Canada, and National Australia Bank. Partners using xCurrent include American Express, Santander, National Bank of Kuwait, Mitsubishi Corporation, BBVA, Western Union, Bank of England, and Merrill Lynch.

The main obstacles to global adoption are the lack of unified regulatory rules, the indecision of the banking sector, and competition from cryptocurrencies.

And in the crypto-community, there are constant disputes about the decentralization of the crypto-project. Ripple's level of decentralization is a very debated topic. Many argue that Ripple is centralized and XRP is not a cryptocurrency at all because the company owns over 60% of the coins. However, as mentioned earlier, most of these tokens are held in escrow.

Detractors also claim that only validators authorized by Ripple can help protect the network, which means that ordinary users do not participate in the protection of the network. This selectivity may lead to a more centralized method of reaching consensus.

In response to the attacks, the company continues to state that the complete decentralization of the ledger is not essential and mandatory for its purposes, and for security reasons, only trusted parties should have control.

Ripple’s prospects

Ripple continues to gain popularity in the industry. This promising development has occupied a market niche and is effectively expanding its presence in traditional capital markets. More and more financial companies are showing interest in membership in RippleNet.

However, many retail investors are now underestimating Ripple's chances of success, according to CoinMarketRate, the project has dropped to 5th place by market capitalization.

This is due to a lawsuit between the US Securities and Exchange Commission (SEC) and Ripple for allegedly illegally selling tokens, which the regulator claims are actually securities and not digital assets.

However, in February the SEC amended its current lawsuit to drop allegations that the cryptocurrency firm had engaged in market manipulation by promoting its token through social media platforms. As a result, the price of XRP began to rise, increasing by 15% within 24 hours after the announcement.

Today, the crypto community stood up for the company, and more than 10 000 XRP users asked the court for permission to testify in favor of the project. This has put the regulator in a very difficult position, and now both sides are trying to find a compromise to resolve the situation. The dispute is ongoing, but it does not diminish the benefits of Ripple.

Ripple certainly has many advantages that many other cryptocurrencies do not have. The fact that it is intended for use by large financial institutions and is accepted by them means that Ripple has room for growth.

The project is actively growing in Asia, North America, and Europe. XRP is also available on the Uquid payment portal, headquartered in the UK, and is open in more than 150 countries. Just one of its famous partnership agreements with India-based technology network Tata Consultancy Services, which has over a billion users, opens up endless possibilities for Ripple.

Ripple's key goal has always been to create a payment mechanism that would allow banks to use it to move money both domestically and internationally. So far, the project has gained the trust of many prominent financial institutions such as the Royal Bank of Canada (RBC), JP Morgan (JPM), HSBC Holdings (HSBA), and MoneyGram, and it appears that the list will continue to grow.

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