What is Ripple and XRP?

Ripple is the company behind XRP, a high-speed payment coin used to facilitate global payments. XRP is one of the most visible and popular digital assets on the market thanks to its loyal community and a growing network of banking partners. This article will explore the core elements of Ripple, its purpose, and how its currency, XRP, differs from other digital assets. 

What is Ripple?

Ripple (formerly Ripple Labs) is a company based in San Francisco.  

The brand first entered the market back in 2004 as RipplePay, a Canadian-based global payments solution. The company was eventually sold in 2012 to Jed McCaleb, Arthur Britto and David Schwartz, who pivoted into the digital asset market. 

Ripple (then OpenCoin), wanted to retain the identity as a global payment solution, but integrate blockchain technology into the vision. So, the team formed XRP, a digital currency intended to serve as a bridge between different fiat currencies. 

Ripple has evolved significantly since then and now consists of multiple core elements: RippleNet, a P2P transfer platform, the XRP Ledger, and the cryptocurrency XRP. We will cover each of these a bit later. 

What is the purpose of Ripple?

While many aspects of our lives, such as postal mail (email) or photography (selfies), have made a seamless transition into a digital form, the transfer of fiat across borders has always been a reasonably clunky process. At present, to transfer international transactions, many banks use the Society for Worldwide Interbank Financial Telecommunications (Swift). Unfortunately, this method can be quite expensive and transactions can sometimes take several days to clear. This pain point is where Ripple comes into play – to speed up and smooth out the currency transfer process while decreasing associated costs. 

How does Ripple work?

You can think of RippleNet, Ripple’s Digital Payment Network, as a sort of informal intermediary in transactions. These middle parties are necessary when each person involved in the transaction has a different preferred method of sending and receiving money or simply uses different currencies. However, unlike traditional currencies which may require several intermediaries, RippleNet is built on a decentralised network to streamline the process. 

So, institutions across the globe can join RippleNet and use it to quickly and efficiently settle international payments.  

Let’s take a look at an example. Georgia needs to send money abroad to Ted. However, because they’re using different currencies, direct transfer is inefficient or costly. Instead, Georgia provides funds to her ‘agent’ – a financial intermediary connected to the RippleNet – who then alerts Ted’s ‘agent.’ To access the funds, Ted must provide a security code or password. Ted’s agent then gives him that amount of funds. 

Because money was never transferred directly from Georgia to Ted, Georgia’s agent now owes Ted’s agent that money. This is recorded to be paid later, or counter transactions – say Ted needs to give Georgia money in the future – can be made to settle that debt. 

This is the core functionality on which RippleNet operates. Instead of fiat currency though, exchanges are made in XRP and recorded on the XRP ledger. 

The core components of Ripple 

What is XRP and the XRP Ledger

While XRP is widely associated with Ripple and the company uses both the ledger and XRP for various purposes, the Ripple network and XRP operate independently. 

The XRP Ledger is a blockchain network that is both public and decentralised. Anyone can connect to the P2P network that manages the ledger. Its community comprises server operators, software engineers, businesses, and end-users whose role is to maintain the ledger.  

XRP is the native token of the XRP Ledger. The XRP Ledger operates similarly to the Ethereum blockchain in which third parties can use it to construct solutions and other tokens. 

You can find out more about the XRP Ledger via our dedicated article diving into the network and its functions. 

What is RippleNet?

RippleNet is the network through which financial institutions can transfer money. RippleNet was designed to transfer funds quickly while costing less and providing greater transparency. As you’ll remember from earlier, direct transfers do not occur on RippleNet. This is why it can facilitate cross-border payments and currency exchanges more efficiently than many of its fiat-based competitors. 

XRP vs Bitcoin: How do they differ?

Bitcoin is the original, and most famous cryptocurrency. It’s only natural for those learning about the sector to compare most other projects to the most well-known. 

However, Bitcoin and XRP are significantly different. 

In a nutshell, Bitcoin transactions take longer to process, require more energy and have higher transaction costs. On the flipside, some would argue that Bitcoin is more decentralised than XRP. Part of this is because the two utilise very different protocols to verify transactions. 

The majority of blockchains use one of two main consensus algorithms to finalise transactions, Proof of Work (PoW) and Proof of Stake (PoS). Coins like Bitcoin and Litecoin use the PoW protocol, whereas coins like Ethereum and Cardano use the PoS protocol. Ripple doesn’t use either. Rather, it uses its own consensus mechanism, the XRP Ledger Consensus Protocol, which reportedly boasts faster and more efficient transaction validation. 

The XRPL Consensus Protocol picks validators from a trusted list of participants, which can improve consistency and security at the expense of decentralisation.   

Bitcoin is more expensive and slower

The Proof of Work (PoW) system is often regarded as the most secure and decentralised way to operate a blockchain. However, the heightened security that comes with Bitcoin mining is timely and requires a lot of computational energy. It also means Bitcoin transaction confirmations can take more than 10 minutes. XRP transactions take just seconds and are far more environmentally sustainable. 

XRP is released through smart contracts

New Bitcoins are created through mining. Supply is largely impacted by network speeds and the mining difficulty, which change over time.  

XRP tokens, on the other hand, are released with a maximum of 1 billion tokens per month by an in-built smart contract set up by Ripple. As a result, there are significantly more XRP coins than Bitcoins in the market. Bitcoin is capped at a maximum of 21 million coins, while approximately 99 billion XRP tokens are now in circulation. 

SEC vs Ripple

Ripple has never really left the spotlight in the crypto world. For much of its life, XRP has had a home in the top ten cryptocurrencies by market cap. But in recent years, Ripple has been in the limelight because of its legal troubles with the Securities and Exchange Commission (SEC). 

In late 2020, the SEC filed a lawsuit against Ripple and its current and former CEOs. It was alleged Ripple executives ‘raised over $1.3 billion through an unregistered, ongoing digital asset securities offering’.  

It took over four years and a new SEC administration, but eventually, in March 2025, the US regulators dropped the case against Ripple following several twists and turns.  

In 2023, Ripple achieved a partial victory when a district court found that selling XRP via crypto exchanges didn’t breach securities laws – however, institutional sales may have. XRP were fined $125 million USD as a result, orders of magnitudes lower than what the SEC’s desired penalty. 

Ultimately, the two sides came to an agreement over the fine’s size – settling on $50 million USD. 

The abandonment of legal action against XRP gave rise to industry-wide optimism of improved regulatory clarity in the United States. 

Where to trade XRP

You can buy Ripple (XRP) from most big cryptocurrency exchanges. Swyftx is a popular crypto exchange in Australia and New Zealand where users can buy Ripple with low fees and store it in their personal crypto wallet.

Wrap up

Ripple’s XRP is one of the most fascinating and highly discussed cryptocurrencies in the Web3 world. The project has entrenched itself in the top ten digital currencies by market cap and has evolved substantially since its beginnings in 2004 as RipplePay. If you would like to learn more about blockchain technology, mining, or digital wallets, there is plenty more great content on Swyftx Learn!