XRP is the cryptocurrency developed and used by Ripple Labs. Ripple started as a company named Ripplepay that was launched way back in 2004. In 2012 Ripple created the XRP ledger under the name OpenCoin, and in 2013, the company changed its name to Ripple Labs.
Unlike many cryptocurrencies intended for direct, peer-to-peer transactions, XRP was created to serve the specific needs of banks and financial institutions. It aims to make international money transfers faster, cheaper, more decentralized, and more energy-efficient than traditional cash remittance.
The XRP ledger uses an open-source, distributed ledger to send payments. This ledger is behind Ripple’s payment solutions that are used by financial institutions to streamline currency exchange, remittance systems, and international settlements.
XRP uses the Proof-of-Burn consensus mechanism which is quite different from cryptocurrencies that use Proof-of-Work (like Bitcoin) or Proof-of-Stake systems (like Ethereum). Instead of using a mining process to validate transactions and create new crypto tokens, all 100 billion XRP coins were created at its launch, and no more will be made in the future. The XRP ledger does not collect transaction fees to pay miners or validators. Instead, it burns a small amount of XRP whenever it processes a transaction. Over time, this reduces the total supply of XRP to keep its value from inflating while also discouraging users from spamming the network with bogus transactions.
Transactions on XRP are verified by multiple trusted validators. Unlike blockchains that use mining to add new blocks, these validators do not have to compete with each other. This setup allows transactions to be confirmed much faster (within 3-5 seconds) and at a very low cost.
Ripple works as a payment settlement system that lets banks transact directly with each other without needing an intermediary. Let's say one bank wants to transfer $1,000 to another bank in the form of Japanese yen. The funds are represented by XRP tokens, transferred, and converted into yen. In effect, XRP acts as a bridge between the different kinds of currencies for cross-border transactions.
Unfortunately, Ripple Labs has been involved in legal battles with the U.S. Securities and Exchange Commission revolving around whether or not it should be classified as a security. Yet, despite these regulatory challenges, XRP remains one of the top coins in the crypto space. Meanwhile, Ripple continues to pursue its vision to make cross-border transactions between financial institutions as simple as sending an email.
