Key Takeaways
- Ripple is the firm that owns a payment solution system known as RippleNet that aims to assist banks and businesses in transferring money across borders fast, efficiently, and affordably.
- XRP refers to a cryptocurrency designed to facilitate fast and affordable transactions and is very ideal for making cross-border money transfers.
- The XRP Ledger or XPRL in short, is a decentralized blockchain network where transactions relating to the XRP digital asset occur and can also be used for creating NFTs and stablecoins.
The blockchain and cryptocurrency ecosystems are still young and dynamic, and as a result, you have new names, terms and acronyms popping up every other day. Three terms that are mentioned and sometimes interchanged are Ripple, XRP and XRPL. While the names are related, they refer to different aspects of the ecosystem. This article defines those three terms and explains their different functions within the blockchain and crypto ecosystem.
What is Ripple?
Ripple is a blockchain tech company that’s best known for creating the RippleNet decentralized global network that connects payment providers, banks, corporations, and cryptocurrency exchanges to enable hassle-free cross-border money transfers. The RippleNet payment protocol uses blockchain technology to facilitate transfers just like the SWIFT system by facilitating messaging, clearing, and settlement of financial transactions, which enables users to send money across borders with reduced friction.
Launched in 2004 by Chris Larsen and Jed McCaleb, Ripple has its own native cryptocurrency known as XRP, which not only enables users to avoid the waiting times associated with traditional international transfers but can also be exchanged with other fiat and cryptocurrencies. Instead of focusing on its cryptocurrency, Ripple offers on-demand liquidity (ODL) solutions that use XRP to settle payments and bridge currencies quickly. Currently, Ripple is at an advanced stage of developing its own stablecoin, dubbed RLUSD.
What is XRP?
XRP is a cryptocurrency created in 2012 by Ripple Labs, the firm behind the RippleNet payment protocol. The digital asset is designed to enable fast and affordable cross-border transfers. XRP is the native token for the XRP Ledger (XPRL), a distributed, permissionless blockchain that’s maintained by an extensive network of peer-to-peer servers technically known as nodes. Digital assets are an attractive option for remittance companies and financial institutions looking for an alternative to SWIFT.
Unlike the other digital assets that are mined, XRP’s total collection of 100 billion tokens was created when the cryptocurrency was launched. The majority, at least 38%, are owned by Ripple Labs escrow accounts, which could be the reason the terms Ripple and XRP are usually mentioned in the same sentence and sometimes interchangeably.
XRP functions as a means of sending money overseas without the need to involve a payment processor or bank to handle the transaction. Its peer-to-peer model makes it a convenient tool for bridging different fiat currencies within seconds, as opposed to days when dealing with huge amounts of money, thereby saving time and money when doing international transactions.
When you have parties that prefer different methods of sending or receiving payments across international borders or are using different currencies, RippleNet becomes the intermediary for the transaction. Instead of using their different government-issued currencies, they can conduct the transaction using XRP tokens whose value will be equal to the amount involved. The network will charge a relatively small amount in fees (in XRP), compared to systems like SWIFT, to complete the transaction.
What is XRPL: The Ripple Ledger?
XRPL, the short form for XRP Ledger, is the blockchain network where XRP transactions are processed and validated. The XPRL network is maintained by several independent validators who confirm transactions within the ledger, ensuring integrity. Unlike other blockchains like Bitcoin, which use the proof-of-work (PoW) consensus mechanism, XPRL uses a unique consensus mechanism called the Ripple Protocol Consensus Algorithm (RPCA). This consensus model is built on the foundation of the network’s core principle, which says that a bit of trust goes a long way.
Unlike Bitcoin’s PoW or Ethereum’s proof-of-stake (PoS) protocols, no mining or staking is used to validate transactions. Instead, there are trusted, permissioned servers that are trusted to create consensus on the network. The servers, also known as unique nodes, create and maintain a “unique node list,” meaning a list of nodes the network believes are trustworthy. A transaction is validated when at least 80% of the nodes deem a transaction as valid, after which a unique node will proceed and authenticate the transaction.
The Key Differences between XRP and XRPL
The following is the summary of the differences between XRP and XRPL as far as their functions within the Ripple ecosystem go:
- XRP is the native cryptocurrency of the XPRL blockchain, which acts as a bridge for international currency transfers.
- Transactions on the XPRL Ledger are denominated in different currencies, but XRP is the liquidity tool that facilitates the exchange.
- XPRL is the underlying technology that moves the XRP ecosystem, providing a secure infrastructure for efficient transactions.
XRP and XRPL Use Cases and Applications Beyond the Ripple Ecosystem
- XRP can be used to facilitate micropayments, smart contracts, or tokenizing real-world assets (RAWs)
- XRPL can be used to issue other crypto assets or create an ecosystem of tokens and other applications.
- Token developers can use the XPRL Ledger Application Programming Interfaces (API) to create custom solutions and integrations on top of the XPRL Ledger.
Conclusion
XRP and XRPL are closely linked entities within the Ripple ecosystem serving distinct purposes. XRPL provides the underlying infrastructure and technology for the XRP ledger while XRP is the crypto asset that facilitates online transactions within the system. By understanding the difference between Ripple, XRP and XRPL, investors and developers can learn more about the unique capabilities offered by the different entities so they take full advantage of the two components of the Ripple ecosystem.
