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Understanding Ripple: What is Ripple Coin?

Floating ripple coin

As it is third only to Bitcoin and Ethereum, I’m going to assume you’ve heard of Ripple coin. It is the 3rd most valuable cryptocurrency with a current market capitalization of $31.36 billion. Huge, right?

Are you wondering what is Ripple and why is it so popular? You don’t need to look any further as this is exactly what I am going to cover in this guide.

I will give you a complete overview of how Ripple works, what are its pros and cons and answering FAQs such as whether you can buy Ripple on Coinbase etc.

By the end of this guide, you will also get to know its security features — one of the most important aspects of all cryptocurrencies!

So, let’s get started!

An Introduction to Ripple

The first thing you need to know is that Ripple is a cryptocurrency focused on solving the problems related to international payment transfers.

To be more precise, Ripple is a platform for a global system of payments, settlements, and exchange. XRP is the cryptocurrency that is exchanged on this platform to facilitate transactions.

Ripple Coin Ripple Platform XRP Cryptocurrency

Ripple was released in 2012 by Ripple Labs Inc. with just one thing in mind — to provide one frictionless experience to send money globally using the power of blockchain.

So, Ripple is different from both Bitcoin and Ethereum. While Bitcoin is just a digital currency, Ethereum is a platform for developing smart contracts. Ripple, however, is a new payment infrastructure targeted towards international financial transactions.

XRP creation and circulation is another point of differentiation for Ripple. New coins are created by way of mining in most cryptocurrencies. Well, that’s not the case with Ripple coin. All the 100 billion XRP have already been created, right when Ripple started.

What’s even more surprising is that Ripple labs hold about 55 billion XRPs itself. This is something unheard of in the cryptocurrency universe where the focus is normally on decentralization.

So, now that you know what is Ripple, let’s see what it is trying to achieve.

What Does Ripple Coin Aim to Achieve?

Technology has progressed so much that things like self-driving cars have become a reality. But one sector which has failed to progress much is international payment transfers.

International payment transfers suffer from two major problems:

1. They’re expensive

If you have experienced making a cross-border payment, you’ll know of the costly fees that come with them. High-street banks are typically the worst for this but even services such as PayPal come in high — it costs about 2.9% to make an international payment with PayPal.

Ripple Coin fees

On top of these charges, customers lose money when currency conversion takes place too.

2. They’re slow

In the age of the internet where everything is instant, international transactions can take anywhere between days to weeks. There is no specific reason for this other than the fact that financial institutions do not wish to upgrade their technology — awful excuse!

In this process, financial institutions are making a lot of money and the customers are suffering. Ripple aims to change that and make international transfers instant and cheap.

Ripple is to banks what the internet is to the world, and they call this concept “Internet of Value”.

Since Ripple began in 2012, it has been working toward solving this problem and has been able to generate a lot of interest from investors. Let’s take a look at the historical performance of Ripple XRP.

Ripple Coin Historical Performance

Ripple coin is one of the oldest cryptocurrencies, but it was not always so popular. As you can see in the snapshot below, it was only in April 2017 that Ripple’s price started increasing.

Ripple coin was trading at around $0.0066 in January 2017 and it touched its highest ever price of $3.65 in January 2018. Can you guess the percentage of return?

That’s right! It’s a return of 55,203%.

Ripple Coin Market Cap

Like all other cryptocurrencies, Ripple coin also saw a huge price crash in Q1 2018. There has been a slight revival in its price during the last 1 month, but it is not that significant.

Ripple continues to enjoy the third spot among the top 10 cryptocurrencies by market capitalization. That’s because of the on-ground work they are doing in terms of developing technology and building industry partnerships.

Let’s talk about how Ripple is being used in the real world.

How Ripple Can Be Used & Abused

Unlike Bitcoin which aims to remove banks as intermediaries, banks are the largest users of Ripple. Ripple is being used by banks to make international payments faster, cheaper and more transparent.

Ripple for Banks and Financial Institutions

Currently, banks use Society for Worldwide Interbank Financial Telecommunication (SWIFT) to facilitate cross-border payments in a secured manner. SWIFT is basically a messaging network that securely transmits payment orders from one bank to another.

10,000 SWIFT member institutions send approximately 24 million messages on the network every day. Point to note here is that SWIFT itself does not hold any money or accounts for the banks. It is just a communication channel, but a very important one as a large amount of international trade relies on it.

The problem with SWIFT is that it has not changed much since its inception in 1974. So, Ripple is trying to bring about the change that SWIFT has failed to do. You can think of Ripple as a direct competitor to SWIFT.

Ripple XRP network is being used and tested by financial institutions and banks to send and settle international payments in a more efficient manner. It is already backed by over 100 financial institutions from all over the world which includes names like American Express, Santander, Standard Chartered and others.

Ripple Coin partnerships

Other Ripple Partnerships

Banks are not the only beneficiaries of Ripple. Coinone, one of the biggest cryptocurrency exchanges in South Korea, has entered a partnership with Ripple. It will use Ripple’s product called xCurrent for launching “Cross” (a new global remittance service).

Ripple is also expected to enter partnerships with 5 more organizations in the near future — RationalFXMoneyMatchFairFXUniPAY, and Exchange4Free. They will use Ripple’s xVia product for facilitating remittances and wire transfers.

As you can see, Ripple coin is making a lot of progress with strategic partnerships and is being accepted by a large variety of organizations.

So, Ripple protocol seems like good news as far as international payments are concerned. But there is something that makes many people uncomfortable, and that’s the way in which Ripple could be abused.

Can Ripple be Abused?

The initial idea of cryptocurrencies was to eliminate centralized agencies like banks and create a truly decentralized system. Well, Ripple Labs Inc, the company behind Ripple XRP itself holds more than half of the total 100 billion XRP that will ever exist.

This leads to some of the same old problems that centralization carries. One entity, Ripple Labs, in this case, becomes too powerful. A lot of concerns have been raised about this issue, but the CEO of Ripple has a different view.

Ripple Coin Ripple CEO Brad Garlinghouse

Ripple is not centralized. To be clear, if Ripple disappeared today, XRP would continue to function. To me, that’s the most important measure of whether something is decentralized.

Ripple CEO, Brad Garlinghouse

Ripple’s team has been responsive to such concerns and has come out with a decentralization strategy. In December 2017, Ripple placed 55 billion Ripple XRP in a cryptographically-secured escrow account to create certainty of XRP supply at any given time.

A contract has also been put in place which now releases 1 billion XRP into the market each month. That way, Ripple Labs does not have the power of flooding the market with XRPs if it wanted to.

So, I would say that the risk of Ripple coin being centralized has reduced considerably. I also think that a little bit of centralization may be good as it helps in taking faster decisions.

Now that you know what Ripple is and how it is being used, let’s find answers to other questions like how secure it is, whether you can buy Ripple on Coinbase and so forth.

Is Ripple Secure?

To answer this question, we first need to understand how it works.

By now, you should understand that Ripple is not a regular cryptocurrency like Bitcoin or Litecoin.

It is not compulsory to use XRP for transactions — it just acts as the currency of last resort. This means that when the parties involved do not trust each other then XRP tokens are used for transactions.

XRP offers several advantages like:

Low transaction fees
 The fast transaction speed of about 4-5 seconds

With this information in mind, let’s see how a Ripple transaction works. Suppose Kate in the U.S. wants to transfer funds to Carl in Germany. Assuming that both their banks are on the Ripple network, the transaction would go through the following steps.

Step 1: Kate initiates the transfer of $500

Step 2: Ripple’s messenger will verify the basic account information of Kate and Carl through the originating bank and beneficiary bank.

Step 3: Next, nodes on the Ripple network verify that there are enough funds available for sending the payment. As you can see in the snapshot below, after successful verification, Ripple settles the payment.

Ripple Coin transaction process

A point to note here is that in most other cryptocurrencies, this step is performed by a decentralized network of nodes. These nodes are called miners because along with verifying the transaction, they also mine the new coins of that cryptocurrency.

However, all the coins have already been released in the case of Ripple coin, eliminating the need for mining. So, nodes that verify Ripple transactions are known as validators.

Also, these validators are approved and appointed by Ripple Labs. Whereas, anyone can become a node in the case of other cryptocurrencies.

This is another reason why Ripple has been labeled as ‘centralized’.

Step 4: Upon successful verification, payment confirmation is sent to both Kate and Carl.

This whole process, which could take days through a regular channel, gets completed in only a few seconds.

So, is this process secure?

Most cryptocurrencies are based on blockchain technology, which is considered to be very secure when built well. Although Ripple is built on something similar, it is not built on blockchain technology.

Ripple is instead based on its own form of DLT (Distributed Ledger Technology). It is an open-source protocol, hosting a shared and public ledger, using a consensus mechanism to ensure security. It’s easy to see the similarities.

The security is provided by the validators that constantly compare their transaction records before coming to a consensus. This way they can make sure that the same money is not being spent at two or more places (also known as double spending).

But what happens when one validator decides to go against the consensus? In such a situation, the validator who disagrees needs to digitally sign it and inform the other validators.

Other validators can then listen to this validator and replace it if it turns out to be malicious. This way they can still continue to maintain the security of the system and avoid delays caused by a disagreeing validator.

While Ripple coin does seem to be secure, its technology is still in a very early stage and would need a continuous upgrade to fulfill its objective, especially from the security perspective.

By now you must have a fair idea about what is Ripple, how it works, who are its users are and so on. Let’s summarize this guide with a list of pros and cons of Ripple coin.

Pros and Cons of Ripple coin

Below is a summarized list of the pros and cons of Ripple.

thumbs up PROs

Transaction fees

The cost of a standard transaction on the Ripple protocol is about 0.00001 XRP. The cost of 1 XRP is currently around $0.69. That means the transaction fee is so cheap that it’s practically free!

As I said before, there are no miners of Ripple coin. So, who gets the fee? No one!

In this unique mechanism, the XRP that is used for paying fees is destroyed.

This means that the number of XRPs are reducing day by day. This also implies that the value of the XRPs that remain will continue to increase.

Transaction speed

Ripple transactions are not only faster as compared to traditional payment methods but also as compared to other cryptocurrencies. The snapshot below says it all about the performance of Ripple in terms of transaction speed.

Ripple Coin transaction speed


At the time when most of the cryptocurrencies are struggling to find acceptance in the mainstream economy, Ripple seems to have found success there.

As described earlier, Ripple is already being piloted by many large financial institutions and payment apps. This is one of the key reasons that Ripple is a favorite among investors.


Ripple is being led by a very capable team with a good mix of experience and expertise. In a young industry like cryptocurrency where things are not yet clearly defined, a good team can really make all the difference.
Ripple, is also the brain behind Stellar.

thumbs down CONs


Centralization is an aspect which has been time and again criticized in the case of Ripple coin. Ripple Labs controls a majority stake of XRP. In addition to that, Ripple Labs is also the entity that approves the validators for the network.

Also, the founders gave themselves around 20 billion XRPs at the time of its release.

Critics say that it is not in the spirit of the basic philosophy of cryptocurrencies, which has decentralization at its core.

Focused on large corporations

We saw that many large corporations are already using Ripple to reduce their costs and provide a better service. That said, Ripple doesn’t currently have much to offer to an end consumer like you and me.

Most of the offerings of Ripple have been designed with banks and payment providers in mind. You won’t personally see much change in sending or receiving payments anytime soon.


International payments transfer is an attractive industry for cryptocurrencies. So, Ripple is facing competition from coins like Stellar (XLM), which are targeting the same space.

In fact, Stellar has also managed to find a spot in the top 10 cryptocurrencies with a market capitalization of $5.87 billion.

Another competitive disadvantage for Ripple is that you can still not buy Ripple on Coinbase, despite it being the 3rd largest cryptocurrency! Being able to buy Ripple on Coinbase would certainly generate a lot of hype and make it easier for beginners to get involved.

Finishing the list of pros and cons of Ripple coin, we have come to the end of our guide on what is Ripple.

Final Words

You now know that Ripple is a cryptocurrency focused on solving the problems related to cross-border money transfers. You have an in-depth idea about how it works and how it is already being used by many large banks and financial institutions.

You also know about one of the biggest issues of Ripple — decentralization. Fortunately, Ripple Labs has started taking action to ‘decentralize’ Ripple.

After looking at the pros and cons of Ripple coin, what do you think about it? Is it doing a good job? Do you favor Ripple? We would love to hear your thoughts about it.

1 Comment

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  • XLM is not competing with XRP.
    XLM is an Ethereum killer like many other cryptos. A totally different market than a “Swift Killer.”
    Also another feature of XRP is, at least in theory, you can send one Ripple currency to another Ripple currency address and they will convert.
    One thing I was wondering, personally, is “Is a Ripple Fork a Ripple currency?” The specific case was Casino Coin which claims to be a Ripple Fork so I was wondering if I could send XRP to a CSC address and have it convert or not….