Cryptocurrency is a rapidly changing space, with new technologies and names emerging every day. One of the biggest and most controversial topics in this space is Ripple's XRP, a privately owned platform and cryptocurrency launched in 2012. It gained fame due to its unique foundation, structure and activities.
Its enthusiastic supporters support its real potential for adoption and growth. Dissenters argue that due to many of these factors, it is philosophically incompatible with the ideals and foundations of cryptocurrencies.
Despite these claims, Ripple's XRP has become a household name in cryptocurrency. Here's everything you need to know about this cryptocurrency and how to invest in it.
What is Ripple?
Ripple is both a currency exchange system designed for fast and inexpensive transactions, and a cryptocurrency in its own right. Ripple's main goal is to connect financial institutions, payment service providers and digital asset exchanges to enable faster and cheaper global payments.
Founded in 2012 by Jed McCaleb and Chris Larsen, Ripple is perhaps best known for its open-source, peer-to-peer, decentralized platform, RippleNet, which allows money to be transferred in any fiat or cryptocurrency between financial institutions around the world.
Ripple corrects the common shortcomings of traditional banks. Transactions on the Ripple network are completed in seconds, even under the regular stress of millions of transactions. Compare this to bank transfers, which typically take days to weeks and can cost $15 to $30 or more when sent or received overseas. Ripple's fees vary depending on the size of the transaction, but in general they are minimal, with the minimum cost for a standard transaction being 0.00001 XRP.
While leading cryptocurrencies such as Bitcoin, Ethereum and Litecoin are intended primarily for use by individuals, the Ripple system is intended for use by banks, funds and institutions.
Indirect mining
Despite all this, users can still use their computer hardware to earn XRP. But, as you understand, this will not be exactly mining. Matches consist of working for a project, using computing power and receiving tokens as a reward.
If you carefully surf the forums dedicated to cryptocurrencies, especially Ripple, you will find that many research companies are willing to pay in XRP for the user to provide their power to carry out any operations.
So, if a university or a home-grown project does not have enough performance of existing equipment to solve some cryptographic problems, it is often more profitable for them to rent capacity from ordinary users rather than completely buy new equipment. That's why they post relevant offers.
The advantage of this method is that users also spend less resources. After all, companies pay in proportion to the amount of capacity that was transferred. This way, you can allocate only part of the performance of your equipment. At the same time, there is no need to buy new components, since there is no need to strive for maximum efficiency.
In addition, in this way you can help different communities in the development of a project or new technology. Who knows, maybe such a lease will become key, and the user will become a small part of a patent that will conquer the whole world.
What is XRP?
XRP is a cryptocurrency issued and managed by Ripple (although users can also create their own currency on the platform). Ripple began selling XRP in 2012 to fund the company's operations by allowing users to buy the cryptocurrency, although it has taken a backseat to the company's main goal of developing RippleNet.
Throughout Ripple's life, management has reconsidered how XRP fits into the company's business model, initially hailing it as the fuel that powers its borderless payments technology and then as a more efficient medium of exchange than Bitcoin.
XRP tokens represent a transfer of value through the Ripple network, and anyone can trade them on the open cryptocurrency market. Unlike the popular use case of Bitcoin, XRP is primarily used for payments and borderless currency exchange. While Ripple's centralized infrastructure is a concern for some in the cryptocurrency space, its high transaction speeds, low transaction costs, and low power consumption provide superior performance as a medium of exchange compared to many blockchain-based cryptocurrencies.
Resource consumption
Another reason for the inappropriateness of integrating mining into the Ripple system is the large amount of energy consumption. Especially when it comes to using a video card as the basis for mining.
GPUs are one of the most demanding components of a computer. And when they work at full capacity, the meter runs very quickly. In addition, the cooling system consumes a lot of resources, without which this process cannot be done.
Ripple is a project that requires a small amount of electricity to ensure stable and efficient operation of the system. This is how they achieved such cheap transactions. If you add mining, the system will be more loaded and will also begin to consume more resources. Accordingly, the commission will increase.
Therefore, it is simply impractical in this system, not only from the point of view of concept, but also from the point of view of savings and proper distribution of funds. Moreover, the integration of mining and its consequences will also provoke the refusal of most companies to cooperate with the project.
How does Ripple work?
When it comes to Ripple and XRP, there are two main technologies to keep in mind. Specifically, the XRP Ledger (XRPL) and the Ripple Protocol Consensus Algorithm (RPCA). Here's how they work.
XRP Ledger (XRPL)
RippleNet is built on top of its own blockchain-like distributed ledger database, the XRP Ledger (XRPL), which stores the credentials of network participants and matches exchanges between multiple currency pairs. The transaction log is maintained by a committee of validators who act as miners and full node operators to reach consensus in three to five seconds, compared to Bitcoin's 10 minutes. Since there are no miners competing to confirm transactions for block rewards, validators verify transactions without monetary reward.
Anyone can become an XRP validator, but in order to gain trust and be used by others on the network, validators must compile a unique Ripple node list (UNL), making them trusted Ripple validators. These centralized validators are critical to preventing double spending and censoring transactions. There are only 35 active XRP validators; six of them are operated by Ripple.
Ripple Protocol Consensus Algorithm (RPCA)
XRP's design is based on speed and cost rather than decentralization. Unlike various cryptocurrencies such as Bitcoin and Ethereum, which are built on the blockchain and verified by miners using a Proof of Work consensus mechanism, Ripple confirms transactions through its own consensus mechanism, the Ripple Protocol Consensus Algorithm (RPCA).
By avoiding energy-intensive Proof of Work mining, Ripple transactions require less energy than Bitcoin or Ethereum, are confirmed faster, and are less expensive. However, this speed is ultimately achieved thanks to XRP's centralized infrastructure, which some say makes the network less secure, censorship-resistant, and permissionless than open-source networks.
Is it possible to mine ripple
If you have already started frantically searching the Internet for information about whether it is possible to mine Ripple, then stop. Coin mining is not possible. Even if videos and publications appear with mining methods, they usually concern a completely different cryptocurrency. If these arguments do not convince you, then it is enough to familiarize yourself with the technology of Ripple developers in more detail. It fully explains why coins cannot be mined, like, for example, bitcoins.
Ripple transactions are not associated with the blockchain or blocks: their confirmation and processing occurs completely differently. There is also no reward for miners for mining blocks on their facilities: farms, computers, etc. In simple words, no blocks - no mining. So what does Ripple have then, how do transactions work? Although the entire system is considered decentralized (uncontrolled by anyone), everything has its own control centers. These are independent servers. The vast majority of them are the property of the development company itself, as well as the banks that use Ripple.
The work of the server (validator) in checking Ripple transactions between banks
Where then is decentralization and independence, as in the blockchain? But she still exists. All transactions are processed in the same way by adding a digital record. Transactions are confidential, data is not transferred anywhere. It is not the miners (more precisely, the client program), but independent servers who verify the authenticity of each transaction. There is no blockchain with sequential addition of blocks. Therefore, there is no one to transfer the reward for confirming and verifying transactions. And this is how miners earn cryptocurrency.
Ripple Cryptocurrency Token Offering
Unlike many other cryptocurrencies, XRP is not mined. The entire supply of the token was created when the network first launched in 2012, and Ripple executives periodically use escrow to free up segments of the supply to be sold on the open market.
In other words, unlike the decentralized economy of Bitcoin, the supply and issuance of XRP is centralized and regulated by multiple authorities. Since the total supply already exists, no more coins will be created, making XRP fixed in supply rather than inflationary.
As of January 2022, there are only 46.62 billion XRP tokens in circulation out of a maximum supply of 100 billion. Due to the sheer volume in circulation, XRP has had one of the largest market capitalizations of any cryptocurrency, even briefly eclipsing the second largest market capitalization Ethereum at the end of the 2017–2018 bull market.
Don't trust anyone
Who offers real Ripple mining in the browser without investments. The method described above is necessarily accompanied by the signing of a contract. In other words, it is a full-fledged lease agreement. The only difference is that the parties work remotely.
If he finds an offer to lease out capacity without signing the relevant documents, then most likely it will simply turn out to be a scam. There are two options: in the first, you will voluntarily give up your equipment to be torn to pieces, but you will be able to stop it.
In the second, which happens much more often, a hidden miner will simply be introduced into your system, which will use the power to mine other cryptocurrencies like Bitcoin.
Remember: there has not been and will not be direct mining of Ripple. This is one of the key ideas of the developers. They created a completely different concept and are not going to introduce mining into it. After all, it will simply ruin the platform in terms of stability, efficiency and speed.
Therefore, carefully study every offer you come across. Sometimes it is better to miss an opportunity if it is dubious than to expose your computer to danger and suffer from system freezes.
Ripple's Cryptocurrency and Regulatory Issues
At the end of 2022, Ripple became the subject of an SEC investigation. The regulator has determined that Ripple Labs Inc. and two of its executives, co-founder Chris Larsen and CEO Brad Garlinghouse, raised more than $1.3 billion through an "unregistered ongoing digital asset securities offering" to fund the company's operations. Under recent cryptocurrency rules set by the SEC, Ripple's leaders have been charged with illegally issuing securities through the sale of its XRP token, raising questions about cryptocurrency tax compliance.
The price of XRP fell amid the fallout from over $0.60 to under $0.30 as prominent crypto exchanges began delisting the token and Ripple executives, including founder Jed McCaleb, sold off millions of personal holdings of XRP.
Peculiarities
The core of the Ripple protocol is a shared database or ledger that uses a defined consensus process. This allows payments, transfers or exchanges of money to be made in a distributed process.
On Ripple, all users transact via cryptographically signed trades denominated in hard currency or XRP. Here, Ripple has the opportunity to use the internal registry, and for payments in all other assets, the Ripple registry will only keep records - record the current amounts of debt on debt obligations.
A trade requires only two participants: a regulated financial institution where the currency is held and hedge funds or currency trading desks that can provide some liquidity in the currency where they would like to trade.
To confirm all transactions, Ripple users must indicate other users they fully trust and the current amount. When there are no such direct trust relationships among users, then the system selects additional links.
Advantages
What does the future hold for cryptocurrency? There are only two developments. If banks are able to implement Ripple, then the XRP cryptocurrency will rise sharply in price and it will be possible to sell it very profitably. If, as a result, Ripple is completely abandoned, then users are guaranteed to be left with absolutely useless candy wrappers.
Just like any other investor, you need to understand these risks. If you decide to take a risk and bet everything on Ripple, then you should buy cryptocurrency and wait for its price to rise in order to sell it profitably. The current cryptocurrency rate may also rise slightly even if it is introduced into banks. Currently in 2022, the XRP coin price is a little over 22 cents, but it has recently started to rise. If you have some money in your stash that you could freeze for one or two years, then you won’t find a more interesting offer yet. As is clear from all of the above, mining of this cryptocurrency is not provided. Initially, it has 100 billion coins, so they can be purchased on exchanges, for example, on poloniex.com.
The official Ripple website is now located at ripple.com, so you can always find a lot of interesting information and details on it. But unfortunately, everything here is written in English and is replete with unfamiliar terms and words. It is not recommended to store the XRP cryptocurrency purchased “for growth” on the exchange itself; it would be better to create a wallet and keep the cryptocurrency on your computer.
Flaws
The Ripple network is based on an accessible ledger with multiple accounts, so it is possible for an attacker to create a sufficient number of fake accounts and fake transactions. This will help it overload the network. This could also result in the ledger becoming unmanageable and also impacting the network's ability to process legitimate transactions instantly.
To ensure the network is securely protected from creating unnecessary ledger entries, it is imperative to have an XRP reserve. Currently, the standard for sufficient reserve is 50 XRP. In accordance with the plan, such a standard should be a small amount for ordinary users, and also not allow an attacker to accumulate many fraudulent accounts.
Is Ripple a good investment?
Although XRP was impacted by Ripple's legal blow, XRP is an independent token that can and does operate somewhat outside of Ripple's business model. Falling prices and soured fundamental prospects may not paint a bright picture of XRP as an investment for some. It remains to be seen whether XRP will recover and continue to evolve along with the rest of the crypto herd, but as investors look for value in undervalued assets, it can't hurt to do more research and form an informed conclusion.
Advantages and Disadvantages of Ripple XRP
Since Ripple is different from other cryptocurrencies in some ways, it makes sense to analyze its perceived pros and cons before making any investment decisions.
| Benefits of Ripple XRP | Disadvantages of Ripple XRP |
| High speed | Centralized infrastructure, management, release |
| Low commissions | Corrupt validators |
| Fixed offer | Not supported by many exchanges |
| Interest/pre-acceptance by financial institutions |
Video cards - the basis
In the classical sense, mining is the extraction of cryptocurrency using the computing power of a computer. Video cards and central processors have these in sufficient quantities. However, the latter are much more inferior in this regard. Therefore, video cards became the basis of production.
In addition to the high speed of solving hash functions, they have another important advantage: the cards cope well with constant long-term tasks, which is mining. That is why they perform better than any other equipment (except for some algorithms that are tailored for the CPU or RAM).
When a user gets involved with mining, he is primarily interested in the choice of GPU (if not ASIC), the compatibility of a specific model with a specific algorithm, the payback period of the device and the approximate service life at maximum loads. Without the correct selection of a video card, mining will definitely not be effective.
Summarize
Ripple XRP is a global digital payment system that sacrifices decentralization for performance. The network and technology are owned and at least partially operated by the private company Ripple, which controls the underlying infrastructure, issuance, and some of the network's limited validators. While Ripple deviates from the traditional decentralization model adopted by leading cryptocurrencies Bitcoin and Ethereum, it is somewhat consistent with its own custom-designed infrastructure.
While Ripple's primary goal is to provide financial institutions with a gateway for borderless payments and currency exchange, its native cryptocurrency XRP has taken on a life of its own and is actively traded and analyzed by investors. Some investors argue that with highly rated metrics such as fast and low-cost transactions, XRP is a strong competitor to major cryptocurrency blockchains such as Bitcoin and Ethereum. Conversely, the centralization of Ripple's XRP has been a major philosophical and security issue for others, including regulators.
Igor Titov
Economist, financial analyst, trader, investor. Personal interests – finance, trading, cryptocurrencies and investing.
