Ripple is being hyped as a possible competitor to SWIFT, which is the global industry standard for cross-border remittances as it has been used by major banks as well as in initiatives backed by world governments. At the same time, there is a discussion about XRP, which is its native currency and one of the most prominent in the crypto market. This can cause confusion about what each is used for as both serve unique purposes within the financial landscape.
Ripple is the firm that governs its namesake ecosystem which includes RippleNet, xRapid and xCurrent. Ripple is the firm that initially managed the development of the ecosystem and created the 100 billion XRP tokens that are in existence and manages the supply of the tokens in the free market. As RippleNet sees greater use, it will require more scalability to accommodate its growing userbase and this is managed by Ripple who has increased its scale to up to 50,000 transactions per second, putting it far above its competition.
Its native XRP token is not the easiest cryptocurrency to acquire and this is believed to be a deliberate act on the part of Ripple management in order to manage the supply of XRP in the market.
Ripple as a company also manages the business aspect of the ecosystem’s expansion such as negotiating deals with firms to join the RippleNet platform as well as its use by world governments. Moving forward, it is likely that Ripple will push the expansion of RippleNet even further.
RippleNet is the payment platform that is powered by XRP and is the aspect of the Ripple ecosystem that sees the most mainstream attention. The purpose of RippleNet is to facilitate cross-border payments and is able to leverage blockchain technology to do so in mere seconds and for a very low transaction fee, often just a few cents per transaction. RippleNet, while it has been used heavily by large businesses and institutions, is not restricted to them and can be used by individuals to send and receive funds with greater convenience.
In terms of sending a receiving, RippleNet is also not limited strictly to fiat currency as any form of currency, from gold to even airline miles, can be sent via RippleNet. This makes it suitable for people who wish to trade in all sorts of valuables across the world and thanks to RippleNet’s secure system, this can be done with confidence.
XRP is the native token at the center of the Ripple ecosystem. XRP is the medium through which transactions are carried out on RippleNet. When transactions take place between two or more individuals or banks, XRP is the asset used to settle the transaction instantaneously. There is debate as to what the future of XRP will be in the ecosystem as it has been stated that Ripple intended to discontinue its use but backtracked once interest increased in XRP as a cryptocurrency.
As a cryptocurrency, XRP also has a complicated function. While it is in the top five cryptocurrencies in terms of market capitalization, it is not as easily available to purchase as other cryptocurrencies as it cannot be easily purchased with fiat currency but is usually exchanged for other cryptos. It is, however, accepted by at least 4,500 merchants across the globe and acts as a medium of exchange. The Ripple ecosystem, unlike platforms like Tezos, does not have a voting system based on the ownership of tokens and so XRP does not act as a voting tool.
There is also confusion about the status of XRP as a possible investment tool. As of 2020, Ripple Inc is in court facing a class-action lawsuit in which they are accused of selling XRP as an unregistered security. Their defense, however, is that XRP is a utility token and not a security. Their accusers have, in response, pointed out that XRP was being exchanged for fiat currency and other assets despite statements made by Brad Garlinghouse, the CEO of Ripple Inc, stating that he was HODLing XRP tokens. This ongoing lawsuit once again brings up the age-old question of whether cryptocurrencies should be classified as securities or not. In the meantime, the decision on whether XRP should be considered a security is in limbo.
Prior to this, it was fairly common for crypto holders to HODL XRP tokens in anticipation of a price increase as they would with any other crypto on the market.
Ripple, in all its forms, serves a plethora of functions from being a medium of exchange to facilitating exchanges and is a case study in the complexity of cryptocurrency and blockchain-based platforms.