Gate.io Blog What is XRP and how does it work

What is XRP and how does it work

09 March 16:43

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![](https://gimg2.gateimg.com/image/article/16783509841.18.jpeg)
## [TL; DR]
Jed McCaleb started to develop the XRP cryptocurrency and the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger in 2011.

<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is faster, more scalable and more energy efficient than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> which uses the proof of work consensus mechanism.

The purpose for <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is to enable banks and other financial institutions to send and receive funds around the world.

<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> has a premined supply of 100 billion coins.

## Introduction 
The history of cryptocurrency is long, with thousands of coins and tokens on the market. Ripple (<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>), which has been on the market since 2012, is one of the leading cryptocurrencies.  Developed by Ripple Labs, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> was one of the earliest cryptocurrencies, created a few years after the launch of <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. Presently, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is the sixth largest cryptocurrency with a market capitalization of over $19 billion.  In this article, we cover the history of <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, what it is used for and how it works.

## The history of Ripple
The history of Ripple (<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>) cryptocurrency is fascinating since its foundation was laid in 2004, well before Satoshi Nakamoto developed and [launched Bitcoin](https://www.gate.io/learn/articles/who-is-satoshi-nakamoto/286 "launched Bitcoin"). Notably, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> was not created in a similar way as other cryptocurrencies like <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and ETH, where the founders started the projects from scratch.

![](https://gimg2.gateimg.com/image/article/167835106811041678350635_.pic.jpg)
Ripple- Cryptonews

The concept of <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> started between 2004 and 2005 when the founder of Ripple, Ryan Fugger, a Canadian computer programmer, developed Ripple with the vision to provide a secure payment system that caters for the needs of the online community. To that end, he developed Ripple Pay to facilitate the international transfer of funds.

The advent of cryptocurrency created an opportunity for Ripple to meet its vision of being a global provider of fast, secure and seamless transfer of funds. However, that vision was pursued by renowned entrepreneurs, Arthur Britto, Jed McCaleb and David Schwartz who identified cryptocurrency as a means to end the inefficiencies that exist in the  international traditional remittance and payment systems.

In 2011 a programmer, Jed McCaleb, started to develop the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger and the XRP cryptocurrency before recruiting a team which included other investors. Importantly, in 2012, he approached Fugger, the then owner of Ripple, requesting to use the RipplePay network. Fugger agreed to the plan and handed over the network to McCaleb and his team.

Later in 2012, McCaleb and his team launched the Ripple transaction protocol (RTXP) before rebranding the company to Ripple Labs in 2013. Originally, they named the company NewCoin before rechristening it to OpenCoin and finally adopted the name Ripple.

The three engineers, Britto, McCaleb and Schwartz, created <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> with the aim of overcoming the limitations of <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. As such, they wanted to create a cryptocurrency that was sustainable and that served as a reliable international payment system. One of the team members, Chris Larsen, joined the project in 2012.

Later on, as the Ripple crypto gained momentum, the company forged partnerships with financial institutions. By 2019, Ripple had partnered with over 300 financial institutions in more than 45 countries. Sadly, in 2020 the SEC filed a lawsuit against Ripple for breaching the United States securities law. [SEC claims that Ripple](https://www.gate.io/uk/blog_detail/1983/5-things-you-need-to-know-about-the-crypto-market-this-week "SEC claims that Ripple") sold unregistered securities when it put Ripple <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> on the market.

## How does Ripple <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP crypto</a> work? 
Ripple <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP crypto</a> is a native cryptocurrency of the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger which uses the federated consensus algorithm. It is important to note that Ripple is not a blockchain but a hash tree that operates in a similar manner as a blockchain since it has nodes that verify transactions.

Primarily, people can transfer the XRP cryptocurrency the way they do with all other tokens which they can send to digital wallets. As expected, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> transactions are transparent, permanent, secure and immutable. This is because they exist on a public electronic ledger.

## Ripple (<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>) consensus mechanism 
Ripple uses a quorum-based consensus mechanism which it calls Ripple Protocol Consensus Algorithm (RPCA) where selected validators should agree to verify the transactions. Basically, the validators compare the ledger entries and blocks within 3 to 6 seconds. If 80% of the validators reach an agreement on the transactions, they verify them.

However, if less than 80% of the validators agree on the transactions they need to make new proposals until they reach a consensus. To start with, Ripple selects 35 validators based on their previous performance. In turn, each of the 35 validators selects a list of other nodes to participate in the verification process. This list of additional validators is called a Unique Node List (UNL).

## What is <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> used for? 
The main [purpose of Ripple (XRP) is to enable real-time payments](https://www.gate.io/blog_detail/601/Behind-the-Scene-SEC-vs.-Ripple-Lawsuit "purpose of Ripple (XRP) is to enable real-time payments") as well as supporting fast and efficient cross border remittances. In fact, the team created <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> as a cryptocurrency for financial institutions such as banks.

Using <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, these institutions are able to make faster transactions linked to cash systems and foreign currency exchange. Therefore, the team does not anticipate people to use <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> as a means of exchange to trade goods and services. Rather, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> facilitates efficient transactions among large financial institutions.

![](https://gimg2.gateimg.com/image/article/167835117811051678350671_.pic.jpg)
<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> supports international payments- Forexlive

For this reason, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> enhances fast transactions among parties. That is why it processes up to 1 500 transactions per second. Further to this, these transactions are approved within 3 to 5 seconds, making it one of the fastest public ledgers.

<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is decentralized and integrates well with decentralized finance (DeFi) applications. Since it is decentralized the transactions are guaranteed, standardized and are executed near-instantly. This is why XRP cryptocurrency has revolutionized the financial sector.

## The other advantages of Ripple cryptocurrency
Apart from speed and decentralization, crypto <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> has a very [low transaction fee](https://www.gate.io/fee "low transaction fee").

Also, Ripple Ledger users can denominate their transactions in any major fiat currency of choice. For example, they can use the United States dollar or the British pound. This is because the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> ledger offers autobridging service which identifies the best exchange rate at any time.

It also has a wide customer base comprising big financial institutions such as Axis Bank.

## <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is premined 
Another outstanding fact about the XRP cryptocurrency is that it is premined. <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, with a total supply of 100 billion coins, was premined at the time of the launch. Of these,  Ripple Lab Foundation, which is responsible for the Ripple Network, owns 80 billion coins which it sells to fund further developments on the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> ecosystem.

20 billion of the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP crypto</a> was distributed to the founders of the project. As well, a small amount of the cryptocurrency is burned whenever a transaction is successful. Presently, over 45 billion of the XRP cryptocurrency is in circulation.

## What is the difference between Ripple and <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>?
In most cases, we use Ripple interchangeably with <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, yet there is a difference. Ripple is a company that developed the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public  ledger and the [XRP cryptocurrency](https://www.gate.io/price/xrp-xrp "XRP cryptocurrency"). It is a profit oriented company which runs other projects apart from the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public Ledger. On the contrary, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is a cryptocurrency that supports an international financial system consisting of banks and other related institutions.

## A comparison of <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>
Most people are interested to know the difference between the number one cryptocurrency, <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, and <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>. <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> uses the proof-of-stake consensus mechanism while <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> uses a Quorum-based consensus algorithm.

![](https://gimg2.gateimg.com/image/article/167835127511061678350683_.pic.jpg)
Ripple vs <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>- Interactivecrypto

With <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, the first validator to solve a complex cryptographic equation verifies the transactions and adds the block to the blockchain. Nevertheless, for the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger, 80% of the validators should agree to verify a transaction.

In addition, the <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain rewards the node that validates and adds a block to the network. In contrast, the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> ledger does not reward the nodes that verify the transactions. The motive for the validators is to secure the stability and integrity of the network.

Secondly, the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger is cost-effective, more efficient and greener than the <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> blockchain. This is because the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> network is able to process many transactions within a second at less energy than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. On the other hand, the proof-of-work mechanism, which <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> uses, consumes much electricity. Also, since the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> ledger processes about 1,500 transactions per second, it is more scalable than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>.

<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> has a much higher supply than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. The maximum supply of BTC is 21 million while <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> has 100 billion premined coins.

## Conclusion 
<a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is a cryptocurrency created on the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger whose main purpose is to promote and sustain a global financial system. The cryptocurrency is used by banks and other financial institutions to send and receive funds globally. The <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP crypto</a> is more efficient, more cost effective, faster and greener than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>.

## FAQs about Ripple <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>
### Is Ripple and <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> the same?
Ripple and <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> are different. Ripple is a company that aims to generate profit from several projects which include the XRP cryptocurrency. On the other hand, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is the native cryptocurrency for the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger which is under the responsibility of Ripple. The maximum supply of <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is 100 billion.

### Where can I <a href="/how-to-buy/xrp-xrp" target="_blank" class="blog_inner_link">buy XRP</a>? 
You can <a href="/how-to-buy/xrp-xrp" target="_blank" class="blog_inner_link">buy XRP</a> at cryptocurrency exchanges and brokers. For example, many investors [purchase it on Gate.io](https://www.gate.io/price/xrp-xrp "purchase it on Gate.io"), a centralized exchange, using P2P, credit card or wire transfer. However, you can also purchase it from your peers.

### How secure is <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>? 
The <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> public ledger uses the Quorum-based consensus algorithm where 80% of the validators should agree on a transaction. Since the Ripple network is almost centralized, the validators are selected from its reliable customers such as banks and other renowned financial institutions. The main aim of the validators is to secure the network as a means to protect their investments.

### Is <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> a good investment? 
Although <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> is facing a lawsuit from the SEC, it has the potential to experience a bull run if it wins the case. Its current low market price can lead to high profit if its value rises in the future. Also, over 300 banks accept <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> and can influence a rise in its demand in the future. In addition, the <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> network is scalable, fast and secure which attracts investment.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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TL；DR

Introduction

The history of Ripple

How does Ripple XRP Crypto work?

Ripple _XRP_ consensus mechanism

What is XRP used for?

The other advantages of Ripple cryptocurrency

XRP is premined

What is the difference between Ripple and XRP?

A comparison of Bitcoin and XRP

Conclusion

FAQs about Ripple XRP

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What is XRP and how does it work

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