What to know about Ripple (RXP)?
With the ability to act as both a cryptocurrency and a payment network, Ripple has gained a reputation as the "cryptocurrency for banks".
Ripple is a network used for settling payments, exchanging currency, and an overall remittance system that can be utilized by banks and financial institutions (hence the nickname, "cryptocurrency for the banks").
Given that Ripple is built on and functions through the blockchain, it is considered the first money transfer network targeted towards the financial services industry which operates in this decentralised manner.
In conjunction with the Ripple network itself, there is XRP, which is the proprietary cryptocurrency tailored to function within the Ripple network.
Released initially in 2012 by founders Jed McCaleb and Chris Larsen, the core goal of Ripple was always to function as a payment settlement and asset exchange platform - Similar to SWIFT.
Its proprietary cryptocurrency, XRP, is actually pre-mined, meaning the XRP currency was mined before its actual public release.
Like many digital currencies, they operate strictly within their blockchain network or platform, in this case, Ripple, serving as an operational currency and intermediary.
Like many and most cryptocurrencies, Ripple is completely open-source and decentralised. It is notable to mention that the Ripple platform works with cryptocurrencies, fiat currencies, and commodities, while it allows clients to integrate the protocol into their own systems.
Back in 2017, The National Bank of Abu Dhabi started to use the Ripple technology for some of its transactions, specifically for cross-border transactions.
The XRP currency remains in the top 10 cryptocurrencies (defined by market capitalization) as of March 2022, as defined by Forbes Advisor.
Who Invented Ripple?
Ripple was initially founded by Jed McCaleb, who then had David Schwartz and Arthur Britto build the ecosystem and platform. Ryan Fugger is also part of the team thereafter, who helped launch it as a financial service in 2005.
The growth of Ripple began in 2004, when the creation of 'RipplePay' was established by Ryan Fugger. In 2011, the system was redesigned, making it faster and much more energy-efficient compared with Bitcoin. In 2012, 'OpenCoin', Inc. was formed.
Shortly after, the Ripple Transaction Protocol (RTXP) was developed based on Fugger's concepts. The protocol is able to circumnavigate the fees and waiting times of the traditional correspondent banking system.
Since 2012, Ripple has been also focused on expanding into the banking market.
What is the Ticker for Ripple?
The shortcut for Ripple is simply XRP.
Ripple can also be paired to currencies like USD (US Dollar) and EUR (Euro). The Ripples vs the US Dollar currency pair name is, therefore: XRP/USD.
It's possible to trade Ripple (XRP/USD) CFD, the most popular, as well as (XRP/EUR) CFD and (XRP/BTC) CFD on a free-access demo trading account with Admirals. Experienced traders highly recommend trading with a demo account first, before transitioning to the live markets.
What's the Difference Between Ripple and Bitcoin?
While many think that Ripple and Bitcoin are very much one and the same, this is not correct. There is one major difference between the Ripple platform which hosts XRP and Bitcoin.
Bitcoin, being the first player in the cryptocurrency market, is simply a currency that can be used for purchases. Ripple, on the other hand, is very much a literal payment ecosystem - while it also hosts its own proprietary currency, XRP.
The goal of Ripple is to act as a faster, cheaper, more secure version of SWIFT, to put it relatively simply.
Another very notable difference between Ripple and Bitcoin, is their functionality and the system on which it is built.
As Bitcoin is built on the blockchain, Ripple instead uses a distributed ledger consensus via its network of servers used for validating. The XRP tokens also play a major role in this validating process.
Advantages and Disadvantages of Ripple
As we start to grasp and understand further the functionality of Ripple and XRP, let's outline both the advantages and disadvantages of the Ripple payment ecosystem:
Advantages of Ripple
- Fast; Ripple offers faster settlement time with its transaction confirmations, with a general wait time of 4-5 seconds
- Versatile; While the Ripple system has its own currency (XRP), it can also process other digital currencies, commodities and traditional currencies.
- Mainstream Potential; The purpose of Ripple is to be of use to financial institutions, themselves, as a payment network - this shows the potential of further future mainstream adoption.
- Low Fees; The fee for transactions on the Ripple network is incredibly low, typically under one cent.
- SEC Ongoing Lawsuit; As you may know, the Securities Exchange and Commission (SEC) has been pursuing an ongoing lawsuit against Ripple (since 2020), being an obvious disadvantage.
- Partially Centralised; Being that Ripple relied on validators, this makes the system somewhat centralized.
- Pre-Mined; Since XRP is pre-mined, this reduces the incentive for common nodes to work within the network, while there are also not many nodes needed to actually run the network.
- General Risk; As with all cryptocurrencies, they all come with a certain level of risk given the industry is still relatively new.
Ripple uses a structure that processes payments in a similar fashion to the concept of blockchain.
According to Ripple, it uses a "shared ledger to process transactions [which allows it to] work cross-border and with any size payment."
The Ripple currency, XRP, helps facilitate transactions between two parties, in case no direct exchange is possible. XRP has no counterparty risk, as it doesn't rely on a third party.
What Are the Risks of Trading Ripple?
As with any financial asset, there is a risk that the price will move up and down.
Ripple is subject to market fluctuations, such as demand and supply. The price fluctuation, however, is what allows traders to trade.
Considering the wide acceptance of Ripple as a financial network by major financial firms and banks, it seems unlikely that any major disruptions will take place in the intermediate future.
Last but not least, each Ripple account is required to have a small reserve of 20 XRP, with a transaction fee of 0.00001 XRP for each trade.
These actions are implemented to combat hackers who want to overload the network. But, all in all, these costs are effectively very low.
As an Admirals client, you have free access to our MetaTrader 5 platform, which can assist you in making educated trading decisions by analyzing live price movements.
Is Ripple Safe to Trade?
Yes, it is just as safe to trade as Bitcoin, Ether, Litecoin, or any other commodity for that matter but also comes with associated risks.
As such, as a trader or investor, you must always keep your risk tolerance and risk management strategies intact with your trading activity.
Below you will see the following TradingView chart which shows the XRPUSD Monthly chart, from 2014 all the way into the current time period, 2022. You can see clearly the major price swings, giving you some perspective into the volatility of XRP and cryptocurrencies, in general.
It is important to note that this is a live chart, meaning the data is always fluctuating and changing over time to reflect current market conditions. Also, keep in mind, past results are not representative of future potential in any financial instrument.
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