XRP is a highly efficient cryptocurrency built on the XRP Ledger, a decentralized blockchain technology designed to facilitate fast and affordable cross-border transactions. Its primary use case is currency exchange for global payments, with additional applications in decentralized finance, tokenization, and everyday transactions. Created by McCaleb, Britto, and Schwartz in 2012, the XRP ecosystem continues to evolve, supported by a global community of developers and validators.
Understanding XRP and Its Unique Supply Model
Unlike Bitcoin and other mineable cryptocurrencies, where new coins enter the market as block rewards, XRP has a fixed supply. The original founders pre-mined (created at launch) 100 billion XRP tokens in 2012. These are all the XRP tokens that will ever exist, as no new tokens can be created.
The founders allocated 80 billion tokens to Ripple to fund future operations and development, while distributing the remaining tokens among themselves. XRP enters circulation whenever Ripple decides to sell tokens from its pre-mined supply on the secondary market.
In 2017, Ripple placed 55 billion of its 80 billion XRP tokens into an escrow account. This move was designed to improve transparency and predictability in XRP sales. From this escrow, Ripple can sell up to 1 billion tokens per month on the secondary market.
XRP held in escrow is considered "non-distributed," while the rest (including XRP held by Ripple in wallets) is distributed (i.e., in circulation). At the end of each month, any unsold tokens are returned to escrow and redistributed for future periods.
Over the last 32 months, 32 billion XRP have been released from escrow, with 26.7 billion returned. As of early 2022, the escrow account held approximately 46.5 billion XRP tokens. Ripple publishes this data on its official website for public transparency.
Historical Price Performance of XRP
In the three and a half years following its 2012 launch, XRP’s price experienced two significant surges. In December 2013, the price of XRP increased nearly 11-fold in just 15 days. A year later, the price jumped 454% over 33 days.
After these early spikes, XRP’s price remained below $0.01 until the crypto market began gaining momentum in early 2017. Between March 22, 2017, and January 8, 2018, the price of XRP rose in a parabolic fashion, mirroring the trends of Bitcoin and other cryptocurrencies at the time. It increased by over 51,000%, from less than one cent to an all-time high of $3.40.
XRP was unable to sustain its momentum above the $3 level, and within a few months, the price fell to around $0.10. It remained below this level until April 2021, when the broader crypto market began to rally again. That month, XRP reached a yearly high of $1.98. However, this surge was short-lived, and the price soon fell back below $1.
The Technology Behind XRP: XRP Ledger
The XRP Ledger is a permissionless network of peer-to-peer servers that power XRP operations. XRP is the native token and is designed to function as a "bridge" between hard-to-match fiat currencies. For example, if there are no market makers willing to trade shekels for shillings, one can sell shekels for XRP and then use XRP to buy shillings.
The XRP Ledger uses a federated consensus algorithm, which differs from proof-of-work and proof-of-stake mechanisms. In this system, network participants are known and trusted by other participants. Unlike miners, they are not rewarded for securing the network.
When validators reach consensus, a new block—a "ledger version"—is created and validated. The content of a block cannot be altered, allowing servers in the network to maintain a complete history of the ledger’s state.
To access the XRP Ledger, connected applications can use HTTP or WebSocket APIs. They can also use libraries available for various programming languages, including Java, JavaScript, Python, and others. The ledger is open-source, meaning its code is publicly accessible.
Real-World Use Cases: RippleNet and On-Demand Liquidity
XRP is also used to provide on-demand liquidity (ODL) for Ripple’s flagship service, RippleNet. This is a global payment network of financial institutions that originally included three separate products until 2019: xCurrent (an instant settlement system), xRapid (a liquidity product), and xVia (an API interface for payments).
ODL is the process of exchanging one fiat currency, such as US dollars, for XRP tokens, sending those tokens to the recipient's account, which then exchanges the XRP for their local fiat currency, such as Philippine pesos. Unlike fiat currencies, which can take several days to transfer, XRP transactions typically take about three seconds.
This makes XRP an attractive solution for cross-border payments, reducing both time and cost for financial institutions and their customers.
Technical Specifications and Transaction Efficiency
According to the XRP Ledger documentation, the ledger processes payments in less than five seconds and can handle more than 1,500 transactions per second. A small amount of XRP—approximately 10 drops (a unit of XRP, equal to 0.00001 XRP)—is destroyed to cover transaction fees.
The transaction cost is designed to increase with network load to discourage network use during busy periods. All XRP transactions are executed and settled on the ledger, ensuring security and finality.
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Frequently Asked Questions
What is the main purpose of XRP?
XRP is primarily designed for fast and cost-effective cross-border payments. It acts as a bridge currency between different fiat currencies, facilitating quick settlements for financial institutions and individual users.
How is XRP different from Bitcoin?
Unlike Bitcoin, which uses a proof-of-work consensus mechanism and has a limited supply released through mining, XRP has a fixed supply that was pre-mined at its creation. XRP also offers faster transaction times and lower fees compared to Bitcoin.
Can new XRP tokens be created?
No, the total supply of XRP is fixed at 100 billion tokens. No new tokens can be created, which distinguishes it from inflationary cryptocurrencies or those that rely on mining rewards.
What is the role of Ripple in the XRP ecosystem?
Ripple is a technology company that uses XRP and the XRP Ledger to develop solutions for global payments. While closely associated, Ripple and XRP are separate entities, with Ripple being one of many participants in the XRP ecosystem.
How secure is the XRP Ledger?
The XRP Ledger uses a federated consensus algorithm, which relies on trusted validators to confirm transactions. This allows for fast and secure transactions without the high energy consumption associated with proof-of-work systems.
Where can I track the live price of XRP?
You can track the live price of XRP on various cryptocurrency exchanges and financial data websites. These platforms provide real-time charts, historical data, and market analysis for XRP and other digital assets.