What is XRP?
The digital currency is issued and partially operated by Ripple Inc, which, as a payment solutions firm, also runs a cross-border network called RippleNet. Even though the company is highly focused on cross-border payment technologies using RippleNet, it also manages the XRP Ledger, a network similar to blockchain technology. Using this network, payments in XRP are facilitated. Cross-border payments in XRP, as in the other crypto assets, are performed between digital wallets.
When it began to sell XRP in 2012, the company promoted this asset as a more efficient and less costly alternative to bitcoin as its transaction takes only 3-5 seconds. The reason why such quick transactions are possible is its centralized infrastructure. In addition to this, it does not necessitate a consensus algorithm, in other words, proof of work in trades, unlike bitcoin.
In XRP transactions, a group of validators performs multi-tasks by acting as miners as well as full node agents. They maintain the transaction ledger and publish an updated version of the ledger at very short intervals: The latest transactions are registered every 3-5 seconds.
The current number of active validators in XRP technology is 35. Six of them are managed directly by Ripple. An XRP validator needs to gain trust from the other validators to be active in the network. To achieve this trust, they need to make a unique node list of Ripple (UNL). It is a record of trusted validators and held by Ripple.
The company has many operations which are not necessarily connected. For instance, RippleNet does not require XRP in its actions. However, many banks today use RippleNet’s technology in remittance payments and currency exchanges. The technology serves more than 55 countries on six continents with 120 currency types. The only feature in the network of RippleNet that requires XRP is the service called On-Demand Liquidity. It is available in the EuroZone, the United States, Australia, the Philippines, and Mexico.
Lastly, let’s have a look at the differences between XRP and bitcoin. First, XRP is not mined while bitcoin mining continues. Ripple got the whole supply initially, and it releases some amounts of coins once in a while to the market. The amount of XRP coins in circulation today is over 45 billion, while the total amount is 100 billion!
XRP network is centralized, unlike bitcoin’s decentralized design. The former does not include a proof-of-work mechanism, which makes it less secure. On the other hand, it gets quicker as the consensus on the shared data is more accessible in its centralized system. The fact that there is no mining in the XRP network also leads to easier transactions quickly verified by validators.