In the world of cryptocurrency, the trio of Ripple, XRP, and XRP Ledger (XRPL) are familiar names but are often confused. Despite being closely related, each component has its own role, function, and degree of independence. This article will help you understand each element, as well as how they work together to build a fast, efficient, and cost-effective global payment ecosystem.
Ripple: A Global Payment Technology Company
Ripple is a private company operating in the financial technology sector, specializing in providing cross-border payment solutions. Founded in 2012 under the initial name OpenCoin, the company rebranded to Ripple Labs in 2013, and by 2015 officially adopted the name Ripple as it is known today.
Although not issuing or controlling XRP, Ripple plays a crucial role in building the financial infrastructure using XRP as part of its payment solutions. Ripple's core goal is to improve the slow, costly, and traditional intermediary-dependent international money transfer system.
Ripple Product Suite
RippleNet is the company's payment network, connecting banks and financial institutions globally to facilitate fast, transparent, and cost-effective transactions. A key component of RippleNet is On-Demand Liquidity (ODL) – a mechanism using XRP as a bridge between two different fiat currencies.
ODL eliminates the need for pre-funded accounts (nostro/vostro) by allowing instant currency conversion through XRP. Although Ripple owns a large amount of XRP (mostly locked in a monthly escrow contract), XRP remains an independent asset and can operate completely separately from Ripple's specific products.
XRP Ledger (XRPL): High-Performance and Scalable Blockchain
XRP Ledger (XRPL) is an open-source, decentralized blockchain that supports transactions using XRP. Designed to handle transactions quickly and at low cost, XRPL uses a special consensus mechanism called Ripple Protocol Consensus Algorithm (RPCA) – completely different from mining (PoW) or staking (PoS).
Recently, XRPL has expanded its capabilities by integrating EVM-compatible sidechains, allowing the deployment of Solidity applications and paying gas fees with XRP. This opens up opportunities for developers to build DeFi on the high-performance platform that XRPL provides.
How Does the RPCA Mechanism Work?
Instead of mining or staking, RPCA relies on consensus among validators. Every few seconds, validators propose a list of valid transactions, share it with the network, and if at least 80% agree, the transaction is confirmed and recorded in the ledger.
To increase reliability, each validator uses a Unique Node List (UNL) – a list of trusted nodes they choose themselves. This system ensures that the network can achieve consensus as long as the majority of nodes in the UNL behave honestly.
Benefits of RPCA
Low cost: Transactions are much cheaper than Ethereum or Bitcoin.
Fast processing time: Usually completed within 3-5 seconds.
Energy efficient: No coin mining required, making it environmentally friendly.
No token rewards: Validators are not rewarded with XRP; they only help maintain the stability of the network.
Applications of XRPL
Asset Tokenization: Users can quickly create tokens representing real assets (like stablecoins, reward points…) without the need for smart contracts.
Decentralized Exchange (DEX): Allows P2P trading of tokens on XRPL without the need for a centralized exchange.
NFTs and Hooks: XRPL has integrated support for NFTs and the Hooks feature – allowing lightweight logic to be inserted into transactions, such as automatic fees or payment conditions, aiding in the development of simple applications on the blockchain.
XRP: The Native Currency of the XRP Ledger
XRP is the official digital currency of the XRP Ledger. It is designed for fast, cost-effective, and scalable transactions. XRP is not mined but was "pre-mined" with a total of 100 billion tokens in 2012. A large portion was allocated to Ripple, with the rest circulating in the market.
Key Features of XRP
Processing speed: It takes only 3 to 5 seconds for each transaction.
Low transaction cost: Just a fraction of a cent.
Scalability: Processes about 1,500 transactions per second, much faster than Bitcoin or Ethereum.
Environmentally friendly: No coin mining, so it consumes very little energy.
Deflationary mechanism: Each transaction burns a small amount of XRP, reducing supply over time.
Why is there confusion?
Branding issues: Previously, many exchanges and media referred to XRP as “Ripple,” leading users to think they are the same.
Ripple's ownership: Ripple holds a large amount of XRP, leading many to believe that Ripple controls XRP.
Technological link: Ripple contributes to the development of XRPL and uses XRP in its products, making it difficult to separate everything.
The lawsuit with the SEC: In the lawsuit, the SEC often failed to distinguish clearly between Ripple and XRP, further blurring the lines between the two entities.
Conclusion
Ripple, XRP, and XRPL are three closely linked but fundamentally different elements in the cryptocurrency ecosystem. Ripple is the company building payment solutions, XRP is the digital currency that supports fast and cost-effective transactions, while XRPL is the open-source blockchain that enables these transactions to be executed efficiently.
Understanding the role of each component allows us to accurately assess the potential of this ecosystem. As XRP gradually gains legal clarity and XRPL continues to expand its functionality, this trio is helping shape the future of digital finance globally.