What is $XRP
• What is XRP Ledger?
• XRP Ledger (XRPL) is a decentralized open-source blockchain launched in June 2012 by three developers: David Schwartz, Jed McCaleb, and Arthur Britto. XRPL aims to provide an efficient solution for global payments, focusing on speed, low cost, and scalability. Its underlying digital asset is XRP, which is used as a bridge currency to facilitate transactions.
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• Key features of XRPL
• Speed:
o Transactions on XRPL are settled within just 3-5 seconds, making it much faster than many other blockchains like Bitcoin (10 minutes) or Ethereum (about 15 seconds per block).
• Low cost:
o Transaction fees on XRPL are extremely low (often less than a cent), as a small portion of XRP is burned with each transaction to prevent spam.
• Consensus mechanism:
o Unlike Bitcoin which uses Proof of Work or Ethereum (which transitioned to Proof of Stake), XRPL uses a unique consensus protocol known as the Ripple Protocol Consensus Algorithm (RPCA).
o Relies on a network of trusted validators who agree on the order and validity of transactions. Anyone can run a validator, but the network relies on a trusted list called the Unique Node List (UNL).
• Decentralization:
o XRPL is open to the public and not controlled by a single entity. Over time, the network has become more decentralized with an increasing number of independent validators outside of Ripple (which contributed to its development).
• Capacity:
o XRPL can handle up to 1,500 transactions per second, with the potential for further scalability through future enhancements, making it suitable for large-scale financial applications.
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• Functions of XRPL
• Cross-border payments:
o XRP is used as a bridge currency to convert traditional currencies (like dollars to euros) quickly and at a lower cost than traditional banking systems like SWIFT.
• Decentralized Exchange (DEX):
o XRPL features a built-in decentralized exchange that allows users to trade XRP and other assets (such as tokens issued on the network) directly without the need for an intermediary.
• Token issuance:
o Users can create custom digital assets (such as stablecoins or tokenized assets) on XRPL, making it versatile.
• Micropayments:
o Thanks to its speed and low fees, XRPL is considered ideal for micropayments, such as paying small amounts for digital content.
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• How do transactions work on XRPL?
• Each transaction is recorded in the public ledger, a distributed database that updates every few seconds.
• Validators verify transactions and ensure there is no double-spending.
• A small amount of XRP is used as a transaction fee (burned and has no beneficiary), and as a reserve for accounts (10 XRP minimum to activate an account).
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• Ripple's role and relationship with XRPL
• Ripple is a major contributor to the development of XRPL, but the ledger itself is independent of the company.
• Ripple holds a large amount of XRP (100 billion XRP were allocated at launch), but it primarily uses it to enhance liquidity and support partnerships with financial institutions.
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• Updates and developments
• Over time, new features have been added to XRPL, such as:
o Hooks: to add simple smart contracts.
o Federated Sidechains: to link sidechains with XRPL.
o Supports NFTs (non-fungible tokens) since an update in 2022.
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• Real-world uses of XRP
• Ripple collaborates with banks and financial institutions (such as Santander and Standard Chartered) to use XRPL for financial transfers.
• It is also used by individuals and businesses for instant payments or as an investment tool in the cryptocurrency market.