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First, we provide paid placements to advertisers to present their offers. The payments we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market.
Second, we also include links to advertisers’ offers in some of our articles. These “affiliate links” may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor.
While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.
Updated: Jul 12, 2022, 3:34am
Ripple is a money transfer network designed to serve the needs of the financial services industry.
XRP is the native cryptocurrency on the Ripple network, and it consistently lists among the top 10 cryptocurrencies by market capitalization.
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Ripple is the company behind XRP, and it’s a payment settlement system and currency exchange network that can process transactions globally.
“Ripple was designed from the very beginning to essentially be a replacement for SWIFT (a leading money transfer network) or to otherwise replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.
It serves as a trusted agent between two parties in a transaction as the network can quickly confirm that the exchange went through properly. Ripple can facilitate exchanges for a variety of fiat currencies and cryptocurrencies, such as Bitcoin, to name one example.
Whenever users make a transaction using the network, the network deducts a small amount of XRP, a cryptocurrency, as a fee.
“The standard fee to conduct transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the large fees charged by banks for conducting cross-border payments,” says El Lee, board member of Onchain Custodian.
XRP is a cryptocurrency that runs on the XRP Ledger, a blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto would go on to found Ripple and use XRP to facilitate transactions on the network.
You can buy XRP as an investment, as a crypto to exchange for other cryptocurrencies or as a way to finance transactions on the Ripple network.
Notably, XRP’s blockchain operates a little differently than most other cryptos. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can solve complex equations quickly. But transactions are secure as the majority of ledger holders must agree with the verification for them to be added.
XRP’s Ripple network somewhat centralizes things and uses a consensus protocol: while anyone can download its validation software, it maintains unique node lists that users can select to verify their transactions based on which participants they think are least likely to defraud them.
As new transactions come in, the validators update their ledgers every three to five seconds and make sure they match the other ledgers. If there’s a mismatch, they stop to figure out what went wrong. This allows the network to securely and efficiently validate transactions, which gives it an edge over other cryptocurrencies like Bitcoin.
“Bitcoin transaction confirmations may take many minutes or hours and are typically associated with high transaction costs,” says Lee. “XRP transactions are confirmed around four to five seconds at a much lower cost.”
“Mining” is the distributed verification system used by most blockchain-based cryptocurrencies. It both facilitates transactions and provides the mechanism by which new currency is introduced into a cryptocurrency system—typically as a reward to verifiers for their work supporting the network. For example, Bitcoin has a maximum supply limit of 21 million tokens that are steadily released as more and more transactions are verified,
XRP, in contrast, was “pre-mined,” meaning the XRP Ledger created 100 billion units that are then periodically released publicly.
Ripple owns a portion of XRP in circulation, and that is an incentive for it to help the cryptocurrency grow and be successful over time. Another proportion of XRPs is held in reserve for regular release into the market through sales.
Understandably, this has led to concerns that a lot of XRP could be released at once, diluting the value of other XRP already in circulation because part of what gives any currency its value is its comparative scarcity.
“The company has tried to reduce the uncertainty by implementing several mechanisms (trust, predictable release, etc.),” says Tim Enneking, principal of Digital Capital Management. That mining vs. pre-mining distinction may also be a reason for its 2020 conflict with the U.S. Securities and Exchange Commission (SEC).
You can use XRP like any other digital currency, either for transactions or as a potential investment. You could also use the Ripple network to process other types of transactions, like exchanging currencies.
For example, if you are looking to swap Canadian dollars for euros, you could first exchange your Canadian dollars for XRP on the Ripple network, and then use those to buy euros, rather than handling the currency exchange directly through a bank or money changing exchange. This can be a much faster and cheaper approach versus paying the high fees banks and money remittance organizations may charge.
XRP can be a gamble not for the faint-hearted.
That said, if you believe that Ripple will emerge victorious as a payment system, then it could be worth buying XRP. Just make sure it’s with money you can afford to lose.
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David is a financial writer based out of Delaware. He specializes in making investing, insurance and retirement planning understandable. Before writing full-time, David worked as a financial advisor and passed the CFP exam.
Aaron Broverman is the lead editor of Forbes Advisor Canada. He has over a decade of experience writing in the personal finance space for outlets such as Creditcards.com, creditcardGenius.ca, Yahoo Finance Canada, Nerd Wallet Canada and Greedyrates.ca. He lives in Waterloo, Ontario with his wife and son.

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