People often use the term Ripple to describe XRP. However, this is incorrect as Ripple is a private company and the XRP ledger is an open, public, decentralized network that anyone can use. The XRP Ledger community consists of a number of companies that use XRP and the XRP Ledger for a variety of use cases, including cross-border payments, Coil for Web Monetization, and Forte for gaming.
Ripple also runs a separate private network called RippleNet. RippleNet is designed to connect banks and financial institutions efficiently. RippleNet can access liquidity on the XRP Ledger using Ripple’s ODL (On Demand Liquidity) product. Lastly, you have the XRP Ledger Foundation. This is a non-profit foundation that fosters development and encourages adoption of the XRP Ledger.
What makes Ripple different, and why it has always been a bit of a black sheep among early crypto projects, is the fact that it’s designed to serve the central banking community. Ripple functions as global payments network specifically designed to streamline international financial transactions between Ripple Net participants. This group is comprised of mostly banks but there are some other notable financial institutions, such as Money Gram, that have joined the team to leverage Ripple’s real-time gross settlement system, currency exchange, and remittance network.
What Is The Difference Between Bitcoin And Ripple XRP?
Ripple v Bitcoin
While Bitcoin is a digital currency intended as a means of payment for goods and services, Ripple is a payment settling, currency exchange and remittance system intended for banks and payment networks. The idea is to provide a system for direct transfer of assets (e.g. money, gold, etc.) that settles in almost real-time, and is a cheaper, more transparent and secure alternative to transfer systems used by banks today, such as the SWIFT payment system.
Bitcoin is based on blockchain technology, while Ripple doesn’t use blockchain but uses a distributed consensus ledger using a network of validating servers and crypto tokens called XRP (sometimes referred to as Ripples).
XRP – which is the actual cryptocurrency – is a token which is used on the Ripple network to facilitate transfers of money between different currencies. Existing settlement systems generally use US dollars as a common currency for converting between other currencies. This incurs currency exchange fees and takes time – which is why bank transfers between accounts in different countries often take up to three days to process.
By first converting the value of the transfer into XRP, rather than USD, exchange fees are eliminated and processing of payments is reduced to seconds.
Banks including Fidor Bank, Santander, the Commonwealth Bank of Australia and a consortium of 61 Japanese banks have all said that they are trialing or implementing applications utilising the Ripple Network payment system.
XRP is a token used for representing transfer of value across the Ripple Network. Different to bitcoin, where new coins are created (up the a capped level) as rewards for participants offering computing power to maintain the blockchain network, Ripple created 100 billion XRP coins at its inception.
Ripple recently added a new feature whereby, through a smart contract system (escrows), the company releases 1billion of its XRP holding to themselves each month to help fund business operations, incentivise customers, and sell to accredited investors. Any unused tokens will be placed back into escrow. According to internal sources, last month (which was the first month of escrow) Ripple only used approximately 100 million and put 900 million back into escrow.