Ripple, XRP & XRP Ledger: How They Work in Crypto Together

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In the cryptocurrency ecosystem, XRP and Ripple are prominent members, and so is XRP Ledger (XRPL). Often, the trio is confused based on their name and functionalities. This article will provide an explanation of each of the terms and their importance in the crypto world. 

Ripple

With a strong foundation in the crypto world, Ripple is not a stranger even to a novice trader. However, the name of the firm was not its actual name. In 2012, engineers David Schwartz and Jed McCaleb co-founded OpenCoin, which was changed to Ripple Labs Inc. in September 2013. Later, on October 6, 2015, the company was rebranded to its current name, Ripple. A private technology company, Ripple, focuses on building solutions for cross-border payments. It does not issue or control XRP but plays an influential role in the ecosystem by developing financial infrastructure that uses XRP. Ripple’s main goal is to improve the traditional payment system, especially for cross-border money transfers, which are slow, expensive, and depend on middlemen.

Ripple’s Product Suite

Through the RippleNet network, the firm allows banks and financial institutions to send money globally in a transparent manner. A key feature of RippleNet is On-Demand Liquidity (ODL), which uses XRP as a bridge between two different fiat currencies. This removes the need for pre-funded accounts (called nostro/vostro accounts) and allows instant currency conversion at a much lower cost. Ripple, however, is not synonymous with XRP. Although Ripple owns a large amount of XRP, most of it is locked in monthly escrows. Still, XRP works on its own and is not tied to Ripple’s specific products. This distinction becomes important when considering decentralization, usage, and the ongoing regulatory narratives around XRP’s status as a security.

XRP Ledger (XRPL)

The XRP Ledger (XRPL) is a decentralized, open-source blockchain that powers XRP. Designed for speed and efficiency, it processes transactions in seconds using the Ripple Protocol Consensus Algorithm (RPCA), avoiding the energy-intensive mining seen in PoW and PoS systems. Traditionally focused on fast payments, XRPL has now expanded into smart contracts with the launch of its EVM-compatible sidechain. This new chain, connected via Axelar, allows developers to deploy Solidity-based apps and pay gas fees in XRP. It brings Ethereum-like programmability to XRPL’s high-speed infrastructure, positioning it as a strong player in the evolving multichain DeFi ecosystem.

Working of the RPCA

This mechanism helps to validate transactions in without mining or staking. Instead of competing for block rewards, validators come to a consensus (agreement) every few seconds. Each validator proposes a list of valid transactions, and these proposals are shared across the network, and validators compare them.

If at least 80% of the validators agree, those transactions are confirmed and added to the ledger. To ensure trust, each validator uses a Unique Node List (UNL). It is a set of nodes that is considered to be reliable. This means that the validator doesn’t have to trust everyone on the network, but only the ones on the list. As long as the trusted validators act honestly, the network can agree on valid transactions. 

With the help of RPCA, transactions are completed at a low cost within seconds. Further, without the concept of mining, energy consumption is less, thus benefiting the environment. Moreover, unlike PoS and PoW, validators on XRPL do not get new tokens. They are used solely to maintain the health and security of the network. 

Uses of RPCA

Tokenization

XRPL allows users to create and manage custom tokens directly on the ledger. The tokens could vary from fiat-backed stablecoins to reward points or even digital assets. The process is fast and at a low cost, and primarily does not require smart contracts for execution, making it ideal for businesses that need token utility without complexities. 

Decentralized Exchange (DEX)

XRPL has a built-in decentralized exchange, supporting P2P trading of XRP and other issued tokens. Users can place trustless limit orders directly on-chain, without relying on a centralized exchange. The DEX is integrated into the ledger and benefits from fast settlement via RPCA.

NFTs and Hooks

While XRPL is not a smart contract platform like Ethereum, it has added support for non-fungible tokens (NFTs) and Hooks. The latter allows developers to embed lightweight logic (like conditional transfers or fee automation) into transactions, opening the door to simple dApps and automation on-chain.

XRP

One of the top tokens in the cryptocurrency world, XRP has faced several ups and downs, with the most significant event being its legal turmoil with the U.S. Securities and Exchange Commission (SEC). The token, currently ranking in the fourth spot, is the native cryptocurrency existing on the XRP Ledger blockchain and is designed specifically for fast, scalable, and efficient value transfers.

Unlike Bitcoin or Ethereum, XRP does not use the regular consensus mechanism for mining. At the time of its launch in 2012, all 100 billion XRP tokens were pre-mined. While a significant portion was allocated to Ripple Labs, its developers, and early participants, the remaining supply is now being traded openly in the market. 

Key Attributes of XRP

Transaction Speed

XRP transactions are processed within 3 to 5 seconds, enabling near-instant value transfer. It is ideal for payments and real-time financial services.

Cost Effective

Transaction fees are extremely low, often just fractions of a cent, making XRP practical for both large and micro-level transfers.

Scalability

The XRP Ledger can handle about 1,500 transactions per second, supporting high-volume use cases without network congestion or performance delays.

Sustainability

XRP doesn’t rely on mining, so it consumes very little energy compared to proof-of-work systems like Bitcoin and Ethereum.

Burn Limit

A small amount of XRP is destroyed with every transaction. This slowly reduces the total supply, helping to increase scarcity over time.

Why the Confusion Exists

  • Branding Legacy: For a long time, exchanges and media referred to XRP as “Ripple,” creating long-standing confusion between the company and the token.
  • Ownership: Ripple holds a large amount of XRP, leading many to assume it controls the token, though XRP operates independently.
  • Interdependency: Ripple helped develop XRPL and uses XRP in its products, making the ecosystem seem more tightly linked. 
  • Legal Confusion: The SEC lawsuit often treated Ripple and XRP as one, blurring the distinction between the company and the asset.

Conclusion

To make matters easy, Ripple, XRP, and the XRP Ledger (XRPL) are closely related but not the same. Ripple is a company that builds payment solutions, while XRP is a digital asset used for fast and low-cost transfers, and XRPL is the decentralized blockchain that powers it all. 

While Ripple holds XRP and contributes to XRPL, the token and ledger function independently. As time elapsed, confusion grew due to names, ownership, and legal issues, but understanding their roles helps clarify the ecosystem. As XRP gains legal clarity and XRPL continues to expand, the trio forms a powerful network for global financial innovation.

Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.


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