XRP is a digital currency that has gained attention not only in the crypto markets but also in broader discussions about traditional financial systems. XRP is not just a speculative investment, but is designed to solve specific problems that financial institutions and payment services face. These challenges include slow international payment traffic, high transfer fees, complicated currency exchange, and reliance on outdated systems such as SWIFT. XRP aims to provide an alternative that enables near-real-time, secure, and cost-effective global payments.
Unlike many other cryptocurrencies, XRP does not aim to create a completely new economic system independent of the current financial infrastructure. For example, Bitcoin was created as a reaction to traditional financial systems and aims for a completely decentralized and independent monetary system. XRP, on the other hand, works in part the opposite way: its basic idea is to support and complement existing systems – especially the operations of banks and payment institutions – by using blockchain technology to streamline their existing processes.
XRP operates as part of the XRP Ledger, a decentralized, open-source blockchain. It differs technically from many other blockchains in that it does not use mining (Proof of Work) or staking (Proof of Stake), but instead has its own consensus mechanism where predetermined validating nodes reach consensus on each transaction quickly and energy-efficiently. This makes the XRP Ledger one of the world’s fastest and lightest blockchains.
XRP’s development is supported by the American technology company Ripple, which does not own the XRP Ledger, but acts as a central player in its ecosystem. Ripple is developing commercial applications around XRP, in particular in the form of the Ripple Payments payment platform, which is used by financial institutions, banks and money transfer services worldwide. Within the Ripple Payments system, XRP acts as a so-called “bridge asset”, i.e. an intermediary currency that enables the exchange of two different fiat currencies without either party needing to hold money in the other party’s currency. This eliminates the need for liquidity at several stages and significantly speeds up the process.
XRP History
XRP’s history began back in 2011, when three software developers, David Schwartz, Jed McCaleb, and Arthur Britto, became interested in Bitcoin, but at the same time discovered its significant technical limitations. According to them, Bitcoin’s system based on Proof of Work mining was too slow, expensive, and energy-intensive to function as a sustainable global payment system. Thus was born the idea of a new, lighter, and payment-optimized blockchain: the XRP Ledger (XRPL).
In June 2012, XRPL was officially launched. Shortly thereafter, entrepreneur Chris Larsen joined the trio, and under his leadership, a company called NewCoin was founded. The company was quickly renamed OpenCoin and eventually became Ripple. Ripple’s mission was to commercialize the technology and integrate it into the traditional financial system.
According to the original vision, the XRP Ledger was specifically designed as a payment system that:
- Offers a significantly more environmentally friendly alternative than Bitcoin.
- Enables much faster and more scalable transfers that happen in seconds – without high transaction fees.
- Is technically optimized specifically for value transfer, and not as a general application platform like many other blockchains – and focuses on solving real problems in international payments.
Unlike many other cryptocurrencies, all XRP tokens were created at once. The total amount, 100 billion XRP, was divided between the founders and Ripple. Of this amount, the founders donated 80 billion to Ripple, and the company placed the majority of the tokens in a time-limited escrow system to ensure market stability.
One of the key differences between the XRP Ledger and Bitcoin was its consensus mechanism, which did not require mining. Instead, validating nodes quickly and energy-efficiently reach consensus on transactions. This enabled almost instant transfers, very low fees, and high scalability. These features made the system particularly suitable for global financial solutions.
In 2013, the OpenCoin name was dropped and the company was then known as Ripple Labs. The company made a conscious strategic choice: it did not aim to “overthrow” traditional banking, but to develop a modern and efficient infrastructure alongside it, which traditional financial institutions could gradually transition to. XRP’s role in this was to act as an intermediary currency, enabling the rapid exchange of fiat currencies of different countries without cumbersome intermediaries.
In 2020, XRP Ledger development began to receive further support through the founding of the XRPL Foundation, an independent, non-profit organization dedicated to promoting the decentralized development of the XRP Ledger and its global use. The foundation received initial funding from Ripple and crypto company Gatehub, among others.
SEC Legal Process
One of the biggest challenges in XRP’s history began in December 2020, when the US Securities and Exchange Commission (SEC) sued Ripple Labs. The SEC claimed that XRP was a security and that Ripple had violated federal law by selling it without proper registration. The charges were also brought against Ripple CEO Brad Garlinghouse and Chairman Chris Larsen personally. The lawsuit was a major blow to Ripple and the entire XRP ecosystem: several US crypto exchanges, such as Coinbase and Kraken, removed XRP from their offerings as a precautionary measure.
After over two years of legal battle, a ruling was made on July 13, 2023, when the judge ruled that XRP is not a security when sold on exchanges to the public. XRP’s price immediately rose by as much as 85%, and several exchanges resumed trading in XRP the same day. In October 2023, the SEC also dropped the personal charges against Ripple’s management.
The decision was a major victory for Ripple and the entire XRP ecosystem. If XRP had been defined as a security, its use in international payment solutions, especially in the United States, would have been seriously threatened. The court’s decision strengthened XRP’s position and paved the way for its broader use in the global financial system. The final outcome of the legal process was crucial for the future of the entire project. If XRP had been defined as a security, trading it would have become dramatically more difficult in the United States and possibly other countries, which would have weakened its operational conditions. The decision was therefore both a legal and a strategic relief for the entire ecosystem.
What is XRP Ledger?
The XRP Ledger (XRPL) is one of the world’s oldest still-functioning blockchain platforms. It was launched in 2012 and has served as the basis for XRP token transfers ever since. The XRP Ledger’s architecture and principles are different from many other blockchains, particularly in terms of energy efficiency, speed, and transaction capacity. XRP serves as XRPL’s native currency and is an integral part of its technical structure.
XRP Ledger was designed from the ground up to support fast and efficient value transfer on a global scale. Unlike many modern blockchains that focus on versatile smart contracts and Web3 solutions, the strength of the XRP Ledger is its secure and high-performance payment protocol. XRP Ledger is not intended to compete with Ethereum or Solana in programmability, but to build the most functional, stable and cost-effective network for financial transactions.
The XRP Ledger’s key features include its proprietary consensus algorithm, which enables block validation without mining or staking. Transactions are confirmed in seconds, and the network can handle over 3,000 transactions per second. Transfer fees are almost non-existent, making micropayments possible. In addition, there is a built-in decentralized exchange (DEX), support for tokenization, NFTs, lightweight smart contracts (Hooks), and decentralized identity solutions. These features allow the XRP Ledger to function not only as a payment platform, but also as a versatile network for digital assets.
In recent years, the XRP Ledger’s functionality has gradually expanded – not so much that it has become a full-fledged smart contract platform, but in a way that supports lighter and more efficient programmable solutions as well as new digital assets.
Versatile and scalable payment system
At the core of the XRP Ledger is the ever-present task: to enable near-instant, global, and cost-effective payments. Transactions involve not only the XRP currency, but also support the transfer of other assets. The structure of the blockchain allows the issuance and transfer of virtually any asset, such as digital US dollars, euros, gold, or even loyalty points.
In practice, the XRP Ledger serves as a platform for tokenized currencies and commodities. Thousands of assets already move on it, as part of experiments and commercial applications by both financial institutions and communities.
Ripple and RLUSD stablecoin
Ripple USD (RLUSD) is a stablecoin developed by Ripple, which was officially launched in December 2024. Its purpose is to provide a stable and transparent digital means of payment that can be used in both traditional and blockchain-based payment traffic. RLUSD is pegged 1:1 to the US dollar, and its collateral consists of cash, US Treasury securities, and other liquid instruments. Ripple publishes monthly audit reports on the stablecoin’s reserves, which increases its credibility with investors and institutions.
RLUSD operates on both the XRP Ledger and the Ethereum blockchain, making it a versatile tool for decentralized finance (DeFi), payment applications, and international currency transactions. The XRP Ledger offers RLUSD fast and near-free transfers, while Ethereum support enables compatibility with broad DeFi ecosystems.
RLUSD has received approval from financial regulators in New York and Dubai. Ripple aims to use RLUSD to reach out to growing stablecoin markets, where there is an increased need for reliable and regulated alternatives. The use of RLUSD also supports Ripple’s broader vision of modernizing international payments and reducing reliance on traditional, slow and cumbersome systems.
XRP Ledger Summary
XRP Ledger is a unique blockchain where technical development follows two parallel paths: at its core, it remains a lightweight and stable system optimized for payments, while programmable features and add-on functions are built at its periphery for those who need them.
It is not an Ethereum clone and does not aim to compete as a Web3 application platform. Its strength lies in the agility of payments and the structure that enables tokenization, decentralized applications (DApps), and stablecoin use without compromising the scalability or security of the blockchain.
XRP Ledger excels when fast, cost-effective, and scalable transfers are required – especially in payment traffic where full programmability is not a focus. It offers its users a stable platform where performance and usability are prioritized.
Ripple Payments and On-Demand Liquidity – New Structure for Global Payment Traffic
Ripple Payments (formerly known as RippleNet) is Ripple’s global payments network designed to replace traditional, slow and complicated money transfer channels with a modern, transparent and efficient solution. It connects banks, payment service providers, fintech companies and financial institutions in a single, seamless system where payments move across borders in seconds – without the need for multiple intermediaries and high fees.
In traditional systems, international money transfers can take several days and pass through multiple banks. The customer may not know exactly when the payment will arrive, how much will be charged, or what the final exchange rate will be. Ripple Payments, on the other hand, provides near real-time information about all of these factors: the payment’s route, price, duration, and exchange rate are known before any money is transferred.
Ripple Payments’ technical foundation consists of an API-based architecture that can be integrated directly into banks’ and payment service providers’ existing systems. This simplifies implementation as customers do not need to learn new user interfaces or methods, but the service operates in the background as part of the existing payment network.
On-Demand Liquidity (ODL) – XRP as an intermediary currency
The most significant and innovative part of Ripple Payments is Ripple’s developed On-Demand Liquidity (ODL) system, which makes XRP an active part of international money transfers. The basic idea behind ODL is that payment liquidity is no longer tied to static currency reserves around the world, but can be obtained dynamically when a transfer occurs.
Traditionally, banks and financial institutions have had to maintain separate accounts in different countries’ currencies to ensure that money can be sent quickly to the recipient. This system ties up large amounts of capital, incurs costs, and requires ongoing management.
ODL eliminates the need for such arrangements. For example, if a US bank wants to send $10,000 to a recipient in the Philippines, the process works as follows:
- Bank A converts dollars to XRP on a US exchange.
- XRP is transferred via XRP Ledger in seconds to the Philippines.
- Bank B converts XRP to Philippine pesos on a local exchange and sends the money to the recipient.
The entire process takes virtually no time and occurs without either party needing to hold foreign exchange reserves or wait for bank opening hours. The transaction is also fully traceable and its costs are known in advance.
This technology offers particular advantages in developing markets, where banking systems can be more unstable or services fragmented. That’s why Ripple has focused particularly on Southeast Asia, Latin America, and Africa, where the need for efficient currency transfer solutions is real.
The use of ODL has grown significantly in recent years, with Ripple reporting transaction volumes increasing by several hundred percent year-on-year, demonstrating that XRP’s role is not theoretical, but is increasingly being used in real-world payment transactions.
Additionally, Ripple has partnered with players that manage the money flows of millions of people, such as Tranglo, SBI Remit, and Lemonway. These partners enable the implementation of ODL in local markets and act as a bridge between traditional and new payment traffic.
XRP’s practical applications in payment traffic
XRP’s greatest strength is its practical use in international money transfers. While traditional systems like SWIFT are slow, expensive, and rely on multiple intermediaries, XRP enables near-real-time and cost-effective transfers between two different currencies. This is achieved by using XRP as an intermediary currency, acting as a means of transferring value between two countries’ fiat currencies in seconds.
RippleNet’s internal service, On-Demand Liquidity (ODL), uses XRP as a source of liquidity. It eliminates the need to hold large foreign exchange reserves in different countries, saving financial institutions significant costs and freeing up capital. In practice, banks and payment services can conduct currency exchanges and transfers dynamically without dedicated accounts or complex intermediaries.
XRP is already in concrete use: for example, Tranglo, SBI Remit and Lemonway use it for transfers between Asia and Europe. XRP’s speed and cost-effectiveness are also attracting fintech companies and central banks that are exploring digital currency solutions and modernizing payment systems.
XRP thus offers not only a technical solution, but also a truly scalable alternative to streamline global payment traffic – without complex and outdated systems.
XRP as an investment object
XRP is of interest to investors because it is not just a cryptocurrency, but part of a larger effort to integrate blockchain technology into international payment traffic. While many crypto projects focus on decentralized applications, XRP’s adoption is driven primarily by institutional acceptance and practical commercial utility. This makes it an exceptional, but not entirely risk-free, investment.
XRP has been around for over a decade and has maintained its position among the largest and most well-known cryptocurrencies despite multiple market cycles. Many investors see XRP as an opportunity to participate in the “institutionalization” of blockchain technology – a situation where cryptocurrencies become part of the fabric of global financial systems. Solutions developed by Ripple, such as Ripple Payments and On-Demand Liquidity, are operational in practice, and XRP serves as a central component.
However, it is important for investors to note that investing in XRP tokens does not imply direct ownership in Ripple. XRP’s value may rise if Ripple succeeds, but it is not a direct equity stake in the company. Despite this, many investors see XRP’s growth potential as linked to Ripple’s commercial and technological successes.
One of the biggest risks with XRP has always been regulatory uncertainty. The SEC lawsuit against Ripple has been partially resolved in XRP’s favor, but any future regulatory decisions in the US or other parts of the world could impact its usability, trading, and liquidity.
Additionally, XRP raises concerns among investors about centralization, as Ripple still manages a significant amount of XRP tokens. While a large portion of these are locked in escrow agreements and released to the market gradually, this can still create selling pressure and price fluctuations, especially during uncertain market times. And like all cryptocurrencies, XRP is a highly volatile investment. Its price can change rapidly due to market sentiment, macroeconomics, or technical news.
From an investor’s perspective, XRP offers the opportunity to capitalize on the commercial adoption of blockchain technology. XRP is not a speculative meme coin, but one of the few projects designed to be compatible with the current financial system. This makes it particularly interesting as a long-term investment opportunity for those who believe in the development of digital value transfer as part of the traditional economy.
Summary
XRP is a blockchain-based cryptocurrency designed to address inefficiencies in international payment transactions. Unlike many other cryptocurrencies, XRP does not aim to replace the traditional financial system, but rather complements it with more efficient technology. At its core is the XRP Ledger, a lightweight and fast blockchain without mining, and Ripple’s commercial payment platform Ripple Payments, where On-Demand Liquidity (ODL) uses XRP as an intermediary currency.
XRP’s history began in 2012, when development began to address Bitcoin’s speed and energy consumption issues. The result was the XRP Ledger – a decentralized and energy-efficient blockchain, as well as Ripple, whose mission was to create technology for practical financial applications. XRP’s position in the market was significantly strengthened in July 2023, when a US court ruled that XRP is not a publicly traded security. This decision removed a major regulatory hurdle and paved the way for broader adoption, increasing trust and liquidity.
From an investor’s perspective, XRP offers a combination of potential and risk. Its strength lies in real-world use cases and institutional acceptance, but there are challenges such as regulation, Ripple’s large token reserves, and the general volatility of crypto markets. Nevertheless, XRP can be seen as a long-term opportunity for those who believe in the integration of blockchain technology into the global financial market system.