What Is Ripple and Why Is It Different from Other Coins?

6 min readMar 31, 2021

You might have heard about Ripple. Also, you might know that it differs from other cryptocurrencies. However, not many people understand clearly what the differences are and why this project is unique and offers attractive investment opportunities.

Here, we will check why Ripple differs from other crypto-coins and what these differences mean for the industry.

The Purpose of Ripple Is to Improve the Existing Banking System

While Ripple is listed along with other cryptocurrencies on the exchange platforms such as LetsExchange, it differs a lot from other coins. The main difference of the Ripple network is the purpose for which it was created. While other crypto-coins, such as Bitcoin, are created as an alternative to the existing banking system, Ripple was meant to improve it.

For example, now, the majority of banks rely on SWIFT transactions for making money transfers. It means that between a sender and a recipient, there are other middlemen. Each party charges its part which results in elevated transfer fees. Moreover, such transactions take long (up to one week) to be processed.

The purpose of the Ripple project is to eliminate the long chain of middlemen and reduce transaction fees to practically zero and increase the transaction speed.

Now, let us check how these aims can be achieved.

Ripple is a network powered by its own token called XRP. XRP enables transactions via the Ripple network.

If one bank wants to make a transfer via the Ripple network, it looks like this:

The bank sends money to the Ripple network.
The funds are converted to XRP.
Further, the XRP tokens are converted to the recipient’s preferred currency and sent to the recipient.

You might be wondering whether the funds can be lost during the transfer due to the fluctuations in the cryptocurrency market. It could be the case with such cryptocurrencies as Bitcoin where one transaction can take up to 10 minutes which is enough for the coin price to change significantly. The Ripple network processes around 1,500 transactions per second. This speed is sufficient to protect the transfer parties from fluctuations. When you are sending money via the Ripple network, you can be sure that the price will simply not have time to change.

Can a transaction be delayed? Well, rather no. Let us check on an example of how the entire system works to understand better why delays are impossible.

Say, Ana wants to send 200 USD to Rosie who lives in Canada, and will receive the equivalent in CAD. If Ana makes a SWIFT transfer, she will pay a high fee and the transfer will take several days to be completed. Some money will be lost if the exchange rate changes. Also, Rosie will suffer some losses due to the difference in the buy and sell price. In the end, such a transfer doesn’t seem convenient.

Now, let’s suppose that both Ana and Rosie use the services of agents (say, Ana`s agent is Ron, and Rosie`s agent is Dan), and these agents collaborate one with another. Ana gives 200 USD to Ron. Ron communicates with Dan and notifies him about the transfer. Dan pays an equivalent of 200 USD in CAD to Rosie from his (Dan`s) account. Later, Ron and Dan settle their accounts without participation from the side of Ana or Rosie.

For Ana and Rosie, such transfers are extremely convenient and profitable compared to SWIFT transfers.

In the case with Ripple, Ana and Rosie can be any financial institution, the agent system is the Ripple network, and the agents are secure gateways in the Ripple system. Thus, when financial institution A sends funds in currency X via a secure gateway in the Ripple network, the funds can be immediately withdrawn in currency Y by financial institution B via another secure gateway. This is how Ripple payment processing solution xCurrent works.

You might be wondering how Ripple transactions differ from, say, transfers in PayPal or Payoneer. The main difference is there is a company behind such a payment system as, say, PayPal. If the company shuts down, the system will also stop functioning.

While Ripple Labs is behind the Ripple network, all the transactions in the network are confirmed in a decentralized manner. Thus, even if Ripple Labs closes, the system will continue functioning. This is a benefit of the Ripple network compared to traditional systems such as PayPal, Payoneer, and similar.

How the Liquidity Issues Are Solved by the Ripple System

Along with the transaction speed and fees, the Ripple project is aimed at reducing the liquidity amount required to enter the market. For example, there is a payment processor in an African country, say, Ghana, that wants to expand its services to include one of the major cities, it can be Accra, the capital of the country. To do so, the payment processor needs to own a sufficient amount of Ghanaian cedis to cover all the potential transactions in cedis. It might be rather demanding especially if the market isn’t promising enough.

The Ripple network with its xRapid solution solves this possible liquidity issue. If this payment processor uses Ripple, and Ripple collaborates with the local financial institutions to provide transactions from XRP to Cedi, the issue of liquidity in the local currency is solved if the payment processor has enough liquidity in XRP. XRP can be easily transferred to Ghanaian Cedi, to USD, to roubles, or any other currency of the world. In this regard, XRP is absolutely currency-agnostic.

Finally, the solution that allows banks and financial institutions to collaborate with the Ripple network is called xVia. It is an API, a link between the funds and the information for all the institutions that perform transactions.

Now, more than 300 financial institutions collaborate with the Ripple network which means that the system is already huge, and the project has all the chances to develop further.

Any Other Differences?

As we have already mentioned, Ripple is intended rather for commercial than for individual use. XRP in itself is not a traditional cryptocurrency but a way to replace any coin (fiat or crypto) with any other coin in the world. However, this is not the only difference of Ripple from other cryptocurrencies.

Ripple is not completely decentralized. More than 50% of coins are held by Ripple Labs. Thus, there is a single authority that can control the market. While the total XRP number is 100 billion, just around 40 billion are in circulation. Ripple Labs holds the rest of the coins and will release as many of them as needed to control the coin supply.

XRP cannot be mined. All 100 billion coins are pre-mined. It means that the Ripple network is much more environmentally friendly than, say, Bitcoin because it doesn’t consume huge energy resources for mining purposes.

Is Ripple Worth Investing In?

Among the main partners of Ripple, you can see such names as Santander, MoneyGram, American Express, Interbank, Bancoredimento, and some others. The network is developing and new financial institutions are joining. The benefits of the project for the entire financial system are evident.

Therefore, it is possible to make a conclusion that the project is going to be developed, and the XRP price will be growing constantly. Thus, Ripple might be a good option to invest in. XRP and more than 200 other coins can be purchased on LetsExchange without registration with the most profitable conditions.

Disclaimer

Please keep in mind that the above information is based exclusively on our observations and is provided for informational purposes only. It doesn`t constitute any kind of financial advice nor represents an official forecast. Cryptocurrency is a highly volatile asset, and you are investing in it at your own risk.