People are usually surprised to learn that these two terms are in fact not the same at all. Well, this confusion is understandable for both Ripple and XRP (also known as the Ripple digital asset) have identical origins and even share the same name. With that said, however, there are still some substantial differences between the two that we will attempt to explain in this article. So read along to learn their differences.
First and foremost, we have Ripple, a private software company, who was the one behind the Ripple Protocol. It is an open source protocol founded and created by Ripple, which consists of RippleNet – a suite of payment solutions marketed to digital currency exchanges, banks and non-financial institutions – and the RCL (Ripple Consensus Ledger).
The RCL utilizes distributed ledger technology in order to support the transfer of different tokens representing cryptocurrencies, fiat currencies and even other units of value. The protocol is fully open which means anyone is able to get access to it without the need of prior approval from Ripple. Also, banks and non-bank actors have the permission to use this protocol in their own systems. Participants of the network verify the transactions via consensus.
XRP is what people usually mistake for the RCL. XRP (also known as the Ripple digital asset by some people) is the native token used in RCL for facilitating transactions in order to transfer money between various currencies across the network. What we should know is that XRP is different from Ripple which is its creator. XRP is even different from other cryptocurrencies. The Relationship between XRP and Ripple is similar to that of ETH and Ethereum to some extent. There is a small difference however.
Let’s say you buy some ETH (Ethereum’s digital currency). You can then use the tokens purchased to invest in Ethereum’s network. This is the case in other big cryptocurrencies such as Bitcoin as well but not with XRP. Purchasing XRP doesn’t necessarily mean investing in Ripple’s network.
The special fact about XRP is that unlike other cryptocurrencies, it is not unlimited. Only 100 billion units of XRP were created when it was first launched by Ripple. This is the official number announced by the company and is not going to increase, neither is it going to decrease according to the protocol. XRP was created when Ripple Labs, the company, was founded. With that said, still a lot of people call XRP by its creator company, Ripple.
The creators of XRP kept 20 percent of the currency for themselves while gifting the rest. That is 20 billion units of XRP which could be a huge asset if XRP’s price shoots up. This aspect of the currency is one of the main reasons why businesses and banks have taken interest in the digital currency. In simple words, XRP cannot be mine for it is controlled by a central authority and that is Ripple of course.
Another one of the major functions of this currency, is that XRP is a bridging currency. What it means is that when converting money, Traditional settlement systems utilize U.S. dollars as their common currency. XRP was designed with the goal of replacing the U.S. dollars as the preferred settlement currency for financial institutions. By using the digital XRP to convert the value of a fiat currency, rather than using the U.S. dollar, margins and transaction rate fees can all be deleted and also the processing times can improve dramatically.
We have established that Ripple and XRP cannot be used interchangeably. Ripple is the company that created the Ripple Consensus Ledger (LCR) while XRP refers to the actual digital currency the Ripple uses. Now, let’s see how Ripple can affect the price of XRP (the token). The opinions on this one may differ a bit and so this topic is a controversial one. First you should know that both Ripple and XRP share some kind of a resemblance and are not completely different. At the most basic level, XRP’s market price is what directly affects the value of Ripple because Ripple is in possession of a good number of the tokens.
As we have already established in the above sections, Ripple is a big company located in San Francisco, USA. When Ripple protocol was founded, a new revolution occurred in the global market. As a result of this event, a lot of big financial institutions from all over the world moved towards Ripple’s products. One of the products this company produced was the digital currency itself, also known as XRP. Now, investing in XRP does not lead to investing in the whole system of Ripple since XRP is only a part of it.
Regardless of that, XRP is still referred to as Ripple by mistake in some scenarios. XRP was designed and launched in 2013. It is divided into 6 decimals and the smallest unit of it is called a drop. Every 1 million drops are considered as 1 unit of XRP.
According to what many users think, Ripple is both the platform and the digital currency used by the platform but that is not the truth as we have established. With all the points mentioned in this article, we can state that XRP is in fact the token used by Ripple, which is the company that created XRP. Ripple became famous for its payment method network and how much faster and cheaper it would facilitate your transactions. In fact, for every transaction on the network, only a small fee of 0.00001 XRP is required.
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