Last updated August 25, 2019

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Ripple Labs and XRP association

Ripple is not the name of the currency. XRP is the name of the cryptocurrency. Ripple Labs is the company who created the XRP token.

When you purchase XRP tokens you do not own a piece of the company Ripple Labs. 100 billion XRP tokens were created and not all are in circulation. The XRP tokens that are not in circulation are in cryptographically-secured Escrow account and are being released to the market constantly at Ripple Labs' discretion. Read more: An Explanation of Ripple's XRP Escrow.

XRP tokens cannot be mined

100 billion XRP tokens were created and issued by Ripple Labs. No more tokens will be created and unlike other cryptocurrencies such as Bitcoin and Ethereum, XRP tokens cannot be mined.

Do not fall for companies who are trying to sell you mining equipment for XRP tokens.

The XRP ledger network is fast, but not the fastest

Ripple Labs' XRP ledger network is fast, and can complete a transaction in 3-5 seconds. Volume wise, the network can handle & verify over 1,500 transactions per second, and can be scaled up to handle much more if needed.

Completing financial transactions on the Ripple network is not the fastest. For example, Visa currently handles an average of 150 million transactions daily, which is more than 24,000 transactions per second.

With that said, it's not just about speed and volume capabilities, but also about the ability to meet the demand. Ripple Labs the company aims to replace SWIFT on cross-border payment transactions from the beginning, and its network's ability to process transactions fast and in volume is sufficient to achieve that goal.

The price of XRP token will increase as utilization and adoption increase

There's only a limited amount of XRP tokens in circulation. Due to the nature of how XRP is designed to facilitate payment transfers, the price of XRP is influenced by the maximum amount of payments the XRP ledger needs to process within a short amount of time. For example, just because the XRP ledger needs to process 5 trillion US dollar a day, doesn't mean that the price of XRP token needs to be $121 USD/token (based on 41 billion tokens in circulation), unless it takes a day for transactions to complete.

If the network needs to process no more than $3.48 billion US dollar a minute, which is about $5.011 trillion US dollar a day, the XRP token only need to be at $0.0849 USD/token because it only takes seconds to complete transfers. This is under the assumption of all the XRP tokens in circulation are available to be used to facilitate payment transfers.

Let's look at this the other way. If the current price of XRP token is $0.35 USD/token and there are approx. 41 billion tokens in circulation (assuming all can be used for payment transfers), this means the XRP ledger is capable of handling $14.35 billion US dollar every 3-5 seconds. For the sake of simplicity, let's extend that time to a minute. This then means the XRP ledger is capable of handling $14.35 billion US dollar every minute, up to $20.664 trillion US dollar a day, at the price of $0.35 USD/token.

XRP is not likely to replace any country's native currency

As a country, the more people, both within and outside of the country, who use its native fiat currency the stronger the country will be globally.

For example, the United States will never give up USD as the native currency, and will try everything possible to avoid its currency from not being a major reserve currency as any major reserve currency has a significant impact/control over inflation.

Ripple Labs the company understands that, which is why they have never aimed to replace Fiat money, but to focus on facilitating cross-border payments. XRP has never been designed to be a payment currency, but to be a method of payment transfer.

XRP is both cost effective and environmental friendly

Because there's no mining involved, the power consumption required to verify transactions on the XRP ledger is minimal, and significantly cheaper and environmental friendly than many other cryptocurrencies, especially the ones that can be mined, such as Bitcoin.

Ripple Labs embraces transparency and regulation

The utilization of XRP ledger has not yet been widely adopted yet. The current list of clients who are actually utilizing the XRP ledger for payment transfers is insignificant compared to the current daily cross border transaction volume. We are at the very early stage in terms of adoption.

In order for any currency to succeed, fiat or crypto, transparency and regulation are absolutely necessary. They are necessary for the individuals or companies who are utilizing the currency for payment transfers, and also necessary for governments to track the movement of money, and collect applicable tax revenue. Therefore, any cryptocurrency that does not promote transparency and regulation will not be adopted by corporations and governments.

Ripple and SWIFT will most likely co-exist for the near future

Although Ripple has a head start in offering a new way to facilitate payment transfers with blockchain technology/solution, SWIFT has a significantly head start in client base and service utilization.

SWIFT is not likely to lose large financial institutions from its client base any time soon, simply because it is difficult and costly for large financial institutions to switch and modify transaction workflows & current/historic reporting. This gives time for SWIFT to reduce the cost for its clients, and improve the speed and accuracy in its services.

Ripple on the other hand, will have difficulty acquiring large financial institutions to its client base. This is why the company has been laser focused on acquiring smaller clients to build up its momentum in the utilization of its services.

Whether the XRP ledger is centralized or not doesn't really matter

Ripple's goal has always been to facilitate multi-currency domestic and international fund transfers, not as a payment currency. Therefore, in order to accomplish the goal what really matters are transparency and regulations. Speed and cost matters for clients who wish to utilize XRP Ledger for fund transfers; where transparency and regulations matter for governments to monitor the flow of money and collect eligible taxes.

Governments like the United States don't care whether the XRP ledger is centralized or not. Because first of all they will not, for example, replace USD with XRP as the native currency. And secondly, they simply need to monitor the flow of money and collect tax revenue.

For example, if you live in the United States, when you receive international money transfers, the government will always try to impose income tax and collect tax revenue from you. There's absolutely no way for any government to not collect tax on monetary transactions.

XRP price will remain volatile and follow Bitcoin, for now

Before the utilization of XRP ledger is widely adopted by financial institutions and governments, and can showcase a significant volume in terms of multi-currency payment transfers, the price of XRP token will be heavily impacted by speculation and will most likely follow the movements of the top cryptocurrencies such as Bitcoin and Ethereum.

XRP ledger is not the only option for Ripple Labs' target clients

The company behind Ripple Labs had a clear vision from the very beginning and they have been focused on acquiring clients in the financial sector to use their services. The company is trying to target large and global financial institutions and they are starting with smaller clients first.

The truth is, blockchain technology has been around since 1991. The concept was created by Haber and Stornetta in a research paper called "How to Time-Stamp a Digital Document". Large financial institutions have the technical expertise to create a fund transfer solution using blockchain. The challenge has never been in technology, but in the utilization of the technology.

SWIFT currently provides the services to the companies that Ripple is going after, with cheaper and faster solutions. SWIFT currently cannot compete with Ripple in terms of cost and speed. However, SWIFT (being funded in 1973) is significantly ahead in terms of clients and service utilization. Large financial institutions have a long history of financial transactions and records with SWIFT; it is very difficult for them to switch, especially at infrastructure level. For new and smaller financial institutions, switching to Ripple's services is fast and cost effective. For large and aged institutions, the cost on switching alone may not make sense, for now.

Ripple has a head start in offering a blockchain solution for financial institutions

XRP ledger is one of the first blockchain solutions specifically designed for financial institutions. The company (Ripple) behind the technology has been working hard to promote its services to clients in financial sectors.

Although the utilization of XRP ledger has not been widely adopted yet, Ripple Labs has been signing clients (large and small, mostly small for now) on a weekly basis. As a result, the business development efforts by Ripple gave the XRP ledger a head start in terms of implementation and utilization.

Your ability to cash out depends on the amount of buying volume at the time on the exchange

When you need to sell your XRP tokens, don't assume to be able to sell the amount you need to sell at the price you wish to sell at. If the cryptocurrency exchange that you are with do not have enough buyers trying to buy the volume at the price that you are requesting, you won't be able to sell your XRP tokens.