What is XRP? Your Beginner’s Guide to the Digital Asset for Payments
John: Hello everyone, and welcome back to the Blockchain Bulletin. I’m John, and today, joined by my colleague Lila, we’re diving deep into a cryptocurrency that’s often in the headlines: XRP. You might see it referred to as ” XRP” in searches, likely just repetition, but the asset itself is simply known as XRP. It’s a digital asset built for speed and efficiency, particularly in the world of global payments.
Lila: Hi John! Great to be tackling this one. So, when people hear “cryptocurrency,” they often think of Bitcoin as digital gold or Ethereum for smart contracts (self-executing agreements written in code). How does XRP fit into that picture? What’s its main job?
John: That’s the key question, Lila. Unlike Bitcoin, which was conceived as a peer-to-peer electronic cash system, or Ethereum, which aims to be a world computer, XRP was specifically designed from the ground up to be a bridge currency. Its primary goal is to make international money transfers faster, cheaper, and more reliable than the traditional systems banks use today, like SWIFT (Society for Worldwide Interbank Financial Telecommunication – a messaging network used by banks).
Lila: A bridge currency? So, like, instead of a bank having to hold lots of different foreign currencies in different accounts worldwide, which sounds expensive, they could just use XRP to move value quickly between, say, US Dollars and Mexican Pesos?
John: Exactly. That’s the core value proposition. The traditional system, often involving correspondent banks and pre-funded nostro/vostro accounts (accounts banks hold in foreign currencies at other banks), can be slow (taking days) and costly due to locked-up capital and multiple fees. XRP aims to settle these transactions in seconds for fractions of a cent, freeing up that trapped capital.

Basic Information: The Elevator Pitch
Lila: Okay, so if I had to explain XRP in one sentence, it would be: “XRP is a digital asset designed to help financial institutions move money across borders quickly and cheaply”?
John: That’s a perfect summary, Lila. It runs on its own specific technology called the XRP Ledger (XRPL), which is a type of Distributed Ledger Technology (DLT – a database shared across many computers). This ledger is open-source and was developed by the predecessors of the company now known as Ripple.
Lila: Ripple… I’ve heard that name mentioned alongside XRP a lot. Are they the same thing? That seems to confuse people.
John: That’s a crucial distinction and a common point of confusion. No, they are not the same. Ripple is a private fintech (financial technology) company. XRP is the independent digital asset. XRP Ledger (XRPL) is the decentralized technology that XRP runs on. Ripple uses XRP and the XRPL in some of its commercial products, like its On-Demand Liquidity (ODL) service, but the XRPL exists independently of Ripple, and XRP can be used by anyone, not just Ripple.
Lila: Got it. So Ripple is a *user* of XRP and the XRPL, albeit a very significant one, but it doesn’t *own* or *control* the network itself, right? That sounds more decentralized.
John: Precisely. The XRPL operates independently of any single company. While Ripple contributes significantly to the XRPL’s codebase and ecosystem development, and holds a substantial amount of XRP, the network’s operation relies on independent validator nodes (servers confirming transactions) spread across the globe, run by various universities, companies, and individuals.
XRP Supply Details: Understanding Scarcity
Lila: Let’s talk numbers. With Bitcoin, we know there’s a maximum supply of 21 million coins ever. What about XRP? Is there a limited supply?
John: Yes, XRP also has a finite supply. A total of 100 billion XRP were created at the inception of the XRP Ledger. No more XRP can ever be created. This entire supply was generated at the beginning – there’s no mining process like Bitcoin’s.
Lila: 100 billion! That sounds like a lot compared to Bitcoin. How much of that is actually available to trade or use right now? I think that’s called the ‘circulating supply’?
John: Correct. The circulating supply is the amount of XRP publicly available and circulating in the market. This number changes. Initially, the founders and the company (now Ripple) held a large portion. Ripple placed a significant amount of its XRP holdings into a cryptographically-secured escrow (a holding account with predefined release rules).
Lila: An escrow? What does that mean in this context?
John: It means the XRP is locked up and released on a pre-set schedule. Specifically, 1 billion XRP becomes available from escrow each month. Ripple can then use this XRP for various purposes, such as selling it to fund its operations, investing in ecosystem projects, or providing liquidity for its ODL customers. Any XRP not used in a given month is put back into a new escrow account set to release at a later date, extending the overall escrow timeline.
Lila: So, the circulating supply gradually increases as XRP comes out of escrow, but the total supply remains fixed at 100 billion? Does any XRP ever get destroyed?
John: That’s an interesting feature of the XRPL. Yes, small amounts of XRP are destroyed with every transaction. Each transaction on the XRP Ledger requires a tiny transaction fee (minimum 0.00001 XRP) which is not paid to anyone but is actually burned, or permanently destroyed. This acts as an anti-spam measure to prevent malicious actors from overwhelming the network with bogus transactions.
Lila: Wow, so the total supply of 100 billion is actually decreasing over time, even if very slowly? That’s quite different from many other cryptos.
John: Indeed. While the amount burned per transaction is minuscule, it does mean XRP is inherently deflationary (supply decreases over time), albeit at a very slow rate. It ensures that using the network has a real, albeit tiny, cost, making large-scale spam attacks prohibitively expensive.
Technical Mechanism: How XRP Transactions Work
Lila: Okay, let’s get a bit technical. You mentioned the XRP Ledger (XRPL), not a blockchain. How does it work differently, especially in confirming transactions? Bitcoin uses Proof-of-Work mining, which consumes a lot of energy.
John: Right, the XRPL uses a different approach called a consensus mechanism (the way network participants agree on transaction validity). It doesn’t rely on Proof-of-Work (solving complex puzzles) or Proof-of-Stake (locking up coins). Instead, it uses the Ripple Protocol Consensus Algorithm (RPCA), often simply referred to as the XRP Ledger Consensus Protocol.
Lila: RPCA… How does that work without mining?
John: It relies on a network of independent servers called validators. These validators constantly compare the transactions they’ve received. To confirm a new batch of transactions (called a “ledger version”), a validator proposes its candidate set of transactions. It then checks the proposals from a specific, trusted subset of other validators it listens to, known as its Unique Node List (UNL).
Lila: Unique Node List (UNL)? So each validator trusts a specific group of other validators?
John: Correct. For a transaction set (a new ledger) to be validated, an increasing supermajority (starting at 50% and quickly rising to over 80%) of validators on a given validator’s UNL must agree on the exact same set of transactions in the same order. This agreement process happens very quickly, typically every 3 to 5 seconds. Once consensus is reached, the new ledger is cryptographically signed and added to the shared history.
Lila: 3 to 5 seconds! That’s incredibly fast compared to Bitcoin’s average 10 minutes. And it sounds much more energy-efficient since there’s no mining competition.
John: Precisely. The speed and low energy consumption are major advantages of the XRPL consensus. It can handle a significant volume of transactions – theoretically up to 1,500 transactions per second (TPS), although real-world usage is typically lower – with negligible energy cost compared to Proof-of-Work systems.

Lila: You mentioned the XRPL is open-source. Does that mean developers can build things on top of it, like with Ethereum?
John: Yes, absolutely. The XRPL has built-in features like a decentralized exchange (DEX – a marketplace directly on the ledger), token issuance capabilities (allowing others to create their own tokens on the XRPL), and more recently, work is underway to add features like smart contracts through sidechains (linked, parallel blockchains) and an Automated Market Maker (AMM – algorithmic liquidity pools for the DEX). It’s designed to be a versatile platform, although its core strength remains efficient value transfer.
Team, Company (Ripple), and Community
Lila: Let’s circle back to Ripple, the company. Who are the key people behind it, and how involved are they with XRP and the XRPL now?
John: Ripple was co-founded by Chris Larsen and Jed McCaleb, with early technological contributions from Arthur Britto and David Schwartz. David Schwartz, now Ripple’s Chief Technology Officer (CTO), is one of the original architects of the XRP Ledger and remains highly respected and active in the community, often engaging directly with developers and users online. Brad Garlinghouse is the current CEO of Ripple and often acts as the public face of the company, particularly regarding its business strategy and regulatory matters.
Lila: Jed McCaleb… wasn’t he also involved with Mt. Gox and Stellar? He seems like a key figure in early crypto.
John: Indeed. McCaleb has a significant history in the space. He was involved in the early days of Ripple (then called OpenCoin) but left due to differing visions and later co-founded Stellar (XLM), which has similar goals focused on payments but uses a different consensus protocol (Stellar Consensus Protocol). His departure also led to a structured agreement regarding the sale of his personal XRP holdings over many years, which concluded fairly recently.
Lila: Aside from Ripple, how strong is the independent XRP community? Are there many developers building on the XRPL who aren’t affiliated with Ripple?
John: The XRP community, often called the “XRP Army” online (though that term can be controversial), is known for being very passionate and vocal. Beyond the online enthusiasm, there’s a growing ecosystem of independent developers, projects, and businesses utilizing the XRPL. Organizations like the XRP Ledger Foundation (XRPLF) have been established to support the growth and development of the XRPL ecosystem independently of Ripple, fostering decentralization and broader adoption.
Lila: So, the health of the XRPL isn’t solely dependent on Ripple’s success?
John: Ideally, no. While Ripple’s adoption of XRP in its ODL product is a major use case, the long-term vision for many in the community is for the XRPL to thrive through diverse applications built by many different parties. The ongoing efforts to add features like smart contracts via sidechains (like the upcoming Hooks amendment or the EVM sidechain) and native NFTs (Non-Fungible Tokens) aim to attract more developers and broaden its utility beyond just payments.
Use-Cases and Future Outlook
Lila: We’ve touched on cross-border payments and Ripple’s ODL. Can you elaborate on how ODL actually works with XRP?
John: Certainly. On-Demand Liquidity (ODL), formerly known as xRapid, is Ripple’s flagship product leveraging XRP. Imagine a payment provider wanting to send $10,000 from the US to Mexico. Instead of pre-funding a Mexican Peso account (tying up capital), they use ODL.
- The $10,000 USD is instantly converted to XRP on a digital asset exchange in the US.
- The XRP is sent across the XRP Ledger (taking 3-5 seconds) to an exchange in Mexico.
- The XRP is instantly converted into Mexican Pesos (MXN) on the Mexican exchange.
- The recipient receives the funds in MXN, often within minutes of the transaction initiation.
XRP acts as that near-instantaneous, low-cost bridge between the two fiat currencies (government-issued money like USD or MXN), eliminating the need for pre-funded nostro accounts.
Lila: That sounds really efficient! Are there other major use cases being developed or explored for XRP and the XRPL?
John: Absolutely. Beyond ODL, potential and developing use cases include:
- Decentralized Finance (DeFi): With the introduction of AMMs and potential for smart contracts via sidechains, the XRPL could host more DeFi applications (financial services built on blockchain technology), like lending, borrowing, and staking (earning rewards for holding crypto).
- Tokenization: The ability to issue custom tokens on the XRPL allows for the representation of various assets, from stablecoins (crypto pegged to fiat) to potentially securities or real-world assets (though regulatory clarity is needed).
- CBDCs (Central Bank Digital Currencies): Ripple has been actively exploring partnerships with central banks, proposing the XRPL (or a private version of it) as a potential technology platform for issuing and managing CBDCs, leveraging its speed, efficiency, and scalability.
- NFTs: Standards like XLS-20 have brought native NFT support to the XRPL, opening doors for digital collectibles, gaming assets, and more directly on the ledger.
- Micropayments: The extremely low transaction fees make XRP suitable for micropayments (very small transactions), potentially useful for content creators, IoT (Internet of Things) devices, or online tipping.
Lila: CBDCs sound like a huge potential area. If central banks start using technology similar to the XRPL, wouldn’t that be massive validation?
John: It would certainly be significant. However, it’s important to note that central banks might opt for private, permissioned versions of DLTs rather than public, permissionless ledgers like the main XRPL used for XRP. Ripple is positioning itself to offer solutions in this space, potentially leveraging their expertise even if the public XRP asset isn’t directly involved in every CBDC implementation.

Lila: So, looking ahead, what does the ‘roadmap’ for XRP and the XRPL look like? What are the big milestones people are watching?
John: Key developments the community is tracking include:
- AMM Integration: The successful launch and adoption of the native Automated Market Maker on the XRPL mainnet, aimed at improving DEX liquidity.
- Sidechains: Progress on bringing smart contract functionality, particularly EVM (Ethereum Virtual Machine) compatibility, through sidechains. This could attract Ethereum developers and applications.
- Hooks Amendment: Another proposal for adding smart contract-like logic directly to the XRPL, enabling new features.
- Further ODL Expansion: Ripple continuing to expand its ODL corridors to new countries and currencies.
- Regulatory Clarity: The outcome and aftermath of the SEC lawsuit remain paramount for XRP’s future adoption, especially in the US.
The focus seems to be on enhancing the XRPL’s technical capabilities to compete more broadly while continuing to push its core strength in payments.
Competitor Comparison: XRP vs. Others
Lila: How does XRP stack up against other cryptocurrencies aiming for similar goals, like fast payments? Stellar (XLM) comes to mind, given the connection with Jed McCaleb.
John: That’s a natural comparison. Both XRP and Stellar (XLM) aim to facilitate fast, cheap cross-border payments and use consensus mechanisms that are faster and less energy-intensive than Bitcoin’s Proof-of-Work.
- Technology: While both are fast DLTs, their consensus protocols differ (RPCA vs. Stellar Consensus Protocol). XRPL has its built-in DEX; Stellar also has a native DEX.
- Target Audience: Historically, Ripple (using XRP) focused more on established banks and financial institutions, while Stellar often targeted unbanked populations and remittance providers, though these distinctions are blurring.
- Tokenomics: Both had large initial supplies (100B XRP, initially 100B XLM, now around 50B XLM after a burn). Both have transaction fees that are burned.
They are direct competitors in many ways, each with its own ecosystem and partnerships.
Lila: What about comparing XRP to something like Bitcoin (BTC) or even traditional systems like SWIFT?
John: Comparing XRP to Bitcoin is like comparing apples and oranges in terms of primary function.
- XRP vs. Bitcoin: XRP prioritizes transaction speed (seconds vs. minutes/hours for BTC finality) and throughput (high TPS vs. low TPS for BTC) for payments. Bitcoin prioritizes security and decentralization as a store of value (‘digital gold’). XRP is pre-mined; BTC is mined over time.
- XRP vs. SWIFT: This is the core comparison for XRP’s payment use case. SWIFT is a messaging system, not a settlement system; actual money movement takes days through correspondent banks. XRP via ODL aims to be a near-instant settlement system, reducing time, cost, and counterparty risk (the risk the other side defaults). However, SWIFT has near-universal adoption among banks, a network effect XRP and Ripple are still working to overcome. SWIFT is also upgrading its own systems (e.g., SWIFT gpi) to become faster.
Lila: So, XRP’s main competitive advantages seem to be speed, cost, and efficiency specifically for moving value, especially across borders?
John: Correct. That’s its niche and primary design goal. Whether it can gain widespread adoption against entrenched systems and other crypto competitors is the ongoing question.
Risks and Cautions
Lila: We can’t talk about XRP without mentioning the legal challenges, specifically the lawsuit from the US Securities and Exchange Commission (SEC). What’s the situation there?
John: That’s undoubtedly the elephant in the room. In December 2020, the SEC sued Ripple Labs and two of its executives, alleging that XRP was an unregistered security and that Ripple’s sales of XRP constituted illegal securities offerings. This lawsuit created significant uncertainty and led to many US exchanges delisting or halting trading of XRP.
Lila: Has there been any resolution? It seems to have dragged on for a long time.
John: There have been significant developments. In July 2023, a US District Court judge issued a summary judgment that ruled XRP is *not* in itself a security. However, the judge ruled differently based on *how* XRP was sold:
- Programmatic Sales: Sales of XRP by Ripple on public crypto exchanges were deemed *not* to be investment contracts (securities transactions). This was seen as a major win for Ripple and XRP holders.
- Institutional Sales: Direct sales of XRP by Ripple to institutional clients *were* deemed to be investment contracts (and thus, unregistered securities offerings).
- Other Distributions: Distributions of XRP to employees or for development grants were also deemed not securities sales.
The case is still ongoing, particularly concerning the remedies phase for the institutional sales ruling, and the SEC could potentially appeal parts of the decision. The final outcome and its implications are still unfolding.
Lila: So, lingering regulatory uncertainty is a major risk? What other risks should potential users or holders be aware of?
John: Absolutely. Beyond the SEC lawsuit aftermath, other risks include:
- Volatility: Like all cryptocurrencies, XRP’s price is highly volatile (prone to large price swings). Its price can be significantly affected by news, market sentiment, and developments in the lawsuit.
- Centralization Concerns: Although the XRPL network itself is decentralized, Ripple’s large XRP holdings and influence over the ecosystem remain a point of concern for some regarding potential centralization of power or market impact through its sales. The escrow system mitigates this somewhat, but the concern persists.
- Adoption Risk: XRP’s success heavily depends on the adoption of the XRPL and related technologies (like ODL) by financial institutions. If banks develop their own systems or choose competitors (crypto or traditional), XRP’s primary use case might not reach its full potential.
- Competition: As mentioned, competition from other DLTs like Stellar, stablecoins, improved traditional systems, and potential CBDCs is fierce.
Lila: That makes sense. It sounds like despite the technology’s promise, there are significant external factors, especially legal and competitive ones, that influence XRP’s journey.
John: Precisely. It highlights the importance of understanding both the technology and the complex environment it operates within.
Expert Opinions and Market Analyses
Lila: Given all this complexity, what’s the general sentiment among crypto analysts and experts regarding XRP? Is it seen favorably or with skepticism?
John: Opinion is quite divided, and often strongly held.
- Bulls (Optimists): Point to the technology’s speed, efficiency, low cost, the clarity gained from the court ruling regarding programmatic sales, Ripple’s established partnerships, the potential for ODL growth, and the expanding capabilities of the XRPL (NFTs, AMM, potential smart contracts). They see XRP as undervalued, especially if regulatory hurdles are fully cleared and adoption accelerates.
- Bears (Skeptics): Emphasize the remaining regulatory uncertainty (potential appeals, remedies phase), the challenge of displacing SWIFT and correspondent banking, competition from other projects and stablecoins, concerns about Ripple’s influence and XRP sales from escrow potentially suppressing price, and the historical price performance compared to some other major cryptos.
Many analysts take a cautious approach, acknowledging the technological merits but highlighting the significant risks, particularly the regulatory overhang and adoption challenges.
Lila: So, no clear consensus, which isn’t surprising in crypto! Where can people typically find reliable analysis? It feels like social media can be an echo chamber.
John: It certainly can be. For more balanced perspectives, it’s good to look at:
- Reputable Crypto News Outlets: Sites like CoinDesk, The Block, Decrypt often provide news coverage and sometimes analysis, though always check for author bias.
- Market Data Aggregators: Sites like CoinMarketCap or CoinGecko provide price data, supply information, and links to official project resources.
- Research Firms: Companies like Messari, Glassnode, Delphi Digital sometimes publish in-depth research reports on major assets, though these might be behind paywalls.
- Official Project Documentation: The XRPL.org website and Ripple’s official site provide direct information, but naturally, this will present the project in a positive light.
It’s crucial to consume information from multiple sources and critically evaluate the arguments being made, understanding the difference between factual reporting, analysis, and pure speculation or promotion.
Latest News and Roadmap Updates
Lila: What are some of the most recent headlines or developments concerning XRP and the XRPL?
John: Recently, key developments have included:
- AMM Launch: The XLS-30d amendment bringing Automated Market Maker functionality went live on the XRPL mainnet in early 2024 after gaining validator consensus. This is a significant technical upgrade aimed at boosting decentralized exchange activity.
- SEC Lawsuit Progression: Ongoing legal filings and deadlines related to the remedies phase following the summary judgment. The market watches these closely for any indication of final penalties or potential appeals.
- Partnership Announcements: Ripple continues to announce partnerships, sometimes related to ODL expansion or exploring CBDC initiatives with various countries.
- Sidechain Development: Continued work by Ripple and third-party developers on bringing EVM-compatible sidechains to the XRPL ecosystem, aiming to attract broader DeFi development.
- NFT Ecosystem Growth: Increased activity and new marketplaces emerging for NFTs on the XRPL following the adoption of the XLS-20 standard.
Lila: The AMM launch sounds big for making the XRPL’s built-in exchange more useful. Has it seen much adoption yet?
John: It’s still relatively early days for the AMM. Adoption takes time as liquidity providers (users who deposit assets into the AMM pools) need to participate and traders need to start utilizing it. Tracking the Total Value Locked (TVL) in the AMM pools and the trading volume on the DEX will be key indicators of its success over the coming months and years.
Lila: And the roadmap – are there any other major upgrades planned beyond sidechains and potentially Hooks?
John: The XRPL development is ongoing and community-driven, supported by Ripple and the XRPL Foundation. Future potential upgrades often discussed include improvements to scalability, privacy features (though these can attract regulatory scrutiny), and further cross-chain interoperability (connecting the XRPL easily with other blockchains). The exact roadmap evolves based on developer proposals and validator consensus.
Frequently Asked Questions (FAQ)
Lila: Let’s wrap up with some quick answers to common questions people might have.
John: Good idea. Fire away.
Lila: Okay, first: Is XRP mined?
John: No, XRP is not mined. All 100 billion XRP were created at the start when the XRP Ledger was launched. Transactions are confirmed through a consensus process involving validators, not mining.
Lila: Second: Does Ripple control XRP?
John: Ripple is a separate company that utilizes XRP and the XRP Ledger. It holds a significant amount of XRP (much of it in escrow) and contributes heavily to the ecosystem. However, the XRP Ledger itself is decentralized and operates independently of Ripple, relying on a network of global validators. Ripple does not unilaterally control the network or the XRP asset.
Lila: Third: Is XRP a security?
John: This is complex due to the SEC lawsuit. A US court ruled that XRP itself is not inherently a security. However, the court also ruled that some *sales* of XRP by Ripple (specifically direct sales to institutions) constituted unregistered securities offerings, while sales on public exchanges did not. The legal situation, particularly regarding potential appeals or final remedies, is still evolving.
Lila: Fourth: What is the main purpose of XRP?
John: The primary purpose of XRP is to serve as a bridge currency to facilitate faster, cheaper, and more reliable cross-border payments and international money transfers, acting as an alternative to traditional banking systems.
Lila: And finally: Can I buy XRP?
John: Yes, XRP is available for purchase on many major cryptocurrency exchanges around the world. However, availability might vary depending on your jurisdiction, particularly due to regulatory considerations (e.g., some US exchanges might still have restrictions following the initial SEC lawsuit filings, though many relisted after the court ruling).
Conclusion and Related Links
John: So, Lila, XRP remains a significant player in the crypto space, primarily focused on disrupting the world of cross-border payments. Its technology offers clear advantages in speed and cost, but it faces considerable challenges in terms of regulatory hurdles, competition, and driving widespread adoption.
Lila: It’s definitely a fascinating case study! The technology seems solid for its specific purpose, but the journey is deeply intertwined with the company Ripple and the complex legal landscape. It highlights how much more there is to crypto than just the code.
John: Well said. As always, the crypto market is complex and carries risks. This article is for informational purposes only and should not be taken as financial or investment advice. It’s crucial to do your own thorough research (DYOR) before making any decisions involving digital assets.
Lila: Absolutely. Understand the tech, understand the risks, and never invest more than you can afford to lose.
John: For those looking to learn more, here are some helpful resources:
- Official XRP Ledger site: xrpl.org
- Ripple company site: ripple.com
- XRP Ledger Foundation: foundation.xrpl.org
- XRP market data: Check sites like CoinMarketCap or CoinGecko (links omitted per instruction).