What is Special About the XRP Ledger?
Consensus
Rather than needing Proof of Work mining such as the Bitcoin network uses, the XRP ledger utilizes a ‘consensus’ protocol in which network validator nodes agree on the order of transactions. This process dramatically cuts the speed and cost of transactions compared to mining-based blockchains, with XRP payments being finalized in 3-5 seconds—no matter how busy the network—and fees consistently amounting to fractions of a penny. It also dramatically cuts the energy usage by the network, with the XRP Ledger literally being 57,000 times more efficient than the Bitcoin network.
Anyone in the world is able to operate a validator, with over 150 in operation at present from individuals to businesses and universities providing consensus for the network. Validator operators are not compensated like Bitcoin miners and therefore are run by entities who have a stake in the success and function of the network itself.
Decentralized Exchange
The XRP Ledger is not only a world-class decentralized, public blockchain but was also the world’s first distributed exchange. On the XRP Ledger, one can buy and sell tokens using XRP or using any other tokens on the exchange with very low fees that go to the network itself rather than to a third party (like a centralized exchange).
Users can also easily create their own tokens for personal or enterprise use. On the ledger, people can tokenize anything of value and send those tokens across the world as easily and cheaply as XRP is sent.
Governance
The XRP Ledger is an open, decentralized network and, like other blockchains, no single person or entity can change its function or operation. When an individual or group of individuals wishes to make a change, they can propose that change to the network through the ‘amendment process.’ If 80% of the network votes in agreeance with the proposal, a two-week countdown begins before ratification. If no further objections exist in that time, the amendment becomes ratified and changes are implemented.
Technology Friendly
The XRP Ledger can be easily used by developers to create and build a number of different enterprise technologies. This is seen today as different companies have used the ledger for:
- Micropayments: Tiny, cost-effective transactions for web monetization, content, and gaming purposes.
- Cryptocurrency Wallets: Digital wallets for the storage of private/public keys and the interaction with other blockchains to send/receive XRP and other assets.
- Exchanges: Simple or sophisticated exchanges allowing people to buy and trade both cryptocurrencies and other ledger-based assets (stocks, commodities, etc.)
- DeFi: Decentralized finance product access to supplant traditional financial institutions
- NFTs: Non-fungible tokens for art, real estate, gaming, identity, and more
History of XRP and the XRP Ledger
In early 2011, three Bitcoin enthusiasts and developers–David Schwartz, Jed McCaleb, and Arthur Britto–sought to create a “better Bitcoin.” The developers were concerned by three troublesome issues they identified with Bitcoin:
- High energy consumption for its mining (which, including energy waste, would also force miners to consolidate into areas where energy is cheap)
- Scalability problems which caused network stalls and long payment processing as users increased in number
- Security issues with the network when greater than 50% of the mining power can be obtained by a small number of miners, leading to a potential “double spend” (creation of more Bitcoin)
The three developers worked to build a distributed ledger that improved upon the fundamental problems of Bitcoin, calling the code “Ripple,” an homage to Canadian software developer Ryan Fugger’s “RipplePay” created in 2004 as a peer-to-peer trust network of financial relations that could replace the need for banks.
The ledger utilized a different protocol than the Bitcoin network called ‘Federated Byzantine Agreement’ to reach ‘Consensus’ in verifying transactions, drastically cutting the energy usage, network fees, and speed of transactions compared to Bitcoin.
The original native currency within the ledger was referred to as ‘ripples,’ using ‘XRP’ as the currency code (‘X’ meaning the currency is not linked to any specific country, ‘RP’ being short for ‘Ripple’). At the time, the name ‘Ripple’ was the name used for their open-source project, the consensus ledger, the transaction protocol, and the digital asset (before an actual company existed).
By June 2012, McCaleb, Schwartz, and Britto had completed the code development, and the ledger went live with 100 billion XRP created into existence.
Once live, the creators knew they had a significant technology, one that certainly could be utilized by anyone in the world in a number of ways (peer-to-peer currency, a distributed ledger for any asset represented on the ledger) but were still unsure of how they should proceed.
Ripple
Understandably, for most of its history people have conflated XRP with the blockchain payments company Ripple. This is due to the fact that soon after the initial creation of the XRP Ledger and the minting of the 100 billion XRP supply, a large portion of the XRP was gifted by the creators to the company (not yet called Ripple) who would work to build out a cross-border payments use case for the asset.
The company continues utilizing and holding XRP (they are the largest single entity holding XRP) but are separate from the XRP Ledger. Presently, Ripple controls less than 6% of the validators on the distributed network. If the company wished to alter or control the ledger, there would be no path forward for them to do so.
In addition, the large holdings of XRP by Ripple (at approximately 40 billion in late 2022) were locked in escrow accounts on the ledger in late 2017. This escrow only releases 1 billion XRP a month—of which the unused portion gets locked back in another escrow—and was set up as a good faith act to give the market certainty that massive amounts would not be unexpectedly sold at any given time.
XRP sells on over 100 exchanges throughout the world independently of Ripple and there are dozens of companies utilizing the asset and building their businesses on the ledger with no affiliation to the company Ripple.
XRP Ledger Projects
There are currently dozens of companies building on the XRP Ledger and utilizing XRP. The technology-friendly aspect of the code allows for a multitude of services and tools to be constructed on and around the ledger. Some of the projects currently utilizing the ledger include:
XRPL Labs—Focused on building software on the XRP Ledger, The Netherlands’-based XRPL Labs is currently most well-known for the XUMM wallet. XUMM (pronounced ‘sum’) is a multi-functional, non-custodial cryptocurrency wallet which keeps users keys safe while providing a platform for developers and app users to access their programs and services with security and ease of use.
Coil—Coil is a platform designed to create an alternative to the online advertising revenue mode. Through Coil, users can access web content and send ‘micropayments’ to creators rather than fighting paywalls and advertisements.
CasinoCoin—CasinoCoin is revolutionizing the online casino industry, with casinos able to onboard customers with an easy KYC and AML verification and utilizing the lightning-fast and low fee CasinoCoin token on the XRP Ledger.
Aesthetes—Aesthetes is making fine art investing accessible to the masses by providing custody for fine art, tokenizing it, and providing an online marketplace where investors can buy, sell, and trade. In addition, Aesthetes is providing a digital NFT marketplace, all powered by the XRP Ledger.
Sologenic—Sologenic provides a distributed exchange, NFT marketplace, and decentralized financial tools for users from around the world.
Forte—Forte is a user-friendly platform to assist video game developers in integrating blockchain into the games they create, opening up new possibilities for creators and gamers alike.
KEEP READING
