What is Ripple? XRP Explained with Animations

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Ripple is a for-profit company that serves the banking system, which is the perfect way to start out this video. We want to remind you we aren’t here to have opinions or spread rumors, we know you read these articles because we get straight to the facts and then hopefully you can decide for yourself what to think. That’s exactly what we are going to do in this video. 

First off, let’s get into the difference between Ripple and XRP. Ripple Labs is the company behind XRP, which is a cryptocurrency. Kinda like Apple and their iPhones, XRP is the product, while Ripple labs is the company that created it. 

What is Ripple Labs?

In short, Ripple Labs aims for banks and payment providers to send money internationally, quickly and cheaply. You may not know this, but there’s a big problem when you want to send money from one country to another country. Sometimes it takes days, is very expensive, and in some countries you have to do illegal things to make it happen. So immediately, Ripple Labs is trying to solve a big, common problem. 

Currently, most transfers use “SWIFT”, which is a protocol that makes up half of all international wires, moves around 6 trillion dollars a day, but like I said… it’s very slow and takes a lot of work, and high fees. Those fees are either from transferring through multiple banks or through currency conversion. Because that’s a big one too, not all banks will be able to quickly, cheaply, and reliably convert the money you’re sending to the desired currency. 


Their first product is something called RippleNet, also now known as xCurrent. Technically, they are the same thing, RippleNet is the network behind the xCurrent product though. xCurrent is a decentralized system using a consensus model called the Unique Node List. In short, this is the product from Ripple Labs that is supposed to fix that slow bank issue. If you want to transfer your money, you go to RippleNet and have them help you, it’s supposed to be quicker and cheaper. Along with that, they plan to be anti-money-laundering compliant, and even include fraud detection. In fact, they have fixed this problem so well that they already have a bunch of big institutions with them, AMEX being one of them, but like another fifty big banks have joined. So already, this stuff is kinda complicated and not for everyday transactions, right? Well, kinda. 

XRP Cryptocurrency

RippleLabs also offers a cryptocurrency called Ripple that follows the ticker XRP. 

This cryptocurrency is powered by a blockchain, similar to many other cryptocurrencies, but with a few key differences. First, the transactions are confirmed in less than 5 seconds, and the cost of each transaction is like 2 ten thousandths of a penny (.0002). Secondly, the blockchain can handle around up to 1500 transactions per second, with them claiming to be able to reach Visa speeds, but I couldn’t find any technical explanation of this. How does this relate to the grand scheme of things? XRP can run without RippleLabs, but RippleLabs needs XRP to function. 

Unique Node List

Also, one big difference in the XRP crypto blockchain is that they don’t use Proof of Work or Proof of Stake, which are two of the main methods that blockchains use to agree on what transactions should be verified. Instead, Ripple uses a method called a “Unique Node List.” I’m gonna explain this as plainly as possible, but it’s quite centralized. Basically RippleLabs sets up a list of a bunch of people that they trust, and then pretty much the majority decides what gets added to the blockchain or not. They don’t use work, or a staking feature, but instead use majority rule from a list of trusted sources. I could explain this a bit more, but then this would be a video about Unique Node Lists and not XRP and Ripple.

Also, it should be noted that XRP can be divided up into 6 decimal places, and they call the smallest amount a drop, which is .000001 XRP. 

There’s also no reward for running your validator, which is important, because I can’t understand why someone would do it without a reward, unless you wanted to team up and make fake transactions. This is at least the thinking of those who claim XRP is too centralized. 


Let’s talk about how all of this is related to centralization. Basically, one of the big benefits of cryptocurrencies is decentralization where we get away from banks being able to control all of our money, but if XRP is centralized, why would we use it? 

From what I understand, RippleLabs has no control of the network after publishing their initial RTXP protocol, which runs the XRP currency, but can maintain it in the same way the nodes of Bitcoin and the Ethereum Foundation can maintain their blockchains and suggest updates. In short, XRP can run without Ripple Labs, but some of the other products RippleLabs offers can’t run without XRP. 

One of the biggest risks of XRP is the fact that a bunch of validators, or those people on the unique node list can come together, collude, and then make fake transactions spending your money without you agreeing to it. Like I said, there’s no reward for validators, they get no mining fee or validating staking reward, they are doing it ‘just because.’ 

SEC issues

The SEC, which is some agency in the United States, is arguing that XRP is a security, not a currency. This is actually a big lawsuit because it sets precedence for future similar cryptocurrencies. The SEC says that ripple cofounders are treating XRP as security, like a stock or bond. Now, this actually says more about the US government than RippleLabs. In short, the US government is unhappy that XRP may be similar to a stock, but these SEC issues are mostly unrelated to the centralization issues. 


Let’s get into the tokenomics of the XRP coin. First off, XRP is used as what it takes to spend XRP, so natural demand will rise as the coin is used more and more. Secondly, XRP has a fixed supply of 100 billion coins, and supposedly there won’t be any more created. Around 20 billion of those went to the founders, 7 billion went to RippleLabs, and 40 billion were initially sold to companies and individual investors. The rest are given to RippleLabs each month, at a rate of 1b ripple per month, for a total of 33 months. This technically means XRP is slightly deflationary, since the fees are burned and naturally people will lose or forget their wallets. 

I do not know why stablecoins are not better than XRP. Stablecoins solve cross-borders problems, and if you use a layer 2 scaling solution, it also solves the speed and affordability problem, plus they are somewhat more decentralized. Nevertheless, we are here to educate you, so take that for what you will. 

One last thing, the official XRP Discord is the first one where I’ve seen people against the coin actively attacking it, which is interesting because I usually go to Discords after my initial research to fill in some questions I have. One particularly feisty member asked “Are you too lazy to do your own research” when I asked some initial questions, and later described XRP as “Western Union coin to the moon,” sarcastically meaning that it is too centralized. By the way, for those wondering how I do my research for these coins, joining the official Discord and asking questions is one of the best ways to learn, because if you’re correct, sometimes other people learn, and if you’re wrong… many people will be there to give you correct information. 

Thanks for reading, we hope you enjoyed this article, we really hope you learned something, and most of all, we hope to see you in our next article!

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