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Is Ripple and XRP the same? They are often mixed up, but understanding the difference is key. Chris Larsen and Jed McCaleb introduced the digital payment network and protocol known as Ripple in 2012. To facilitate fast and low-cost international money transfers and currency conversions, the network employs XRP as its native coin.
In this guide, we are going to break down exactly what Ripple is, how it differs from Bitcoin, and decide whether Ripple is a good investment.
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What is Ripple: Summary
The banking system today relies on slow and outdated systems to transfer money (i.e., value) around the world. Ripple aims to create the Internet of Value, called RippleNet, which is a set of unified rules that help the financial sector utilize 21st-century solutions for the fast and scalable transfer of money.
Multiple value transfer methods are supported by Ripple. IOUs—representations of debt for tangible things—and XRP—the native currency of RippleNet, utilized for quick and inexpensive international transactions—were the traditional methods of doing this. Ripple also unveiled its own stablecoin, RLUSD (Ripple USD), in 2024, intending to ensure price stability and enhance the ecosystem’s usefulness.
The Problem: Banks Are Outdated
Have you ever had an occasion where you needed to wire money to someone, only to be told it might take several days for that money to appear in their account?
That’s because most major banks are still using systems that were built 40 years ago for this task. Swift, MoneyGram, and Western Union are just some examples of slow, expensive, and relatively limited systems that financial services use to transfer money.
On top of that, not all banks are connected via the same network. So, in many cases, you don’t even have a direct line between two banks when they need to transfer money from one account to the other.
For bank A to send money to bank B that it doesn’t have any direct relationship with, more often than not, it will have to go through several intermediary banks, searching for common network connections between each other to clear a path for the money.
That’s why international wire transfers are so slow and costly. Each bank, along the way, takes time to process the transaction and charges a fee for servicing the process.
In some cases, bank transfers must involve currency conversions, which makes things even more problematic and expensive. For example, directly transferring currency from Japan to Nicaragua means turning Yen into Cordobas, which is generally not feasible.
The reason is that Japanese banks don’t usually hold accounts denominated in Cordobas because there’s not a lot of demand for them. However, both Japanese and Nicaraguan banks hold accounts in Dollars.
So instead, an individual or bank will usually trade Yen to Dollars and then Dollars to Cordobas. As you can imagine, this process can be costly due to the multiple conversions.
In short, the banking system today doesn’t have a main connecting network with a uniform set of rules. Each time you want to exchange or send money through the banking system, you need to find a path to transfer that money, depending on the circumstances.
The Solution: Ripple
Just like the Internet has its own rules, or protocol, to transfer information, known as HTTP. The Ripple Network, RippleNet, uses a protocol known as RTXP for moving value around the world.
Ripple Labs, the creators of RippleNet, aim to create the “Internet of Value”, a way for money to move as quickly as information does. Through the use of RippleNet, there is no reason to pay a fortune and wait days when transferring money globally.
The idea for Ripple was actually first conceived way back in 2004 by Ryan Fugger and was called RipplePay (now Rumplepay), but in 2012 was passed to Jed McCaleb and Chris Larsen, who founded OpenCoin, later to be called Ripple Labs.
Unlike most cryptocurrencies, which focus on the individual, Ripple Labs aims to serve banks and payment providers, allowing them to lower transaction costs and expedite settlements.
How Does Ripple Work?
RippleNet is a network based on a set of rules known as the Ripple Transaction Protocol, or RTXP for short. The network consists of computers, known as validators, that are spread around the world and maintain a blockchain—a shared ledger of who owns what.
Validators make sure every transaction sent through the network follows the RTXP rules. Anyone can run a validator and help maintain the Ripple network, just like anyone can run a Bitcoin node to maintain the Bitcoin network.
Companies that want access to the Ripple network can use gateways. Gateways, which are usually run by banks, act as entry points to Ripple for people outside the network. It’s the same idea as going to a bank or a credit company to gain access to the banking system.
So Ripple basically offers businesses an alternative to the banking system in the form of an Internet of value called RippleNet. RippleNet and a service called On-Demand Liquidity are offered to companies in order to optimize their current solutions for transferring money around the world.
It’s worth mentioning that for you, as a customer of a financial service using Ripple, this solution is transparent. If the bank switches to this technology, your bank account balance could be residing on the XRP ledger tomorrow, and you would never know it.
Ripple Currencies
Unlike other cryptocurrency protocols that support only their own asset, Ripple offers three different types of “currencies”: IOUs, XRP, and RLUSD.
IOUs
IOUs are tokens on the Ripple network that can be stored on any Ripple wallet. Just like we can store a variety of Ethereum tokens on an Ethereum wallet, we can have plenty of tokens coexisting on the same Ripple wallet. But we really should stop the comparison here since this is as far as the similarities go.
Any participant on the Ripple network can issue an IOU; however, an IOU doesn’t represent something you OWN; it represents something you OWE. It’s a debt, an obligation to pay back something you got in real life.
When you issue an IOU to someone, it means you owe them something. When you hold an IOU issued by someone else, it means someone owes you something.
Each IOU has a name that comprises who issued it and what it represents. For example, USD. Bitstamp is an IOU issued by Bitstamp promising to pay back USD. An IOU can be issued for any type of real-world asset.
For example, you can have an IOU for Dollars, Euros, gold, oil, airline miles… even cows.
It’s important to note that the IOU itself is not the asset; it’s just a promise by the issuer to give you the asset back in the future. This promise won’t do you any good if the issuer isn’t good for his word. That’s why trust plays an important issue with IOUs.
For you to accept an IOU from someone, you have to trust that they will be able to pay you back. In RippleNet, this is known as a trustline. A Trustline is somewhat similar to a line of credit with the bank. It’s an agreement to trust someone up to a limited amount of money.
For each asset we borrow, we will issue a new IOU. Unlike other forms of debt that can be traded, IOUs for the same asset type are not interchangeable if they were issued by two different people.
For example, if I borrow money from you and issue you a 20 USD.99Bitcoins IOU, that IOU can’t be added to a 20 USD.Bitstamp IOU. Since each IOU has a different credit line or trust line, you can only redeem the USD.99Bitcoins IOU from 99Bitcoins.
XRP
What is Ripple XRP? XRP is a cryptocurrency issued by Ripple Labs to help transfer payments through the Ripple Network.
For example, if a bank wants to move large amounts of money, instead of needing to use multiple intermediary banks to transfer the money, it can just convert the money to XRP and send that XRP to the recipient bank.
It’s important to note that two banks don’t have to use XRP to transfer assets between them. Instead, they can choose to keep an ‘open tab’ using IOUs only, without ever closing it.
XRP is a form of payment that, unlike an IOU, is final and is considered a tradable asset by anyone on the network.
Unlike IOUs, XRP is the actual asset, so there is no counterparty risk. In other words, once you have received payment in XRP, the transaction is made, and there’s no fear that the other party will not meet its obligations for payment.
So, if no trust is needed and no trustline needs to be opened when sending XRP to other network participants, why do we even need Ian OU?
The simple answer is that XRP, being a cryptocurrency asset by itself, is relatively volatile and also not widely respected worldwide. IOUs, on the other hand, are treated and valued as the assets each represents.
XRP vs. Bitcoin
XRP has additional advantages as well. It’s fast and scalable, especially when compared to Bitcoin.
Sending an XRP transaction through the network takes 4 seconds as opposed to Bitcoin’s 10-minute average. Also, XRP can handle 1,500 transactions per second, while Bitcoin can handle only about 5. So the upside of using XRP as a form of payment is pretty obvious.
Ripple’s New Dollar Stablecoin: RLUSD
With the introduction of Ripple USD (RLUSD), a U.S. dollar-pegged token available on both the XRP Ledger and Ethereum, Ripple launched a bold move into the stablecoin market. RLUSD is built for stability, regulation, and enterprise-grade use cases. It is fully supported by segregated reserves and audited for transparency.
Due in large part to robust institutional demand and strategic market expansion, especially in Africa, where Ripple partnered with platforms like Chipper Cash, VALR, and Yellow Card to facilitate cross-border payments and liquidity, RLUSD has experienced rapid growth since its launch in late 2024, reaching $400M+ in supply by mid-2025 and $700M+ in market capitalization by September.
Ripple Mining
One question people ask a lot is, “If XRP is a cryptocurrency, can it be mined?”
The answer is no, it can’t.
Mining in Bitcoin is done in order to confirm and determine the order of transactions on the blockchain. In Ripple, transactions are handled through a different process.
When an XRP transaction is broadcast through the network, the validators that maintain the network decide if it’s valid or not through voting. If 80% or more vote it “valid,” the transaction is updated in the Ripple ledger.
For an in-depth read about Ripple’s consensus algorithm, read their consensus whitepaper.
This list of trusted validators that a validator consults with is known as a Unique Node List (UNL for short). Each validator has its own UNL. Deciding who will be included in the validator’s UNL is completely up to the person who runs the validator.
However, Ripple offers a default list of trusted validators. Additionally, validators don’t get compensated for their work like Bitcoin miners do with new coins.
In addition, you can actually get some yield by staking XRP.
XRP Distribution
When Ripple Labs started out, they actually issued, or “pre-mined”, a total of 100 billion XRP, and according to the Ripple protocol, no more XRP can ever be created.
- 20 billion XRP were given to Ripple founders Jed McCaleb, Chris Larsen, and Arthur Britto.
- 7 billion XRP are held by Ripple Labs.
- Over 25 billion XRP have been sold to companies and individuals.
- The remaining supply (around 48 billion) is sealed in a smart contract as of May 2017 that releases 1 billion XRP into Ripple Labs’ hands each month until all of the 100 billion XRP cap is reached.
XRP can be divided into 6 decimal points, with the smallest unit being known as a drop (0.000001 XRP).
If you want to hold XRP, you will need a wallet that supports the currency and a minimum deposit of 20 XRP in your account. This is done to prevent people from spamming the Ripple Network by opening a large number of accounts.
One last thing to know about XRP is that the XRP supply decreases over time, making it, in theory, more valuable as time passes. This is done by destroying the transaction fees attached to each XRP transaction.
For example, at the time of writing, we’re down to about 99.99% of the original 100 billion XRP. The “missing” XRP are transaction fees that have been destroyed and can never be used again.
Legal Victory: Ripple Vanquishes SEC Lawsuit
Settling with the U.S. Securities and Exchange Commission (SEC) was one of the most significant turning points in Ripple’s history. When both parties consented to a mutual withdrawal of appeals on August 7, 2025, the matter was formally closed.
The decision upheld that XRP sold on open markets is not a security, even though institutional sales are nonetheless governed by regulations. A major turning point for the industry was reached when Ripple paid a $125 million punishment, which was much less than the original expectations.
The decision set off a market boom, with XRP rising sharply and trade volumes soaring. It also cleared the path for institutional endeavors like ETF plans, banking licenses, and a renewed emphasis on products.
Ripple’s Future: Is XRP a Good Investment?
Ripple has claimed its place in the crypto scene as one of the few crypto projects with a clear focus on real-world utility. Through its RippleNet solution, Ripple collaborates directly with banks, payment processors, and other financial institutions, in contrast to many tokens that only rely on speculation. This institutional focus gives XRP a unique use case in cross-border payments, an industry expected to reach a market size of $320 trillion by 2032.
The 2023 SEC ruling that XRP sales on exchanges are not securities brought the much-needed regulatory clarity in the U.S. This has opened the door for new partnerships and listings that could strengthen Ripple’s long-term growth. Additionally, the 2024 launch of Ripple’s RLUSD stablecoin demonstrates the company’s goal to expand its product line and offer speed and stability for international transactions.
That said, XRP is not without risks. What can impact its price is the current regulatory landscape, competition from alternative blockchain payment solutions (like Stellar or CBDCs), and overall volatility in the cryptocurrency market. But the bottom line is that XRP has one of the strongest real-world use cases in the industry. If it continues to expand its partnerships and regulatory clarity improves further, XRP could remain a long-term contender. However, investors should treat it as a high-risk, high-reward asset and never invest more than they can afford to lose.
Conclusion
Hopefully, by now, you understand what Ripple is and how it works—a network designed to move value around the world, primarily aimed at banks and payment providers.
Consistently keeping a place in the top 5 cryptocurrencies is not an easy task, and XRP has been doing this pretty successfully, having a market cap of as of February 14, 2026.
For now, it appears that Ripple Labs is gradually advancing toward its goal of adding more banks to its system; however, this doesn’t necessarily mean that XRP will rise in price.
See also:
- XRP Price Prediction 2025-2030
- XRP Meme Coins: Top Meme Coins on XRP!
- How to Buy RLUSD: A Beginner’s Guide to Ripple’s Stablecoin
- Will XRP Flip Ethereum? Here’s What the Odds Say
- XRP Futures: Ripple Trading Guide for 2026
- What are ERC-20 Tokens?
FAQs
Is Ripple the same as XRP?
No. Ripple is the company that develops financial technology solutions like RippleNet. XRP is a digital asset used within RippleNet for fast and low-cost cross-border transactions.
What is Ripple’s RLUSD stablecoin?
In 2024, Ripple introduced RLUSD, a USD-backed stablecoin. It’s designed to provide stability and liquidity on RippleNet, working alongside other Ripple currencies rather than replacing them.
Is XRP a good investment?
XRP has strong real-world adoption and regulatory progress, but like all cryptocurrencies, it remains highly volatile and speculative. Investors should weigh both the risks and potential benefits before buying XRP.
Where can I buy XRP?
Major cryptocurrency exchanges like Binance or Kraken offer XRP trading pairs against other cryptocurrencies and fiat currencies. To store XRP, users can choose between software wallets like Best Wallet, hardware wallets such as Ledger or Trezor, or keep tokens on exchanges.
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