In the crypto ecosystem, there are various terms which are often used interchangeably but they have different meanings, for example, coin and token, cryptocurrency and blockchain, DeFi and DEX etc which creates confusion. One such confusion is between XRP, XRP Ledger, and Ripple.
Many new users in the crypto ecosystem think that XRP is just another coin, Ripple Labs is its owner company and XRP Ledger & XRP are the same, but that’s not accurate. These three components are related but they function differently and independently in various aspects of finance and technology.
In this article, we will explore the purpose and usage of each term to understand the difference between them and what is the correlation between Ripple, XRP and XRP Ledger. We will also try to clear the common misconceptions between these three.
What is Ripple Labs? The Company Behind the Vision
Ripple Labs Inc. is a fintech company co-founded by Chris Larsen and Jed McCaleb back in 2012. It is based in San Francisco. A major reason for its formation was to offer individuals different ways of sorting out their financial issues like cross-border payments, digital asset management, etc. by using blockchain.
Also, it’s important to note that Ripple is not a blockchain network, but it uses XRP Ledger and XRP in its various products. These include RippleNet, On-Demand Liquidity (ODL), Ripple USD (RLUSD), Central Bank Digital Currency (CBDC) platform, etc. These products are developed by the company to improve the financial infrastructure by using blockchain technology.
Moreover, Ripple is different from other crypto projects aimed at decentralization for the masses as it mainly provides services to enterprises and partners with banks, financial institutions, regulators, etc. The organization uses XRP and the XRP ledger as part of its toolkit, but does not own or control the ledger.
What is XRP Ledger (XRPL)?
XRP Ledger (XRPL) is a decentralized public blockchain network on which XRP operates. It is an open source and permissionless ledger that was developed in 2012 by various developers like David Schwartz, Arthur Britto, Jed McCaleb to offer various blockchain based solutions.
XRPL is different from other blockchain networks because it uses a unique consensus algorithm that does not depend on proof-of-work or proof-of-stake consensus mechanisms. It uses a Byzantine Fault Tolerance consensus mechanism that helps in faster and energy-efficient validation of transactions.
XRP Ledger, as discussed above, is a public blockchain, which means it is not controlled or owned by any single entity. Instead, it is maintained and controlled by developers, validators, and contributors from all over the world. It has various utilities that are beyond payments like tokenization, decentralized exchange, smart contract functionality, etc. The multiple use case makes it a versatile platform far beyond its association with Ripple.
What is XRP?
XRP is the native token of the XRP Ledger, a layer 1 blockchain network. It was developed to serve as a bridge currency in cross-border payments to solve problems like currency conversion fees, delay in settlements, etc. As of writing, it traded at $2.40 with a market cap of $131.36 billion.
XRP is not controlled by Ripple, despite the company using it in its various products that solve various finance-related problems. XRP isn’t just limited to Ripple or its partners as anyone can use it for transactions, micropayments, NFT minting, and more.
Furthermore, XRP is a well-known cryptocurrency due to its high speed and scalability. Transactions involving XRP are settled in 3-5 seconds and can handle more than 1500 transactions per second (TPS). This makes popular among banks, institutions, developers, creators, etc, who want fast and low-cost transactions.
How are Ripple, XRP, and XRP Ledger Connected?
XRP Ledger, Ripple, and XRP together depend on each other a lot, although they are separate in their operations:
- Ripple develops various products to help financial institutions like RippleNet, ODL, etc, that deploy XRP and XRPL in order to achieve the speed and efficiency of global payments.
- XRP is the native token of XRP Ledger that runs on it to facilitate cross-border payments and various other services.
- By contributing to the XRP Ledger’s codebase and making it more accessible, Ripple becomes a main contributor to the ecosystem, but it does not own or control it.
Major Misconceptions Between Ripple, XRP, and XRP Ledger
Below are some common misconceptions about these three components:
Does Ripple Own XRP?
Though Ripple Labs holds a large amount of XRP for its various products, it does not own XRP. The token works independently of Ripple and is open for public use.
Is XRP Ledger a Private Blockchain of Ripple?
No, XRP Ledger is not a private blockchain of Ripple Labs, instead, it is a public blockchain ecosystem that is accessible to all users.
Is XRP Only Used by Banks?
No, XRP can be used by anyone, ranging from developers, institutions, gamers, NFT creators, payment providers, etc.
Final Thoughts
Understanding the difference between Ripple, XRP, and XRP Ledger is very important for anyone who joins the crypto ecosystem. While these three components are interconnected, each serves a different role. Ripple as a fintech company provides blockchain-based solutions, XRP Ledger offers Layer-1 blockchain network services, and XRP serves as a native utility token.
Clearing these misconceptions helps in eradicating confusion and boosts participation in the network. It provides clarity to developers, investors, institutions, etc, on how this trio works to ensure smarter decision-making in the world of blockchain finance.
