What is XRP (XRP)?
XRP is a digital currency designed for fast, low-cost cross-border payments. Created by Ripple Labs and running on the XRP Ledger, it settles transactions in 3-5 seconds with fees under $0.01. XRP serves as a bridge currency for financial institutions, enabling instant international money transfers without the need for pre-funded accounts in every country.
Key Facts
What is XRP?
XRP is a digital asset created specifically for payments, designed to enable fast, low-cost transactions across borders. Unlike Bitcoin, which was designed as digital gold for store of value, or Ethereum, which powers smart contracts and decentralized applications, XRP focuses on solving real-world payment inefficiencies in the global financial system. It operates on the XRP Ledger, an open-source blockchain that uses a unique consensus mechanism to achieve transaction finality in 3-5 seconds.
The XRP Ledger can handle approximately 1,500 transactions per second with average fees of $0.0002 per transaction. Unlike proof-of-work networks that consume significant energy, XRP's consensus mechanism is energy-efficient because validators don't compete to solve computational puzzles.
Transaction fees are burned rather than paid to validators, making XRP slightly deflationary over time as the total supply gradually decreases with network usage.
XRP's primary use case is as a bridge currency for cross-border payments. Financial institutions use Ripple's On-Demand Liquidity service to convert local currency to XRP, transfer it across borders in seconds, and convert to the destination currency-eliminating the need for pre-funded accounts in every country.
While Ripple Labs created XRP and remains its largest holder, the XRP Ledger operates as a decentralized network maintained by independent validators worldwide.
Who Created XRP? A Brief History
Origins and Founding Team
XRP was created by Jed McCaleb, Chris Larsen, and Arthur Britto in 2012. McCaleb was an early Bitcoin pioneer who had founded Mt. Gox, the first major Bitcoin exchange. Larsen was a serial entrepreneur who had co-founded E-LOAN and Prosper. Britto was a software developer with expertise in distributed systems.
Together, they founded OpenCoin (later renamed Ripple Labs) to develop the XRP Ledger and promote its adoption in financial services. All 100 billion XRP tokens were created at the network's launch, with 80 billion given to the company and 20 billion distributed among the founders.
Key Milestones
- • 2011: Jed McCaleb begins developing the XRP Ledger concept.
- • 2012: XRP Ledger launches with all 100 billion XRP pre-mined; OpenCoin founded.
- • 2013: OpenCoin rebrands to Ripple Labs; Jed McCaleb leaves due to disagreements.
- • 2014: McCaleb forks XRP Ledger to create Stellar (XLM).
- • 2017: Ripple places 55 billion XRP in cryptographic escrow (up to 1 billion released monthly).
- • 2018: XRP briefly becomes second-largest cryptocurrency by market cap.
- • 2020: SEC sues Ripple, alleging XRP is an unregistered security.
- • 2023: Federal judge rules XRP is NOT a security when sold on exchanges-major legal victory.
- • 2024-2025: Ripple expands institutional adoption; appeals and regulatory clarification continue.
Ripple Labs Today
Ripple Labs is now led by CEO Brad Garlinghouse and remains the largest holder and primary developer of XRP infrastructure. The company focuses on enterprise payment solutions, including On-Demand Liquidity for cross-border transfers and RippleNet for financial institution connectivity.
While Ripple is the most visible entity associated with XRP, the XRP Ledger operates independently as open-source software maintained by a global network of validators, developers, and contributors.
How XRP Works
XRP uses a unique consensus protocol that differs fundamentally from both proof-of-work mining and traditional proof-of-stake. The Ripple Protocol Consensus Algorithm enables fast, final transactions without the energy consumption of mining or the capital lockup of staking.
Ripple Protocol Consensus Algorithm (RPCA)
Instead of miners or stakers, the XRP Ledger relies on a network of validators who agree on the order and validity of transactions. When users submit transactions, validators exchange transaction sets and vote on validity. A transaction is confirmed when at least 80% of trusted validators agree, which typically happens in 3-5 seconds.
Once confirmed, transactions are final and irreversible-there are no block reorganizations or confirmation requirements like with Bitcoin.
Unique Node Lists (UNL)
Each validator maintains a Unique Node List-a set of validators they trust. Validators only need to reach consensus with their UNL rather than coordinating with the entire network, enabling faster agreement. This design allows for greater decentralization since anyone can run a validator, though achieving consensus still requires overlapping trust between different validators' UNLs.
Ripple publishes a recommended UNL, but operators can configure their own trusted validators.
Transaction Fees and Burning
Unlike most blockchains where fees go to validators or miners, XRP transaction fees are burned-permanently destroyed. This makes XRP slightly deflationary, as the total supply decreases with every transaction. Fees are minimal, typically around 0.00001 XRP (fractions of a penny), making XRP practical for high-volume payment applications.
During network congestion, fees can increase dynamically to prevent spam, but even elevated fees remain far below those of networks like Ethereum.
On-Demand Liquidity (ODL)
Ripple's On-Demand Liquidity service uses XRP as a bridge currency for cross-border payments. When a bank in one country wants to send money to another country, they convert local currency to XRP, transfer the XRP across the ledger in seconds, then convert to the destination currency. The entire process takes about a minute compared to 3-5 days for traditional SWIFT transfers.
This eliminates the need for banks to maintain pre-funded accounts (nostro/vostro accounts) in every country, freeing up billions in capital that would otherwise be tied up in liquidity pools worldwide.
Earning with XRP
Why XRP Can't Be Staked
XRP does not use proof-of-stake consensus, so there is no native staking mechanism that pays rewards for locking up tokens. Validators on the XRP Ledger don't receive block rewards or transaction fees-they run nodes to support network integrity, often because they're businesses that benefit from XRP's functionality. This is fundamentally different from networks like Ethereum or Solana where stakers earn inflationary rewards.
Lending and Interest Programs
While native staking isn't available, you can earn yield on XRP through lending. Some centralized exchanges offer interest-earning programs where you deposit XRP and receive 1-5% APY, though these programs involve counterparty risk-the exchange could fail or freeze withdrawals.
After the collapse of several CeFi lenders in 2022-2023, carefully evaluate the platform's financial health before depositing significant amounts.
XRP Ledger AMM
The XRP Ledger includes a native automated market maker (AMM) where you can provide liquidity and earn trading fees. By depositing XRP and another asset into a liquidity pool, you earn a share of fees when traders swap between those assets.
This carries impermanent loss risk if the relative prices of pooled assets change significantly, but it offers a way to generate passive income from XRP holdings while maintaining exposure to the asset.
Warning: Any yield program involves risk. Centralized platforms can fail, DeFi protocols can be exploited, and liquidity provision carries impermanent loss risk. Never deposit more than you can afford to lose, and understand the specific risks of any platform before participating.
Why XRP Has Value
XRP derives value from its utility in real-world payment infrastructure. Financial institutions using Ripple's On-Demand Liquidity need XRP as a bridge currency, creating genuine demand from enterprises processing billions in cross-border payments. Every ODL transaction requires buying XRP in the source country and selling it in the destination country, generating trading volume and liquidity.
The more institutions adopt ODL, the more demand for XRP increases. Additionally, XRP's speed (3-5 seconds), low cost (fractions of a penny), and 24/7 availability make it superior to traditional settlement systems that take days and cost $25-50 per transaction.
The tokenomics of XRP also contribute to its value proposition. The fixed supply of 100 billion tokens with no new issuance means XRP avoids the inflationary pressure that affects many cryptocurrencies. The burn mechanism that destroys a small amount of XRP with every transaction makes it slightly deflationary over time.
Ripple's escrow system, which holds approximately 43 billion XRP with a maximum release of 1 billion per month, provides predictable supply dynamics and reduces the risk of sudden flooding of the market.
However, XRP carries significant risks that investors should understand. Ripple Labs remains the largest holder of XRP, and monthly escrow releases could create selling pressure. The SEC lawsuit, while largely favorable to XRP after the July 2023 ruling, continues through appeals and creates regulatory uncertainty.
The XRP Ledger is less decentralized than networks like Bitcoin, with validator selection and default UNLs influenced by Ripple. Competition from stablecoins and central bank digital currencies could reduce demand for XRP as a bridge currency. Price volatility remains high, and XRP has experienced drawdowns of 90%+ during bear markets.
How to Buy XRP
XRP is available on most major cryptocurrency exchanges globally. Following the favorable July 2023 court ruling, many US exchanges that had delisted XRP have restored trading, though availability varies by state.
1Choose an exchange
Select a platform that supports XRP in your region. Major options include Binance, Kraken, Coinbase, Uphold, and Bitstamp. Compare fees, payment methods, and withdrawal options. In the US, check state-specific availability since some platforms restrict XRP in certain states due to ongoing regulatory uncertainty.
2Complete verification
Provide identification and complete KYC (Know Your Customer) requirements. You'll typically need to upload government-issued ID and proof of address. Verification times vary from minutes to days depending on the platform and your location.
3Deposit funds
Add fiat currency via bank transfer, debit or credit card, or deposit existing cryptocurrency. Bank transfers are usually cheaper but slower, taking 1-5 business days. Cards offer instant funding with higher fees of 3-5%. You can also swap other cryptocurrencies like Bitcoin or stablecoins for XRP.
4Place your order
Use a market order to buy immediately at current price, or set a limit order to specify your target price. Consider using dollar-cost averaging with recurring purchases to reduce timing risk. Start with a small test purchase to understand the process before committing larger amounts.
Next step: Compare XRP providers in your country to find the best price.
How to Store XRP
Custodial vs Self-Custody
With a custodial wallet on an exchange, the platform holds the private keys for you. This is convenient for active trading since you only need login credentials, but you must trust the platform's security and solvency. With self-custody, you control the private keys in your own wallet, giving you full ownership but also full responsibility for security and backups.
Software Wallets
Popular XRP wallets include XUMM (now Xaman), Trust Wallet, and Exodus. XUMM is specifically designed for the XRP Ledger and offers features like token management and DEX access. These wallets store your keys on your device, making them convenient for daily use while maintaining self-custody.
When setting up any wallet, you'll receive a recovery phrase that must be backed up securely offline-anyone with this phrase can access your funds.
Hardware Wallets
For larger amounts or long-term storage, hardware wallets like Ledger Nano S Plus, Ledger Nano X, and Trezor Model T provide the highest security. Your private keys never leave the device, protecting against malware and online attacks. You can connect hardware wallets to software interfaces for convenient access while maintaining cold storage security.
XRP Account Reserve
XRP wallets require a minimum reserve of 10 XRP to activate an account on the ledger. This reserve is locked and cannot be spent, designed to prevent spam accounts. Additional reserves are required for trust lines and other ledger objects. Keep this in mind when transferring XRP-you cannot empty an account completely below the reserve requirement.
Security Tip: Store your recovery phrase on paper in a secure location. Never type it into websites, share it with anyone, or store it in cloud services. Test recovery with a small amount before storing significant funds.
How to Use XRP (XRP)
Cross-Border Payments
XRP excels at international transfers due to its speed and low cost. You can send XRP anywhere in the world in 3-5 seconds for fractions of a penny. While primarily used by institutions through Ripple's services, individuals can also use XRP for personal remittances-converting local currency to XRP, sending it to the recipient, who converts to their local currency.
This can be significantly cheaper than traditional remittance services that charge 6-10% fees.
Trading and Investment
Many users hold XRP as a speculative investment, betting on increased institutional adoption and regulatory clarity. XRP trades on virtually every major exchange with deep liquidity. The XRP Ledger also includes a built-in decentralized exchange where you can trade XRP against other tokens directly on-chain without intermediaries.
Trading pairs include XRP against stablecoins, other cryptocurrencies, and issued tokens.
XRP Ledger DEX and Tokens
The XRP Ledger supports tokenization through trust lines, allowing anyone to issue tokens representing any asset. These tokens can be traded on the native DEX. The ledger also supports NFTs and has added AMM functionality for automated liquidity provision.
While not as feature-rich as Ethereum's smart contract ecosystem, the XRP Ledger offers basic DeFi functionality with faster settlement and lower fees.
Micropayments and Streaming
XRP's low fees make it suitable for micropayments that would be impractical on higher-fee networks. Projects have explored using XRP for content monetization, pay-per-use services, and real-time payment streaming. The Interledger Protocol, developed by Ripple, enables payment routing across different ledgers with XRP as a connector currency.
Notable People in XRP
Unlike fully decentralized networks, XRP's development and adoption have been significantly influenced by Ripple Labs and its leadership. The company's decisions directly affect XRP's market position and institutional adoption.
Brad Garlinghouse
CEO of Ripple since 2017, Garlinghouse has been the public face of XRP during its legal battles and institutional expansion. Previously an executive at Yahoo, AOL, and Hightail, he has advocated for regulatory clarity and expanded Ripple's partnerships with financial institutions worldwide.
He led Ripple through the SEC lawsuit and has been vocal about the need for clear crypto regulation in the US.
Chris Larsen
Co-founder and Executive Chairman of Ripple, Larsen served as CEO until 2016. A serial fintech entrepreneur who previously founded E-LOAN and Prosper, he has been one of the wealthiest individuals in crypto due to his substantial XRP holdings. Larsen remains influential in Ripple's strategic direction while focusing on crypto policy and advocacy.
David Schwartz
Chief Technology Officer of Ripple and one of the original architects of the XRP Ledger consensus protocol. Known as "JoelKatz" in the crypto community, Schwartz has been instrumental in the technical development of XRP since before Ripple's founding. He continues to lead core protocol development and explains technical concepts to the broader community.
Jed McCaleb
Co-founder of the XRP Ledger who left Ripple in 2013 following disagreements about the company's direction. He went on to co-found Stellar, a competing payment-focused blockchain. McCaleb received billions of XRP as a founder, which he sold over several years under a structured agreement with Ripple. His departure and subsequent XRP sales were sources of controversy in XRP's early years.
Regulation Overview for XRP
XRP's regulatory status has been one of the most contested issues in cryptocurrency. The SEC lawsuit and its partial resolution have significant implications for XRP's usability and the broader crypto industry.
The SEC Lawsuit
In December 2020, the US Securities and Exchange Commission sued Ripple Labs, alleging that XRP sales constituted unregistered securities offerings. This was the most significant legal challenge to a major cryptocurrency in US history.
In July 2023, Judge Analisa Torres ruled that XRP sales on exchanges to retail investors did NOT constitute securities transactions, while institutional sales directly from Ripple did. This was a landmark decision that provided significant clarity, though the SEC has appealed certain aspects.
United States
Following the court ruling, XRP's legal status in the US has improved significantly. Many exchanges that delisted XRP in 2020-2021 have relisted it, including Coinbase and Kraken. However, regulatory uncertainty persists due to ongoing appeals and the possibility of future SEC action. XRP is generally treated as property for tax purposes, with capital gains applying to sales and trades.
Availability may vary by state depending on local regulations.
Canada
XRP is legal in Canada and available on major Canadian exchanges. It's subject to capital gains tax on sales and trades. Canadian regulators have not taken specific action against XRP, and it remains widely accessible through registered crypto trading platforms that comply with FINTRAC requirements.
International Status
Outside the US, XRP has generally maintained legal status throughout the SEC lawsuit period. In the European Union under MiCA, Japan, Singapore, and most other jurisdictions, XRP is treated as a cryptocurrency subject to standard crypto regulations. International exchanges never delisted XRP, and Ripple has expanded its institutional partnerships in regions with clearer regulatory frameworks.
Regulatory Note: While the July 2023 ruling was favorable, XRP's regulatory status may continue to evolve as appeals proceed and as broader crypto legislation develops. Stay informed about regulatory changes in your jurisdiction, and consult professionals for tax and compliance questions.
FAQs About XRP (XRP)
CoinVela's editorial team provides independent, research-driven explanations of cryptocurrencies.