What is Ripple and how does it work? A beginner's guide to XRP
Ripple is a company that aims to provide cross-border payment solutions to banks and financial institutions.
The company's business resolves around XRP +5.07%
, the native cryptocurrency of the XRP Ledger. Ripple uses XRP as a bridge currency to facilitate the transfer of value between different fiat currencies for its customers. Anyone can also make transactions of XRP across its network.
This article provides a comprehensive understanding of Ripple and XRP.
What is XRP?
XRP is a digital currency that was designed to offer an alternative to Bitcoin. It was conceived with a specific focus on enabling rapid, low-cost cross-border transactions. This is something that most cryptocurrencies can do — with caveats regarding fees and block times — but Ripple's goal is to provide this function as a service to businesses.
Unlike Bitcoin, which depends on a proof-of-work consensus mechanism, XRP operates on a consensus mechanism based on the Federated Byzantine Agreement (FBA) model. This model does not necessitate mining or staking to validate and record transactions. Instead, it relies on trusted validator nodes, collectively known as the Unique Node List (UNL), to achieve consensus and maintain the transaction ledger every 3 to 5 seconds.
One of the unique aspects of XRP is that it was pre-mined at a very early stage of its development. A total of 100 billion XRP tokens were pre-mined and made available in 2012.
How does XRP work?
XRP represents an innovative approach to blockchain technology and financial services. Understanding how it works can help users navigate the evolving landscape of digital finance, whether as consumers, investors, professionals or entrepreneurs.
Consensus algorithm: Unlike many other blockchain networks that use proof-of-work or proof-of-stake, Ripple utilizes an alternative consensus algorithm. This means that transactions on the Ripple network are validated by a group of trusted validators.
