The word cryptocurrency often goes hand in hand with “decentralized.” You hear about “Bitcoin versus the Banks” or how digital currencies’ “disruptive” technology will overturn the traditional banking sector.
Ripple is no such coin. Most cryptocurrencies and “altcoins” (any digital token that is not Bitcoin) use blockchain technology to enable a peer-to-peer network that avoids a system like that used by central banks. Ripple is not against the banks – it works alongside them. Think of Ripple as a transaction machine – the WD40 oil that speeds up rusty bank transactions. So, what is Ripple, how does Ripple work, and what is Ripple trading?
What is Ripple?
Ripple is one of the biggest cryptocurrencies with a market capitalization of around $30 billion. Ripple sits in the top 10 of the Coin Market Cap ranking and dwarfs many more minor digital currencies. The protocol was first created in 2004, but Ripple’s story began in 2014 when co-founders Jed McCaleb and Chris Larsen joined forces and gave the startup their collective Midas touch.
Ripple was born out of the need for faster and cheaper transactions. Ripple aims to send money as fast as data: the company mission is to “enable the world to move value like information moves today – the Internet of Value.” The open-source protocol grew into RippleNet, a financial network to make international payments easier. Today, RippleNet includes over 300 financial institutions spread across 40 countries.
We live in an increasingly globalized world, yet many currencies cannot be directly exchanged for each other but need to go through the US dollar. This can be both expensive and time-consuming (bank transfers take days, Bitcoin can take hours.) Ripple’s average transaction time? Four seconds.
What is XRP?
Ripple is not to be confused with XRP. Ripple is the company platform partnering with banks and governments to transform international finance. XRP is the cryptocurrency or “token” used on the Ripple network to facilitate transactions using the XRP ledger. Ripple attempts to disassociate itself from the coin on its company page, saying, “XRP is a digital asset independent of Ripple…and Ripple does not control or own it.” The markets tell a different story. However, Ripple owns 61% of XRP, which arguably creates control over the coin’s market value. You can buy XRP tokens as a long-term investment or trade Ripple XRP.
How does Ripple XRP Work?
XRP runs on the XRP Ledger using blockchain technology but is slightly different from most cryptocurrencies. With Bitcoin, “miners” verify individual transactions by solving complex computer puzzles (“cryptography.”) Most users on the network need to verify each transaction, making them secure but also very slow. With XRP, the blockchain operates using its own patented technology: the Ripple Protocol Consensus Algorithm (RPCA.) This sounds complicated, but the clue is in the word “consensus.” Essentially, Ripple XRP uses a system of unique node lists to verify transactions. It is more centralized than most blockchains and relies on 35 trusted validators. This is how Ripple can claim its four-second transaction speed.
Pros & Cons of Ripple
Ripple is a major player in the crypto market, and for a good reason. Unlike many digital coins, Ripple or XRP is both a usable currency as well as an investment. Not everyone is convinced, however, and there are concerns about the security of the underlying technology. If you are interested in trading XRP, here are some of the pros and cons of Ripple.
- Banks: this is a con to some but a pro to many others. The advantage of Ripple being an official organization backed by major financial institutions (it counts Santander, Union Credit, and UPS among its clients.) is stability and trust;
- Future: the more banks come on board, the higher the value of XRP;
- Inflation: All the XRP has been “premined” (1 billion coins), and therefore there can be no inflation.
- Centralized: For many, the high centralization of Ripple defeats the purpose of cryptocurrency.
- Monopoly: Over 61% of XRP is owned by Ripple, which casts doubt over how separated the company is from its coin.
- Security: Ripple’s code is all available as it is open source, leaving it vulnerable to hacking.
What is the future of Ripple?
In December 2020, the SEC (Securities and Exchange Commission) filed a complaint against Ripple. The allegation was that Ripple and two of its executives had sold more than $1.3 billion from an unregistered securities offering. This is strongly refuted by Ripple and a lawsuit has been ongoing since. According to Jeremy Hogan, a lawyer who has sprung to fame within Ripple circles, without a settlement the case may continue until 2022. Whatever the outcome, the case itself is like a dark cloud over Ripple, preventing XRP trading in the USA, and suppressing the price of XRP. XRP has still managed to make steady gains, roughly doubling its value since the beginning of 2021.
In the medium-term then, XRP’s value is somewhat beholden to the SEC lawsuit but, in the short-term, it is still managing to make considerable gains. The pattern with XRP is that it rises when the crypto market is bullish, along with Bitcoin, and it can also resist drops in Bitcoin’s price more than most other coins. Although Ripple is the antithesis and in some ways arch-rival of Bitcoin, it has a considerable following. From investors who believe in Ripple’s product and platform to those who believe in a centralized banking system and, of course, traders who believe it will just make them a good return, Ripple has not been crushed by its haters.
Ripple price predictions
If anything, Ripple has gained more attention as an alternative use of Blockchain technology, helping to empower the current FIAT banking system. Proponents of centralized banking systems would be quick to point to positives, such as payment protection, impeding criminal money transfers, and having recourse to access your funds if you forget your passcode. Its price is also regularly lifted by new deals with banks, keen to get access to the transaction speeds Ripple can offer. Looking beyond the SEC lawsuit, estimates put XRP’s value at about $10 by 2025 and $30 by 2030. The amounts are just rough projections but there seems a lot of confidence that XRP’s value is heading upwards. Within the Ripple camp, many believe Ripple will ultimately become the definitive blockchain currency technology, supplanting Bitcoin.
How do you Trade Ripple (XRP/USD)?
If you are interested in trading Ripple, there are several avenues open to you. The first and most simple way to trade Ripple is by simply buying its associated coin “XRP” from an online trading platform. Remember “XRP” and “Ripple” are not the same thing. Ripple is the company that makes deals with banks and helps them to implement their technology etc. XRP is the coin used on the Ripple network and so, naturally, the success of one will affect the other. Buying the coin outright isn’t the only way to invest in Ripple, however. You can also place derivative bets, including hedging techniques. Options and futures contracts are two particularly popular trading techniques, although make sure you understand how these work before diving in. They are generally used to limit losses, instead of making gains.
Another popular derivative trading option is CFDs (“contract for differences”). CFDs allow traders to leverage more money for the possibility of making greater gains. Of course, they can also incur greater losses. All of these alternatives are known as “derivative” bets because they do not have direct ownership over the underlying asset (XRP), they simply speculate on its price in various ways. Whichever trading strategy you choose to undertake, it’s always a good idea to check chart indicators to know when the best time is to buy, where to set your stop losses and how much to invest. The Bollinger Band indicator, for example, can give you a good sense of volatility and likely future price range. It is also a good idea to keep up with the latest Ripple news.
Where can you Buy Ripple?
To do all the above, you will first need to find a decent, reputable broker. While new online brokers are popping up every day, unfortunately, they do not all offer a good level of service, and some are outright scams so do be careful. We are proud, however, to recommend our online trading platform, “TradeOr”, which has built a considerable reputation within the industry, and it is being well-received in the trading community. At TradeOr we enable purchases on Ripple and many more cryptocurrencies, as well as stocks, currency pairs, and commodities. You will have access to derivative bets, such as CFDs and price analysis tools to help predict the future movements of your assets.
Although Ripple has a lawsuit against the SEC hanging over it, they are still managing to make gains and their future price forecast is overwhelmingly bullish. Ripple trading can come in many forms. The simplest way to invest in Ripple is by purchasing the token associated with it, XRP. TradeOr can also offer traders a number of derivative bets to undertake, including leveraging more money through CFDs. The online trading broker you choose is important and TradeOr has a fantastic reputation. It has a broad range of markets, numerous market indicators available for use, a fantastic support team and even a “demo account” to practice trading on.