XRP is one of the largest cryptocurrencies by market capitalization, starting the year with a value of more than $30 billion.
XRP’s origins date back to 2012 when the company now known as Ripple was founded and the XRP Ledger launched.
Unlike bitcoin (BTC) and ethereum (ETH), the Ripple network and its XRP native cryptocurrency were designed to facilitate financial transfers among banks and other global financial institutions. The goal of the project was to create a cheaper, faster and more secure alternative to the Society for Worldwide Interbank Financial Telecommunications, or SWIFT, which executes financial transfers.
What is XRP?
While investors sometimes refer to the XRP cryptocurrency as Ripple, in fact Ripple is the technology company backing XRP and the XRP ledger blockchain.
The XRP blockchain itself is decentralized and public. The Ripple transaction protocol facilitates XRP network transactions, a set of rules governing RippleNet.
RippleNet is a network of payment facilitators and banks worldwide that helps participants send and receive payments seamlessly, reducing transaction bottlenecks.
Unlike bitcoin, dogecoin (DOGE) and other cryptocurrencies mined using a proof-of-work consensus mechanism, XRP is pre-mined and has a maximum total supply of 100 billion tokens.
In 2012, the XRPL founders gifted 80 billion XRP to Ripple, and Ripple locked 55 billion XRP in escrow. Ripple’s co-founders and other company insiders received the other 20 billion tokens. The company then began releasing up to 1 billion of its XRP tokens from escrow per month — over the next 55 months — into circulation based on XRPL mechanics.
XRP transactions are verified using a unique consensus protocol that utilizes the network’s group of more than 150 validators, of which 35-plus are on the default “unique node list,” or UNL. Once a majority of validators accept a transaction as legitimate, it is added to the ledger. Ripple designed this system to be cheaper, faster and more energy-efficient than blockchains that use proof-of-work mechanisms.
In December 2020, the U.S. Securities and Exchange Commission sued Ripple, alleging the company violated U.S. securities laws by selling XRP, an unregistered security.
In court, Ripple argued that XRP was not a security. The company scored a partial victory in the landmark case in July 2023. A Southern District of New York judge ruled that XRP is a security when offered for sale to institutional investors but not when sold on an exchange to retail investors.
How to buy XRP step-by-step
XRP was originally designed for financial transactions among large institutions. But its availability to trade on several major crypto exchanges has also made it a popular investment among retail traders. If you’re considering investing in XRP, simply take the following steps.
1. Decide if you want to buy XRP.
XRP has advantages over bitcoin, ethereum and other leading cryptocurrencies, but it may only be right for some investors.
Before buying, thoroughly research XRP and potential alternative investments and determine if XRP’s tokenomics and risk profile are appropriate given your financial goals.
XRP bulls tout the usefulness of the Ripple payment network and the speed of its transactions. But critics have raised concerns about Ripple’s centralized control over XRP and potential vulnerabilities in its consensus protocol.
2. Find a place to buy XRP.
Once you have decided to buy XRP, you must find a cryptocurrency exchange or investing app that supports XRP trading. Exchanges are online platforms where users trade cryptocurrencies, and XRP is supported on a large number of markets and exchanges.
Centralized exchanges
A centralized crypto exchange is similar to a traditional financial institution in which a centralized company acts as an intermediary between transaction participants. Leading centralized crypto exchanges that support XRP trading include Binance, Coinbase, Kraken and Bybit.
Decentralized exchanges
A decentralized crypto exchange allows users to make direct transactions through blockchain technology to complete trades without needing a centralized intermediary.
Leading decentralized crypto exchanges that support XRP trading include PancakeSwap, SimpleSwap and onXRP.
3. Choose a form of payment.
Once you open an account on your preferred exchange, you must decide which payment methods are compatible with your exchange and convenient for you.
Fiat currency
Many centralized exchanges allow the U.S. dollar or other fiat currencies for payment. Fiat currencies are government-supported currencies that are not backed by physical assets. Examples include the U.S. dollar, Japanese yen and euro.
Cryptocurrency
Crypto exchanges often allow users to buy and sell one cryptocurrency using other cryptocurrencies. It’s common for crypto traders to buy and sell altcoins like XRP using bitcoin.
Stablecoins
Stablecoins are cryptocurrencies designed to have stable prices, typically by pegging them to the price of a fiat currency or other commodity. Popular stablecoins include tether (USDT), USDC (USDC) and Dai (DAI), which are all pegged to the U.S. dollar.
4. Store your XRP.
You will need a digital wallet compatible with XRP to store your crypto. Digital wallets are hardware or software that store a user’s private keys and are used to send and receive crypto.
Some cryptocurrency exchanges provide custodial wallets to their customers. But others require noncustodial wallets that leave the user responsible for securing private keys. Centralized exchanges such as Kraken and Coinbase offer users custodian wallets. XRP is also supported on noncustodial software wallets such as GateHub, Xumm and Trust Wallet, as well as noncustodial hardware wallets such as Ledger, Keystone and Trezor.
Pros and cons of buying XRP
Like most other leading cryptocurrencies, there are unique advantages and disadvantages to investing in XRP.
XRP offers transaction speeds and fees that are attractive compared to both bitcoin and the existing SWIFT financial payment network.
Ripple’s network is already being used or tested by major institutions, including Bank of America, American Express and Santander, lending credibility to the network’s technology.
XRP can also be used as a bridge currency for international payments. Finally, Ripple was founded in 2012, giving the company one of the longest and most reliable track records in the crypto space.
But XRP critics have argued Ripple’s control of nearly half the total maximum supply of XRP makes it more centralized than other leading cryptos. respectively.
Pros
- Superior transaction speeds and fees compared to bitcoin and SWIFT.
- RippleNet has been used and tested by dozens of high-profile financial institutions.
- The unique consensus protocol is low-energy, and Ripple plans to be carbon-neutral by 2030.
Cons
- Ripple controls nearly half of the maximum supply of XRP, leading to centralization concerns.
- XRP has severely lagged bitcoin in the past five years.
- Risks associated with ongoing SEC legal actions.
Related: Best cryptocurrency exchanges and apps
Is XRP a good investment?
XRP has historically produced mixed returns for investors depending on when they buy and sell.
Ripple’s court victory in 2023 has been a bullish catalyst for XRP. But Ian Weisberger, co-CEO of CoinRoutes, said XRP investors are not fully out of the woods just yet and should expect more volatility ahead.
“On (the) one hand, the digital currency has demonstrated its utility in streamlining international money transfers. On the other hand, unresolved legal issues with the U.S. SEC add a layer of regulatory risk, making it a potentially volatile investment,” Weisberger said.
Kadan Stadelmann, chief technology officer at Komodo, said XRP will likely be highly correlated to bitcoin as the crypto market continues its uphill battle for mainstream acceptance.
“Despite a positive legal ruling within the U.S., the combination of a bear market and wider crypto regulatory uncertainty still looms large over the sector. The price of XRP will likely continue to move as BTC does for the foreseeable future,” Stadelmann said.
Co-founder and CEO of CoinFlip, Ben Weiss said XRP’s popularity and value have exploded following the landmark July court ruling.
“As part of Ripple’s vision, XRP has shown potential for disrupting traditional banking by offering a cost-effective solution for overseas payments due to its lower transaction fees and ability to settle transactions in seconds,” Weiss said.
XRP may be an excellent long-term investment, but it’s likely only appropriate for investors with extremely high-risk tolerance. Even then, investors should fully understand XRP tokenomics before they buy, and they should never invest more money than they are willing to lose in a worst-case scenario.
It’s always a good idea to take a diversified approach to investing to reduce risks. Consider bitcoin and ethereum as alternative cryptocurrency investments, given their relative lack of legal and regulatory risk and long-term outperformance compared to XRP.
Frequently asked questions (FAQs)
Yes, investors can trade XRP on major U.S. cryptocurrency exchanges, including Coinbase, Gemini and Kraken.
Ripple has a reliable track record as a company dating back to 2012. XRP has become one of the most popular and liquid investments in the cryptocurrency market. But XRP and other cryptocurrencies also have a history of extreme volatility, and past returns are no guarantee of future success.
