XRP token is one of the most talked about tokens in the market. This article is all about XRP token and its pros and cons.
What is Ripple Labs?
Ripple Labs is online payment services provider. Ripple Network is one of the primary payment services providers offered by Ripple Labs. It also operates as a currency exchange network. It is considered an alternative for SWIFT banking network and FedNow.
Ripple Network allow individuals and commercial entities to exchange value to enable secure and fast transactions. Ripple Network can also enable transactions for fiat currencies and other tokens such as Bitcoin. Ripple Network deducts transaction fees in the form of XRP tokens.
What is XRP?
XRP is issued by XRP Ledger. It is a type of blockchain that was developed by Ripple CTO Jed McCaleb, David Schwartz McCaleb, and Arther Britto. XRP is also listed a speculative currency on major exchanges.
XRP blockchain is not a DLT like most other blockchain networks. Rather than recording transactions on the open ledger XRP Ledger secure transactions based on majority agreement regarding verified records.
XRP ledger has validators who have to update the ledger after every three to five seconds and ensure that their copy matches with others. If a discrepancy is highlighted they stop to reconcile.
Minting Process of XRP
Mining is process where nodes work to verify the transactions on a blockchain to mine or earn new cryptocurrencies as rewards from the network. However, all XRP tokens are pre-mined. The total limit of XRP tokens is 100 billion units that are released in exchange platforms at regular intervals. Ripple does not control XRP ledger.
However, the firm owns a portion of XRP reserves. This reserve incentivizes the company to ensure the success and price appreciation for XRP project. Ripple Labs has adopted specified and automated token sales mechanisms to address the issue of unexpected massive sales of XRP token.
Advantages of Ripple
Here are some important benefits of Ripple Labs:
XRP Ledger is known for its fast transaction processing rate. This network has the transaction speed that matches some of the biggest digital payment services providers such as VISA and Mastercard.
The average transaction time for this product is 4-5 seconds. In comparison traditional banking network can take a few hours or 24 hours to complete transactions.
Low Transaction Fees
Transaction processing cost on XRP Ledger is very low on account of its verification process. Therefore, the transaction charges on the platform are also considerably many folds lower in comparison to the traditional.
The average per unit transaction fees on XRP Ledger can be as low as 0.00001 XRP. When converted to fiat currencies, this amount of XRP makes up only a fraction of a penny.
Versatile Exchange Network
Ripple network is not only used for making transactions in the form of XRP. It has the ability to process transactions in the form of specified fiat currencies and some crypto coins.
Companies have collaborated with Ripple Labs to leverage the XRP Ledger technology. Enterprises such as Santander and Bank of America have signed service contract with Ripple Labs.
Risks Associated with XRP
Here are some important disadvantages that are associated with XRP:
DLTs bring considerable decentralization for cryptocurrencies. However, there is considerable amount of centralization in terms of governance and tokenomics associated with XRP Ledger. It happens on account of the validator depending transaction verification process on the blockchain network.
Pre-mined XRP reserves are often subject to criticism and source of FUD for XRP token reserves. The investors are always exposed to the danger of unwarranted massive selloffs that can lower the price of the virtual currency.
SEC brought a massive lawsuit against Ripple Labs in 2020 for violating securities laws. The lawsuit resulted in delisting of the coin from all major exchanges.
However, the lawsuit was finally settled in 2023 with partial victory for the XRP token. SEC officials have alluded to going for appealing the decision and challenging the verdict.
XRP tokens have a strong community and it has braved many challenges in its wake. The token has persisted against all odds and got to a position of getting relisted on various exchange platforms.