GuShiio.com This article will initially explain what Ripple and XRP are, their relationship, and how they work in Web 2 and Web 3.
On the weekend night of March 2, with the crypto market wailing, Trump suddenly issued a statement on the U.S. Crypto Reserve: “U.S. Crypto reserves will enhance the status of this critical industry despite years of corruption attacks during the Biden administration. That’s why my executive order on digital assets directs the President’s working group to advance a crypto strategic reserve that includes XRP, SOL, and ADA. I will make sure that America becomes the encryption capital of the world. We are making America great again!”
Subsequently, the encryption market was immediately boosted, which can be described as “an arrow piercing the clouds, thousands of troops and horses come to meet each other.” Although BitMEX co-founder Arthur Hayes commented that “nothing new”, this does not prevent us from understanding XRP and Ripple’s business model behind it. XRP saw a 30%+ increase after the news came out.
Therefore, this article will initially explain what Ripple and XRP are, their relationship, and how they work in Web 2 and Web3. This kind of project that combines the Web2 and Web3 business models is worth learning from by the industry. Especially in the context of Crypto Mass Adoption that everyone is talking about at present, many things that are implemented still need to be coordinated and promoted through the Web2 model, and at the same time combined with Web3. Advantages in the ecological network.
1. RippleLabs-a financial technology company
Ripple is a base America-based financial technology company, also known as Ripple Labs, which focuses on providing solutions for cross-border payment and financial settlement based on blockchain technology. Its core goal is to optimize international remittance processes in traditional financial systems through blockchain technology, increasing the speed and reducing costs of global financial transactions. Ripple’s main products and services include (i) cross-border payments and remittances via RippleNet, and (ii) the recently launched RLUSD stablecoin.
The blockchain-based technology mentioned above is the XRP Ledger web ledger on which Ripple’s technology and services mainly rely. This is an independent distributed ledger technology (DLT) used to record and verify transactions, and XRP is used on this ledger. The original effective token running on it. It is seen as an alternative to the SWIFT payment network used by traditional financial institutions.
XRP Ledger, or XRPL, is a payment-focused blockchain network developed by Ripple in 2012 to enable financial institutions and payment providers to provide innovative financial services, including custody services, digital crypto-wallets, and other decentralized applications (DApps).
After the first release of XRP Ledger, Ripple focused on helping financial institutions process cross-border remittances and payments through blockchain distributed ledger technology. In addition to XRP Ledger ledgers and XRP native tokens, Ripple has developed various cross-border payment products over time. Since these developments, the team has integrated them all into a top-level service called RippleNet.
RippleNet is one of Ripple’s many products. Although over the years Ripple has developed various financial products designed to leverage XRP Ledger and XRP, it eventually renamed many of these ideas to one brand: RippleNet, a global payment network that connects banks, payment service providers and other financial institutions to provide real-time settlement and currency exchange services.
2. XRP Ledger-Blockchain Ledger Network
Back in 2011, Jed McCaleb began developing a new digital currency consensus network, and in 2012 approached Ryan Fugger (founder of peer-to-peer debt payment network RipplePay (now Ripple Payments)) to further reaffirm the concept that Ryan Fugger has been developing since 2004. After discussions with the community, Ryan Fugger handed over the platform to Jed McCaleb, and the project was renamed Ripple. Following the further efforts of Jed McCaleb, Arthur Britto and David Schwartz, the XRPL ledger was created in 2012, and XRP is the native token for the ledger.
XRP Ledger is a blockchain-based payment protocol used to facilitate cross-border payments and central bank digital currency (CBDC) management. In contrast to most blockchains, XRPL ledgers do not use Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus mechanisms. The network relies on a Cobalt based consensus mechanism, a Byzantine Fault Tolerance (BFT) governance framework for open networks, and the Ripple protocol consensus algorithm.
XRP Ledger offers low transaction costs and high performance, and its native token, XRP, is classified as a payment cryptocurrency. These tokens provide a way to store and trade value using distributed networks rather than centralized governments. In this way, the primary use of XRP is to serve as a payment medium for transaction fees on XRPL.
Shortly after the launch of the XRP Ledger network, Jed McCaleb and Arthur Britto co-founded a company called NewCoin with Chris Larsen, which eventually changed its name to OpenCoin and then Ripple Labs Inc. After the new company was established, the entity received 80 billion XRP (80.00% of the initial total token supply). The following year, Jed McCaleb left Ripple and later founded Stellar.
3. XRP-Native Tokens
XRP is a cryptographic asset in the XRP Ledger Ledger ledger and a native token in the XRP Ledger Ledger ledger. XRP’s primary role is to provide a faster and lower-cost global payment solution than traditional financial systems.
XRP is relatively independent and does not rely entirely on Ripple. XRP Ledger is maintained by independent verification nodes around the world (such as universities and exchanges). Ripple only holds a large number of XRPs and participates in technology development. Even if Ripple fails, XRP will still exist. This independence also provides XRP with greater scalability, thus building a financial payment ecosystem based on XRP. For example, DeFi and tokenization: XRPL supports the issuance of stablecoins, NFTs and other assets (such as CBDC); independent payment tools: users can directly use XRP to make point-to-point transfers without going through RippleNet.
Therefore, the value of XRP is not directly related to the success or failure of Ripple Labs, and vice versa. Similarly, Ripple cannot restrict anyone from using it for its own services through the XRP Ledger network, although Ripple holding so many XRPs may restrict any competition.
Ripple is committed to improving global payment systems through its technology, and XRP is one of the key tools to achieve this goal.
In short, Ripple is a private company that provides financial payment services, while XRP is the company’s use of native cryptocurrencies in a blockchain network to support fast and low-cost cross-border payments.
It is worth noting that Ripple is not decentralized like other public blockchains and holds a large number of XRP tokens. Instead, Ripple is a for-profit entity that provides services to financial entities. It initially developed XRP Ledger ledgers and serves as a core contributor to the XRP network, while the Ripple team holds most of the XRP tokens.
The core role of XRP is a bridge currency for cross-border payments. In Ripple’s ODL (On-Demand Liquidity) solution, XRP serves as an intermediary to replace the “pre-deposited fund pool” in the traditional agent banking system. For example:
Bank of America converts U.S. dollars to XRP → XRP sends to Mexico → Bank of Mexico converts XRP to peso.
In this case, XRPL’s consensus mechanism (non-proof of work) ensures that transactions are confirmed in 3-5 seconds, much faster than Bitcoin (10 minutes) or traditional banking systems, and avoids capital occupation and exchange rate risks caused by currency pre-storage., and transaction costs are extremely low.
4. RippleNet-the global payment network
RippleNet is a global financial payment network built by Ripple. It aims to connect banks, payment service providers, money transfer companies and other financial institutions to optimize cross-border payment processes. It is not a public network based on blockchain, but a privatized enterprise-level solution that mainly solves the efficiency issues of traditional financial systems.
RippleNet uses blockchain technology to provide funds transfer capabilities to financial institutions around the world, aiming to build a unified global payment system. There is no unified global payment system in traditional finance, but various financial institutions have established isolated transfer systems to make international payments. These systems do not interact well with each other, and international payments through these systems are expensive and time-consuming.
In today’s interconnected world, this outdated payment system seems incompatible. Despite the high fees, users of all categories still have to wait weeks to complete payments, which limits the number of users entering the international market.
RippleNet aims to solve these issues by providing a decentralized global banking network that is accessible to all. Connecting to the network through application programming interfaces (APIs) allows users to move funds internationally faster and cheaper than traditional methods. The decentralized network claims to process payments in just three seconds, leveraging the global reach of its XRP tokens.
Technically speaking, RippleNet is a set of products that leverage the capabilities of the XRP Ledger blockchain network, rather than a stand-alone blockchain. That is, all transactions made using RippleNet products are recorded on the XRP Ledger blockchain, but this does not mean that RippleNet itself is a blockchain.
Not only that, RippleNet also solves the need to pre-fund accounts in cross-border fund transfers through the On Demand Liquidity (ODL) solution, which uses XRP tokens to obtain liquidity. RippleNet supports nearly a hundred countries and pairs it with more than 120 fiat currencies, ensuring that countries can easily pay each other.
RippleNet core functions and characteristics:
- Real-time settlement: Traditional cross-border payments rely on a correspondent banking network and need to go through multiple transfer banks (which takes 1-5 days), while RippleNet can complete transaction confirmation in seconds through direct point-to-point communication.
- Unified standards: Provide standardized APIs and protocols (such as ILP, Interledger Protocol) to enable financial institutions in different countries to seamlessly connect and eliminate differences in format and compliance.
- Multi-currency support: Supports instant redemption of fiat currencies, cryptocurrencies and even commodities (such as gold) without the need for intermediate currencies (such as US dollars) as a bridge.
- Reduce costs: Reduce cross-border payment costs by up to 60% by reducing intermediate links and liquidity pre-storage requirements.
RippleNet is further subdivided into several key products: xCurrent, xRapid and xVia.
4.1 xCurrent
xCurrent focuses on banks, providing banks with cross-border payments at lower costs than traditional international settlements. Banks access through an application programming interface (API), which converts traditional payments into a blockchain alternative supported by XRP.
xCurrent is designed to adapt to banks ‘existing compliance and risk capabilities and simplify the installation process. The xCurrent document states that the solution complies with all current Know Your Customer (KYC) and Anti-Money Laundering (AML) policy requirements.
4.2 xRapid
If xCurrent provides cheap and fast cross-border payments, xRapid ensures that customers can gain liquidity through XRP tokens. Traditional financing methods require companies to pre-fund accounts abroad because it can take weeks to convert one fiat currency into another.
xRapid provides near-instant conversions, frees up liquidity, also known as on-demand liquidity, and eliminates the need for companies to provide funds abroad in advance, instead retaining funds in their own accounts.
4.3 xVia
xVia is the API part of Ripplenet, ensuring that customers can easily connect to these services. xVia supports sending payments with detailed information, accompanied by detailed information such as invoices. According to RippleNet documentation, other advantages of RippleNet include supply chain payment management, international bill payments, real-time money transfers, point-to-point payments, cash pools and global currency accounts.
The operating process of RippleNet (taking cross-border remittance as an example):
- Originator: Bank A (United States) initiates a transfer request to Bank B (Mexico) through RippleNet.
- Routing and verification: RippleNet automatically selects the best path (such as connecting directly or through a mobility provider).
- Settlement: If ODL is used, Bank A converts U.S. dollars into XRP and sends it to Bank B, which immediately converts the XRP into Mexican pesos.
- Completion: Funds arrive in a few seconds, and both parties do not need to pre-deposit each other’s currency.
4.4 Who is using RippleNet?
Although Ripplenet claims to be a global operator, one may wonder how many banks use Ripplenet. This includes 300+ financial institutions around the world such as Santander and SBI Remit.
Ripple pointed out that hundreds of banks are using their services, from small entities to global institutions. For example, Bank of America, Bank of Santander and American Express are all large groups that use Ripplenet services. Banque Santander is a company that processed more than € 450 million in funds through RippleNet in six European and U.S. countries.
5. RLUSD stablecoins
5.1 Role of stablecoins
Ripple is at the forefront of financial innovation, not only creating compliant, scalable and enterprise-level solutions, but also connecting traditional finance with digital assets through its recently issued RLUSD stablecoin. The launch of RLUSD stablecoins, with a focus on regulatory compliance, provides customers and users with the opportunity to benefit from the stability and transparency that Ripple uniquely provides, marking the next stage of development in Ripple’s journey to build global financial services and support the Internet of Value.
RLUSD will seamlessly integrate the XRP Ledger and Ethereum network to build the foundation asset for additional blockchain solutions for enterprises. It provides a secure, fast and scalable infrastructure for stablecoins with capabilities to support issuance, transactions and payments:
- Native stablecoin support: XRPL natively supports stablecoin without the need for complex smart contracts.
- Automatic bridging and DEX integration: stablecoins on XRPL can benefit from deep liquidity and seamless foreign exchange swaps.
- Institutional DeFi apps: RLUSD and other stablecoins can be used for lending, tokenization of RWA, and cross-border settlements.
This integration allows Ripple USD stablecoins to work in many areas:
- Fiat to Cryptocurrency Gateway: Making it easier for users, traders and businesses to switch between fiat and cryptocurrencies.
- Global remittances: Fast and affordable international transactions used by individuals and businesses.
- Daily transactions: A reliable way to make daily transactions, an alternative to cash or card.
- RWA tokenization: Can be used to support tokenized assets on XRPL and transactions involving them.
- DeFi integration: Users can use RLUSD for transactions, revenue farming, pledge and as loan collateral in the XRPL and Ethereum dApp and DeFi platforms.
5.2 The significance of RLUSD
Ripple’s launch of the stablecoin RLUSD is an important step in its strategic layout, aiming to consolidate its leading position in cross-border payments and expand the broader financial ecosystem. With the rapid expansion of the global stablecoin market, the launch of RLUSD directly responds to the demand of financial institutions for low-volatility crypto tools. Although XRP has speed and cost advantages in cross-border settlement, its price volatility is still a concern for some conservative institutions. RLUSD is collateralized by US$1:1 reserves and short-term treasury bonds, providing compliant and stable settlement options, complementing XRP, allowing RippleNet users to flexibly choose settlement methods based on risk preferences, further optimizing capital efficiency and trading experience.
This move also reflects Ripple’s proactive adaptation to the regulatory environment. In a context where the SEC’s legal dispute over XRP has not yet been fully resolved, RLUSD attempts to circumvent potential compliance risks and maintain the trust of institutional clients through transparent audits and design that conforms to the U.S. regulatory framework. At the same time, Ripple has positioned RLUSD as a multi-chain asset and plans to deploy it on public chains such as XRP Ledger and Ethereum, which not only enhances the cross-chain interoperability of its payment network, but also lays the foundation for future participation in central bank digital currency (CBDC) and institutional DeFi markets. For example, RLUSD may become a bridge connecting traditional finance with emerging scenarios such as on-chain treasury bonds and mortgages, helping Ripple seize the opportunity to innovate in compliant finance.
From the perspective of market competition, RLUSD relies on RippleNet’s existing more than 300 financial institution partners and has the channel advantage of rapid implementation. Compared with universal stablecoins such as USDT and USDC, RLUSD focuses more on vertically integrated cross-border payment solutions, taking advantage of XRPL’s low-cost and high-speed characteristics to target high-frequency cross-border settlement scenarios. In addition, the launch of RLUSD is also seen as the key to Ripple’s ecological expansion-by attracting developers to build stablecoin-related DeFi applications on XRPL, it indirectly enhances the practical value and chain activity of XRP, forming ecological synergy effects.
However, this strategy still faces multiple challenges. Uncertainty in regulatory policies (such as the advancement of the U.S. Stability Coin Act), fierce competition with established stability coins, and management pressures on reserve asset transparency may all affect the market acceptance of RLUSD. If Ripple can balance technological innovation, compliance requirements and customer needs, RLUSD may become the core pillar of its transformation from a payment service provider to an integrated financial infrastructure, but achieving this goal still requires time and market verification.
6. Final summary
Ripple, a privately owned Fintech company based on Web2, has launched XRP Ledger’s blockchain network, which is the network’s native token. Ripple’s technical foundation is the XRPL ledger, which is a distributed ledger technology, and XRP is a utility token running on this ledger.
At the same time, Ripple has integrated the cross-border payment solutions it has accumulated over the years and launched a payment solution for financial institutions called RippleNet. The core is to improve efficiency and reduce costs. Some of RippleNet’s services are implemented through XRP Ledger’s blockchain network.
XRP is an independent cryptocurrency that serves as an efficient bridge currency in RippleNet, but its value and application scenarios far exceed Ripple’s business scope. The relationship between the two is similar to “RippleNet” and “Fuel”, but XRP can also be used alone in other scenarios.
The launch of RLUSD is regarded as the key to the expansion of Ripple’s ecosystem-by attracting developers to build stablecoin-related DeFi applications on XRPL, it will indirectly enhance the practical value and chain activity of XRP. At the same time, RLUSD can also expand beyond the XRP ecosystem to form ecological synergy effects.
