Ripple, XRP And XRP Ledger: How They Work Together In Cryptocurrency

In the world of cryptocurrency, the trio Ripple, XRP, and XRP Ledger (XRPL) are familiar names but often confused. Although closely related, each component has its own distinct role, function, and level of independence. This article will help you understand each factor, as well as how they collectively build a fast, efficient, and cost-effective global payment ecosystem. Ripple: Global Payment Technology Company Ripple is a private company operating in the financial technology sector, specializing in providing cross-border payment solutions. Founded in 2012 under the original name OpenCoin, the company rebranded to Ripple Labs in 2013, and by 2015 officially adopted the name Ripple as it is known today. Although not issuing or controlling the XRP token, Ripple plays a crucial role in building the financial infrastructure using XRP as part of its payment solutions. Ripple's core goal is to improve the international remittance system, which is slow, costly, and reliant on traditional financial intermediaries. Ripple Product Suite RippleNet is the company's payment network, connecting banks and financial institutions globally to facilitate fast, transparent, and cost-effective transactions. A key component of RippleNet is On-Demand Liquidity (ODL) – a mechanism that uses XRP as a bridge between two different fiat currencies. ODL eliminates the need for pre-funded accounts (nostro/vostro) by allowing instant currency conversion through XRP. Although Ripple owns a large amount of XRP (most of which is locked in monthly escrow contracts), XRP remains an independent asset and can operate completely separately from Ripple's specific products. XRP Ledger (XRPL): High-Performance and Scalable Blockchain XRP Ledger (XRPL) is an open-source, decentralized blockchain that supports transactions using XRP. Designed to handle transactions quickly and at a low cost, XRPL uses a unique consensus mechanism called Ripple Protocol Consensus Algorithm (RPCA) – which is completely different from the coin mining mechanism (PoW) or staking (PoS). Recently, XRPL has expanded its capabilities by integrating an EVM-compatible sidechain (Ethereum Virtual Machine), allowing the deployment of Solidity applications and payment of gas fees in XRP. This opens up opportunities for developers to build DeFi on the high-performance platform that XRPL provides. How Does the RPCA Mechanism Work? Instead of mining or staking, RPCA relies on consensus among the validators (validators). Every few seconds, the validators propose a list of valid transactions, share it with the network, and if at least 80% agree, the transaction will be confirmed and recorded in the ledger. To increase reliability, each validator uses a Unique Node List (UNL) – a list of trusted nodes that they have chosen themselves. This system ensures that the network can achieve consensus as long as the majority of the nodes in the UNL behave honestly. Benefits of RPCA Low cost: Transactions are much cheaper compared to Ethereum or Bitcoin. Fast processing time: Usually completed within 3-5 seconds. Energy saving: No need to mine coins, making it environmentally friendly. No token rewards: Validators do not receive rewards in XRP; they only help maintain the stability of the network. Applications of XRPL Asset encryption (Tokenization): Users can create tokens representing real assets (such as stablecoins, reward points…) quickly, without the need for smart contracts.Decentralized exchange (DEX): Allows P2P trading of tokens on XRPL without requiring a centralized exchange.NFTs and Hooks: XRPL has integrated support for NFTs and Hook features – allowing lightweight logic to be inserted into transactions, such as automatic fees or conditions for fund transfers, supporting the development of simple applications on the blockchain. XRP: The Native Currency of the XRP Ledger XRP is the official digital currency of the XRP Ledger. It is designed to facilitate fast, cost-effective, and scalable transactions. XRP is not mined but was "pre-mined" with a total of 100 billion tokens in 2012. A large portion was allocated to Ripple, while the remainder is circulating in the market. Outstanding Features of XRP Processing speed: It only takes 3 to 5 seconds for each transaction. Low transaction costs: Only a small fraction of a cent. Scalability: Processes around 1,500 transactions per second, much faster than Bitcoin or Ethereum. Environmentally friendly: No coin mining, so it consumes very little energy. Deflationary mechanism: Each transaction burns a small amount of XRP, reducing the supply over time. Why Is There Confusion? Brand issue: In the past, many exchanges and media referred to XRP as "Ripple", leading users to think they are the same. Ownership of Ripple: Ripple holds a large amount of XRP, causing many to believe that Ripple controls XRP. Technological linkage: Ripple contributes to the development of XRPL and uses XRP in its products, making it difficult to separate the two. Lawsuit with SEC: In the lawsuit, the SEC repeatedly failed to clearly distinguish between Ripple and XRP, further blurring the lines between the two entities. Conclusion Ripple, XRP, and XRPL are three closely linked but fundamentally different elements in the cryptocurrency ecosystem. Ripple is the company building payment solutions, XRP is the digital currency that facilitates fast and cost-effective transactions, while XRPL is the open-source blockchain that enables these transactions to be carried out efficiently. When we understand the role of each component, we can accurately assess the potential of this ecosystem. In the context of XRP gradually gaining legal clarity and XRPL continuously expanding its functionality, this trio is contributing to shaping the future of digital finance globally.