What is Ripple (xrp)

Ripple is a money transfer network designed to serve the needs of the financial services industry. XRP is the native crypto token of the Ripple network, and it consistently lists among the top 10 cryptocurrencies by market capitalization.
In late 2020, the U.S. Securities and Exchange Commission charged Ripple with selling unregistered securities in the form of XRP on cryptocurrency exchanges. After years of litigation, on July 13 a federal judge handed the company a partial victory by ruling that XRP sales on public crypto exchanges were not offers of securities under the law.
The judge also ruled partially in the SEC’s favor, finding that off-exchange sales of XRP to sophisticated investors like hedge funds were unregistered sales of securities. The rulings were in the early stage of the trial, with a final ruling expected soon.
Crypto markets have responded enthusiastically to the split ruling—note that the trial is not yet over—and XRP rose approximately 75% on July 13.

What Is Ripple?

Ripple is the company behind XRP, and it’s a payment settlement system and currency exchange network that can process transactions globally.
“Ripple was designed from the very beginning to essentially be a replacement for SWIFT (a leading money transfer network) or to otherwise replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.
It serves as a trusted agent between two parties in a transaction as the network can quickly confirm that the exchange went through properly. Ripple can facilitate exchanges for a variety of fiat currencies and cryptocurrencies, such as Bitcoin, to name one example.
Whenever users make a transaction using the network, the network deducts a small amount of XRP, a cryptocurrency, as a fee.
“The standard fee to conduct transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the large fees charged by banks for conducting cross-border payments,” says El Lee, board member of Onchain Custodian.

What Is XRP?

XRP is a cryptocurrency that runs on the XRP Ledger, a blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto would go on to found Ripple and use XRP to facilitate transactions on the network.
You can buy XRP as an investment, as a crypto to exchange for other cryptocurrencies or as a way to finance transactions on the Ripple network.
Notably, XRP’s blockchain operates a little differently than most other cryptos. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can solve complex equations quickly. But transactions are secure as the majority of ledger holders must agree with the verification for them to be added.
XRP’s Ripple network somewhat centralizes things and uses a consensus protocol: While anyone can download its validation software, it maintains unique node lists that users can select to verify their transactions based on which participants they think are least likely to defraud them.
As new transactions come in, the validators update their ledgers every three to five seconds and make sure they match the other ledgers. If there’s a mismatch, they stop to figure out what went wrong. This allows the network to securely and efficiently validate transactions, which gives it an edge over other cryptocurrencies like Bitcoin.
“Bitcoin transaction confirmations may take many minutes or hours and are typically associated with high transaction costs,” says Lee. “XRP transactions are confirmed around four to five seconds at a much lower cost.”

The SEC’s Lawsuit Against Ripple

The SEC alleged on Dec. 20, 2023 that Ripple had violated existing securities laws with its initial coin offering and subsequent exchange sales of the XRP token. The basis for this violation was the SEC’s interpretation of the Howey test for digital assets.
For its part, Ripple immediately defended its actions by filing a Wells Submission with the SEC. In addition, Ripple asked on multiple subsequent occasions that the SEC’s charges be dismissed.
On July 13, a federal judge finally ruled—in response to Ripple’s motion for summary judgment—that Ripple’s XRP offerings were not in fact investment contracts, which was considered a loss for the SEC. However, the judge did also rule that the initial sale of XRP still violated federal securities laws. This issue will have to be decided in court at a later date.
The ruling, however, was taken as a win by crypto enthusiasts, and the price of XRP jumped more than 95% on the news. In addition, other leading altcoins such as Cardano (ADA), Solana (SOL) and Polygon (MATIC) were up 17%, 18% and 19% respectively.