Have you wondered if XRP has a place in your investment portfolio? If the answer is no or even “What is XRP?”? You don’t have to feel like you’re out of the loop. The media spotlight on Bitcoin has been so bright that it virtually dwarfs even the glossiest of smaller coins, some of which are actually at the top of the altcoin pyramid. One of them is XRP, a digital token created by the US-based Ripple Labs, a technology company founded in 2012 by Chris Larsen, Jed McCaleb and Arthur Britto.
In terms of market capitalization, XRP was still the third strongest cryptocurrency in 2020, but is now in sixth place, just above Dogecoin, with a market capitalization of almost $ 29 billion (as of July 9, 2021). CoinMarketCap.
What is XRP (or is it Ripple)?
Although the terms XRP and Ripple are often used interchangeably in both the financial media and the cryptosphere, they are actually different entities.
Ripple is a money transfer network that enables cheaper, faster cross-border payments. XRP is a cryptocurrency that runs on a decentralized, open-source public ledger called the XRP ledger. Both the coin and the ledger were created by Ripple Labs.
There are three separate but interconnected parts of Ripple. These are:
- XRP – the actual cryptocurrency
- RippleNet – the payment and transfer network
- Ripple Labs – the company that develops XRP, RippleNet, and other blockchain services for financial institutions
RippleNet has a growing network of providers in 47 countries. More than 100 banks, including Bank of America, Santander Bank, American Express and Japan’s SBI Remit, have signed up to use the Ripple protocol. “It’s important to note, however, that using XRP is not a requirement for partners on RippleNet,” says Gaby Hui, director at Merkle Science, a predictive blockchain monitoring and investigation platform that helps crypto companies, financial institutions, and government agencies approve illegal ones prevent activities with cryptocurrency.
Still, Ripple is solving real-world problems for large financial institutions that she says will ultimately seep down to small and medium-sized businesses (SMBs).
In fact, as a bridge currency, XRP can “facilitate exchanges for a variety of fiat currencies, cryptocurrencies, and even commodities like gold,” says Hui.
XRP transactions cost a fraction of traditional international money transfers and are processed within three to five seconds, making it a much faster and more efficient way to move money across borders.
Given its origins, it’s no surprise that the virtual coin consistently ranks in the top 10 cryptocurrencies by market capitalization.
To better understand the properties of XRP as a cryptocurrency, let’s take a look at how it compares to the largest cryptocurrency – Bitcoin.
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XRP, the ripple currency, differs from Bitcoin in several ways. For one, Bitcoin is a fully decentralized blockchain powered by a global network of computers, which makes it really free from censorship or centralized control.
XRP vs. Bitcoin
The underlying blockchain of XRP, on the other hand, has centralized some aspects. For example, the network is managed by a group of only 36 nodes that work together to process transactions. According to a research paper from the CFA Institute, Ripple controls six of these nodes, thereby controlling most of the XRP offering and oversight of the ecosystem.
The downside of decentralization is that Bitcoin-based transactions are significantly slower than XRP transactions. While the Bitcoin blockchain can only process a handful of transactions per second, the centralized nature of the XRP blockchain enables 1,500 transactions per second. Bitcoin transaction processing can take more than 10 minutes, while XRP transactions can be processed in three to five seconds.
“XRP uses a different validation mechanism than Bitcoin and opts for a consensus algorithm instead of a proof-of-work system, which makes it faster, cheaper and more energy efficient,” says JP Thieriot, CEO oXRP runs on a decentralized, open-source public ledger called XRP Ledger. Both the coin and the ledger were created by Ripple Labs. Uphold, a cloud-based financial services platform.
Another key difference lies in the dynamics of their offerings. There are currently around 18.5 billion bitcoins in circulation, with a limit of 21 million tokens being released slowly over time. In contrast, there are 100 billion pre-made XRP tokens, of which about 45.5 billion are in circulation. The rest will be published on a regular basis.
Is XRP a Good Investment in 2021?
A price of $ 0.63 per pop (as of July 12) makes XRP a low risk, high reward game that many investors find irresistible – especially when viewed alongside higher-priced crypto superstars like Bitcoin and Ethereum .
“I believe that XRP is uniquely positioned to grow significantly in 2021 and beyond,” says Thieriot, noting that “XRP is a functional product that some large institutions are already using and there is no evidence that that this slows down. “
XRP comes with some baggage, however. According to one estimate, Ripple Labs once owned about 60 billion of the 100 billion XRP that was mined and put 50 billion of those assets in escrow, releasing a fraction of its holdings each month. Here is the story of Ripple’s escrow release.
The control of XRP coins has raised some concerns among investors. It has also attracted an SEC lawsuit alleging that since the company can decide when to release those assets, it should have registered XRP as a security rather than a currency.
Additionally, it is almost certain that the ongoing SEC lawsuit has affected the market value of XRP. “There are many jurisdictions outside of the US that continue to see fantastic adoption, but much of the world is still worried about this situation,” says Thieriot.
If Ripple emerges unscathed from these legal proceedings, the excitement over XRP could really pick up speed.
“I would say that XRP is one of the more rational and usable assets out there,” argues Thieriot. “As such, XRP represents an investment with a higher time preference in a diversified portfolio and is an appropriate measure of industry acceptance.”
Legality aside, the vastly lower transaction fees are part of the appeal of XRP. At around $ 0.00053 on average, that’s a tiny fraction of the penny – and Bitcoin’s nearly $ 4 fee as of July 12, 2021. If you are interested in keeping a close eye on XRP / Ripple, be sure to follow them Twitter account.
In addition, XRP is significantly more secure than many leading cryptocurrencies because the network is actually maintained and monitored by an organization. “If something goes wrong in the code base of other decentralized projects, problems can take a long time to fix or ultimately cause irreparable damage to the asset,” claims Thieriot. “However, RippleNet is secure and any problems that arise can be resolved quickly.”
Is now the time to invest? A wider weakness in the cryptocurrency market represents an attractive entry point for opportunistic investors looking to buy discounted crypto assets.
“Given that XRP is currently trading at a third of the price of its 2021 peak, this is a good time to invest in,” says Hui.
XRP peaked at $ 1.80 in mid-April 2021, but has fallen to $ 0.62 since July 12, 2021.
How to buy XRP with CAD
For private investors with a certain willingness to take risks, there are several ways to own XRP directly. It can be purchased through any of many local and overseas crypto exchanges. Canadian crypto trading platforms like Newton, NDAX, Bitbuy, CoinSmart and others allow investors to buy and sell XRP and other digital coins.
Canadian investors can also access XRP through foreign-owned trading platforms – Crypto.com, Binance, Uphold, and Kraken – which support multiple fiat currencies, including Canadian dollars.
XRP can also be purchased at any of over a thousand Bitcoin ATMs in Canada. However, buyers need to be aware that Bitcoin ATMs tend to charge higher fees compared to online exchanges.
In terms of its custody, XRP is no different from its crypto counterparts. It can either be left on the exchange it was purchased from or moved offline to a secure, hardware-based wallet.
Aside from these sources, it is theoretically possible to get XRP exposure through the US-based Grayscale XRP Trust. However, this comes with a minimum investment requirement of $ 25,000, which some investors may find prohibitive.
As with all crypto acquisitions, XRP comes with the usual disclaimer that digital tokens are inherently risky and prone to extreme volatility. Investors should dampen their expectation of oversized earnings with a cold touch of realism.
Cryptocurrencies may be rapidly gaining status as a legitimate asset class, but compared to traditional securities like stocks, this is a whole different wax ball.
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How to Buy XRP in Canada first appeared on MoneySense.