Would you invest in Ripple (XRP)? Before putting all your money in Ripple as part of your investment portfolio, it is essential to learn what exactly is Ripple coin and what is its potential in a long run. Also, find out where you can buy Ripple.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. The opinions expressed in this article are the personal opinions of the author at the time of publication.

What Is Ripple Coin (XRP)?

Ripple is a digital currency and an Internet protocol that connects disparate financial systems. Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network by Ripple. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol.

The Ripple project is actually older than Bitcoin itself. The original implementation was created by Ryan Fugger in 2004, the intent was to create a monetary system that was decentralized and could effectively empower individuals and communities to create their own money.

In 2012, Ripple purports to enable “secure, instant and nearly free global financial transactions of any size with no chargebacks. Ripple protocol enables the secure transfer of funds in any currency in real time, creating an Internet of Value (IoV). Ripple transforms and enhances today’s financial systems.

Ripple uses a shared public ledger like the Bitcoin blockchain and holds balances as well as buy and sell orders, which makes it the first distributed exchange. Changes in the ledger are reached through a process known as consensus.

In short, Ripple is a payment protocol that functions as a payment system, currency exchange, and a remittance network and works with fiat currencies, cryptocurrencies, and commodities.

Currencies in Ripple are represented as debts (IOUs). This is much the way currencies are represented in the conventional banking system. If you look at the traditional banking system shown in the infographic below, you will understand that the traditional banking system is simply transferring debt between each other.

When you say, “I have $5,000 in my bank account”, what you mean is that the bank owes you $5,000. When you write someone a check, you are transferring debt so that their bank owes them more money and thus they consider you to have paid them. Ripple works this same way — payments occur by a transfer of debt (IOU).

Ripple is more like PayPal or Visa but the difference is that ts internal implementation is based on the same technologies Bitcoin uses such as public transactions, no central authorities, cryptographically secured transactions, peer-to-peer transaction propagation and etc.

Taking the example above, Ripple works in a way that A logs on to his preferred Ripple gateway, deposits money to it, and instruct them to release funds to D via her gateway.

XRP is the native, digital currency to Ripple. XRP has great value as a bridge currency. Ripple transactions always have an XRP cost. In practice, this cost should remain very low. Transaction fees are destroyed in Ripple, they aren’t paid to anyone. Ripple payments can incur fees other than transaction fees. It is hoped that competition will keep these costs low.

The Ripple protocol has been increasingly adopted by banks and payment networks as settlement infrastructure technology. At the time of writing, it is used by the following companies:

Accenture

Akbank ATB

Financial

Axis Bank

Banco Bilbao Vizcaya Argentaria (BBVA)

BMO Financial Group

Cambridge Global Payments

Canadian Imperial Bank of Commerce (CIBC)

CBW Bank

CGI Group

Cross River Bank

Davis + Henderson

Deloitte

Earthport

Expertus

eZforex

Fidor Bank

Mitsubishi UFJ Financial Group (MUFG)

Mizuho Financial Group (MHFG)

National Australia Bank (NAB)

National Bank of Abu Dhabi (NBAD)

ReiseBank

Santander

SBI Holdings

SBI Remit

Shanghai Huarui Bank

Siam Commercial Bank

Skandinaviska Enskilda Banken AB (SEB)

Standard Chartered

Star One Credit Union

Tas Group

Temenos Group

UBS

UniCredit Group

Volante Technologies

Yantra Financial Technologies

Yes Bank

Who’s behind Ripple?

The company building the Ripple protocol, OpenCoin, was co-founded by CEO Chris Larsen and CTO Jed McCaleb. McCaleb is well-grounded in digital currency, coming from Mt. Gox, which currently handles the majority of the world’s bitcoin trades. Larsen previously co-founded and led the online financial company E-LOAN. Other developers on Ripple’s team also have a bitcoin background.

OpenCoin recently picked up a round of funding from Andreessen Horowitz, FF Angel IV, Lightspeed Venture Partners, Vast Ventures and the Bitcoin Opportunity Fund.

Why Do You Invest in Ripple?

When Bitcoin and Ethereum were created, BTC and ETH were designed to be stores of value.

When you create a transaction, you are sending a store of value to another account (for payment for goods and services). Miners create nodes on the network to process transactions and are compensated with this cryptocurrency, either through fees or mining rewards.

This is not how Ripple works. XRP is mined all at once by the parent company, with a majority of the cryptocurrency held by them. When a transaction is made on the XRP network, there is a fee paid in XRP, but this is not compensation. All transaction fees are ‘irrevocably destroyed’, not being paid to any members.

In the homepage of Ripple guide, a sentence states that “Private exchanges and liquidity providers may choose to hold additional XRP for trading. Ripple (the company) does not promote XRP as a speculative investment”.

Don’t get too wary about this sentence as the purpose of the company offering XROP is for member entities (e.g. banks) to use XRP in their transaction. Laymen like us wouldn’t be part of the network, which is exactly what they’re recommending against. They want banks to invest, not individuals. So we “invest” in Ripple for speculation purpose (LOL).

Now, let’s look at the price chart of Ripple as charts don’t lie. It looks like it is still within the realms of the repeating patterns in an upward trend and it may continue.

Ripple is one of the cheapest crypto’s out there and one of the highest market cap. No one really knows what’ gonna happen tomorrow or one year down the road.

Like Ethereum, Ripple has a unique function that gives it long-term potential. So, it’s wise to pad your portfolio with dozens of promising technologies including Ripple.

However, the biggest potential risk about investing in Ripple is its centralisation (it is run from one center), unlike Bitcoin or most other cryptocurrencies. That makes it vulnerable. If governments see a threat in Ripple, they can shut down Ripple but no one can shut down Bitcoin or Ethereum.

Where Can I Buy Ripple?

At the time of writing, Ripple is available for Bitcoin through major exchanges such as Shapeshift, Poloniex, and Bittrex. Users interested in purchasing Ripple with USD on an exchange may visit Bitfinex or Poloniex.

If you would like to buy Ripple through Poloniex or Bittrex, follow their instructions for setting up an account and depositing funds. As cryptocurrency exchanges such as Poloniex and Bittrex offer a different environment for acquiring Ripple in that you must buy it by fulfilling other traders’ sell orders. This means that prices may vary, sometimes widely.

There are very few direct fiat gateways into Ripple, for those who reside in countries that don’t have direct access to Ripple. That means the vast majority of people who buy Ripple did it with Bitcoin. Bitcoin is the first coin that most people buy so it’s hard for a different crypto to overtake the value.

STEP 1: BUY BITCOIN

There are many ways to buy Bitcoin. Perhaps the easiest way is through Coinbase or Coinhako. Once you have purchased some bitcoin, you are ready to buy some Ripple ! Buying Bitcoin is straightforward.

Registration is pretty straightforward, requiring things like your name, email, and a verification of your identity (eg: pictures of your driver’s license, etc). Once your account is created and verified, you’ll need to add a funding source like a bank account and/or a debit card. Once this is set up, you can buy some Bitcoin.

The reason I encourage my readers to buy BTC from Coinbase because you will get $10 free BTC once you trade your first $100 through Coinbase.

You can read the full article on Coinbase and Coinhako.

Those in Europe will use a euro exchange like Kraken, while those in Japan will use a yen exchange like Coincheck, etc.

STEP 2: Set Up the Trade on Shapeshift

Exchanges of Bitcoin and Ripple can be done through Shapeshift. Their service is super simple; you don’t even need to register on their website. You just send them some Bitcoin and they send you back some Ripple. Unfortunately Shapeshift charges really high fees, which is fine for something like a $5 test purchase, since losing 7% to fees isn’t a big deal when it means losing 40 cents.

To do this, you will first need an XRP address, so that Shapeshift can send the Ripple back to you. You can open an account on Poloniex. Then go to Poloniex “Balances, Deposits & Withdrawals” from the “Account” button on the top right menu. Then click “Deposit” from XRP. Then you will see a string of characters will pop up and that’s your Ripple Deposit Address. It looks like this:

Next, you’ll want your Bitcoin address from Coinbase, which can be found on your main account screen. In the upper right click on the link “Wallet address”. A string of characters will pop up like this.

That is the address you’ll need for Shapeshift. In case your trade has a problem, they will send the Bitcoin back to that address.

Next, you’ll go to ShapeShift.io and set it up for Bitcoin-to-Ripple trades by clicking on the two big currency logos, and then click “Continue”.

Now Shapeshift will ask you for your Ripple and Bitcoin addresses. Paste both of these into the boxes (ignore Payment Id) and click “I agree to the Terms”. When everything is ready, click “Start Transaction”.

STEP 3: Send Bitcoin to Shapeshift

With Shapeshift awaiting a deposit, go back to Coinbase. On the “Send Funds” page, paste the Shapeshift address into the “Recipient” box and type the amount of Bitcoin to send into the “Amount” box. Type the BTC amount into the box and click the blue “Send Funds” button. Click “Confirm” on the box that pops up, and your Bitcoin is officially sent to Shapeshift.

Finally, go back to your Shapeshift trade. Hopefully everything went smoothly, and the white “Deposit Received” has turned green with a checkmark, meaning Shapeshift got your funds. Eventually both “Exchange Complete” and “All Done!” should receive checkmarks too, which means Shapeshift has exchanged your Bitcoin and sent Ripple to your wallet.

STEP 3 (Alternative): Send Bitcoin from Coinbase to Poloniex Exchange

There are some weaknesses with the Shapeshift process outline above, specifically that their exchange rate is pretty bad. Therefore, you can choose to send Bitcoin from Coinbase to Poloniex (the biggest exchange for Ripple) directly.

Go to Poloniex “Balances, Deposits & Withdrawals” from the “Account” button on the top right menu. Then click “Deposit” from BTC to get your BTC address.

Now paste the Bitcoin deposit address you got from Poloniex into the “Destination” box and type in the amount of Bitcoin you want to send.

Just one click and your funds should be on their way to Poloniex. It will take a bit of time, perhaps 15 minutes or more, for your Bitcoin transfer to complete.

Step 4: Trade Bitcoin for Ripple on Poloniex

Now that your Poloniex account is set up and you’ve transferred some Bitcoin over, it’s time to actually get some Ripple! To do this, go to Poloniex’s BTC-XRP exchange. Here you’ll be greeted with a historical graph of Ripple’s changing price.

To trade your Bitcoin (BTC) for Ripple (XRP):

Click the underlined number next to “You have”. This will set your trade to include your entire Bitcoin balance. Click the underlined number next to “Lowest ask”. This will set your trade price to the lowest current seller. Click “Buy”.

You just exchanged Bitcoin for Ripple. Be aware that there often isn’t much Ripple for sale at the very lowest price, so you may need to repeat steps 1-3 a few times until all your Bitcoin is exchanged.

Happy earning!