Cryptocurrency XRP, also known as Ripple, is often confused with the company that created it, Ripple Labs.

Ripple Labs owns 60% of all XRP in circulation but insists the currency is independent.

Ripple uses XRP in one of its products but says investors shouldn't use the cryptocurrency as a proxy for the entire business.

Here's everything you need to know about how Ripple and XRP are linked.



LONDON — XRP, often known as Ripple, is the world's third-biggest cryptocurrency and worth over $30 billion.

XRP shares a logo, and the name Ripple, with Ripple Labs, a payments company using blockchain technology for cross-border transfers.

Both the currency and the company were founded by the same people and the company owns more than half of the currency.

But Ripple (the company) tries to stress that the two are not one and the same, an important distinction given that investors could fall into the trap of seeing XRP as a proxy for Ripple's performance.

Here's what you need to know:

What is XRP?

XRP is payment protocol and cryptocurrency that is "fine-tuned for transactions," according to Marcus Treacher, Ripple's Global Head of Strategic Accounts.

An early version of XRP dates back to 2004 when it was first created by web developer Ryan Fugger. The protocol in its current cryptocurrency form really began in 2012.

XRP allows people to send money digitally and is meant to be an upgrade on first generation cryptocurrency bitcoin, which suffers from high transaction cost volatility and slow settlement times. XRP promises to settle transactions in as little as four seconds and claims it can handle up 1,500 transactions per second, far more than the bitcoin network.

XRP averaged 37,935 transactions per hour as of Wednesday, according to BitInfoCharts.com. That compares to 28,437 for ethereum and 8,240 for bitcoin.

What is Ripple Labs?

Ripple Labs is a company founded in 2012 that helped develop XRP and the current Ripple protocol. Chris Larsen, the cofounder of E-loans and Prosper, set up a company called OpenCoin to develop the Fugger's Ripple network concept. 100 billion XRP tokens were issued to run on the protocol and power it.

Ripple's Chris Larsen Ripple

OpenCoin changed its name to Ripple Labs in 2015 and made the Ripple network code open source, meaning anyone could work on it. Ripple Labs remained the major contributor to the code.

While the people behind both XRP and Ripple are the same, the company insists that the open source nature of the network and the fact that XRP can be publicly bought and sold means that Ripple is not "behind" XRP — merely tangentially linked to it.

"It’s one of our creations that we’re proud of but it’s separate from the company," Treacher told BI. "We are trying to reinforce the fact that there’s Ripple the company and there’s XRP the currency."

BI pointed out that it's confusing to have both the company and the asset have the same name, logo, and creators. Treacher said he doesn't accept that and said Ripple isn't considering changing its name to differentiate the company.

Who owns XRP?

Ripple owns 61 billion of the 100 billion outstanding XRP in circulation. The company's holding is valued at just under $50 billion. The rest of the currency is traded freely on the open market.

Ripple's domination of XRP has drawn criticism from some in the cryptocurrency community as many are attracted by crypto's promise of decentralization and the lack of a central authority controlling a currency.

In response, Ripple has placed 55 billion of its XRP holdings into escrow. Tom Channick, Head of Corporate Communications at Ripple, told BI: "1 billion XRP is released to Ripple each month to use at its discretion. Last month was the first contract expiration. Ripple spent less than $100 million worth of XRP last month, which means the remaining $900 million+ was placed back in a new escrow contract for month 56."

Mati Greenspan, an analyst with trading platform eToro, said of the 1 billion a month supply: "Still, that's a lot of supply coming in that they could potentially throw out at any given time."

What does Ripple use XRP for?

Ripple initially wanted businesses to use XRP on the Ripple network to send and receive global payments. But Treacher told Business Insider that the sheer size of the global payments industry and issues around data protection meant that XRP on its own wasn't appropriate.

"We then kind of rethought things about two years ago and decided what we’ll do is we’ll create an interconnection solution using the cryptography of blockchain," Treacher said.

Ripple's Marcus Treacher. Ripple That solution is xCurrent. It is built on another open source platform developed by Ripple called Interledger. It allows different payment networks can plug into each other to allow people to send money all over the world quickly and securely.

xCurrent is "fine-tuned for an internet model, where banks can pay each other with adequate secrecy and not copy and paste it all over the world," Treacher said.

"We’re creating a natural model that’s worked before over the internet, overlaying with cryptography. The big difference is we can shift value over that internet model, which is impossible today."

xCurrent is one of three products offered by Ripple. The other two are xRapid, a liquidity solution, and xVia, which allows people to send payments with data like invoices attached.

xRapid uses XRP "as a method to make that liquidity much more efficient by placing liquidity in the target accounts just in time for the payments to be able to happen over the Interledger model," Treacher said.

"For example, if you’re making a payment from the US to Argentina, with Ripple, with Interledger, payments will happen to your bank and the third party bank in Argentina in seconds.

"The account in Argentinian pesos, you really want that to be topped up when required very efficiently and not have a lot of money just sitting there in the account to cover the local payments as they are being made. XRP is used as a method of topping those accounts up."

Which businesses use XRP?

Five companies are currently piloting the xRapid technology, including Western Union and MoneyGram.

xCurrent is in production, according to Treacher, with millions of dollars moving across the network each day. But xRapid is currently at the pilot stage. Volumes are much smaller and firms are experimenting with it.

Treacher says the feedback from the pilots so far has been "very, very good so far." The idea is that once xRapid fully launches, Ripple will try to convince companies that are using xCurrent to use xRapid as their liquidity solution too — a classic cross-sell.

One potential hurdle for widespread adoption of XRP as a liquidity solution is the volatility of its price. XRP has fallen by 25% against the dollar over the last month, for example. Ripple argues that the fast settlement times over the XRP protocol mean companies will have minimal exposure on a per transaction basis. Ripple's price graph against the dollar over the last year. Markets Insider eToro's Greenspan said: "The minimum transaction fee for Ripple is o.oo01 XRP. It's fractions of a penny. It could go up by a hundred times. I don't think that the volatility of XRP is going to prevent any banks from necessarily using it."

Will Ripple always use XRP?

Given that Ripple and XRP are separate and trials involving XRP are still just at an early stage, it's not clear that Ripple will always offer a product that involves XRP. What if those trialing it decide not to take it up?

Treacher was circumspect when I asked whether Ripple will always use XRP in one form or another.

"It’s very important to keep your true north," he said. "There will be communities that value different parts [of what Ripple does] and we get that. Clearly, our vision is the whole things coming together as a whole but if we find that certain groups or organisations are much more focused on the liquidity angle that XRP offers or focused on the Interledger, that’s absolutely fine.

"The Interledger protocol that we use connects perfectly well to any blockchain and any asset, it doesn’t only work with XRP, it’s very open. If you’re trying to create a solution for the global payment problem, you can’t be closed."

He added: "We care about this currency, we care about the digital asset, it’s part of our vision, we want it to do well. In doing so, we’re careful to make sure it’s freely accessible, it is community controlled."

Does Ripple influence XRP's price?

Treacher insists that Ripple's escrow arrangement means Ripple can't influence XRP's price directly.

However, Ripple's activities appear to indirectly affect the price of XRP as many investors view the cryptocurrency as a proxy for the company.

Greenspan said: "I've been doing battle with that perception for the better part of the last few months. A lot of newcomers are of the understanding that holding on to XRP tokens is somewhat similar to holding shares in Ripple Labs, which is completely false.

Ripple CEO Brad Garlinghouse Ripple , for example, despite the fact that the deal was for xCurrent rather than xRapid.

"A lot of the deals that they do and the payment channels that they set up, at the end of the day, are not going to use XRP tokens," Greenspan said.

Treacher said: "As we’re successful, clearly a lot of people follow Ripple and I think we’re doing some interesting, groundbreaking stuff. As that’s happening, people are clearly watching what we’re doing and then making decisions about how the world is playing out. We can’t stop that. We want to be agnostic here. We don’t want to be encouraging or discouraging, we just want to do our job and build out that network."

He added: "I can understand why people look at what we’re doing, look at the currency, and make that connection. But we do try and make it very clear that there’s Ripple the company and XRP the currency."

So how should I think about Ripple's relationship to XRP?

XRP is "bigger than Ripple," Treacher says. He argues that the cryptocurrency is a "transformational technology" that has "a range of uses."

One way to think of XRP is a little like a digital railway network. Ripple has laid down the gauges but now it has sold off most of them to anyone who wants them. Now, Ripple is focusing on making the best damn trains it can so it can make money from the network it has created.

"We’re trying to build something that’s very, very open and we succeed because we’re very, very good at delivering into that open world that we have created," Treacher said.