The momentum of XRP, the power of Ripple: The breakthrough path for large-scale application of cryptocurrency

Author: Will 阿望

On the weekend night of March 2nd, the crypto market was in turmoil when Trump suddenly released a statement regarding the U.S. Crypto Reserve: "The U.S. Crypto Reserve will elevate the status of this key industry, despite years of corrupt attacks during the Biden administration. This is why my executive order on digital assets directs the presidential working group to advance a crypto strategic reserve that includes XRP, SOL, and ADA. I will ensure that America becomes the world’s crypto capital. We are making America great again!"

Subsequently, the crypto market was immediately boosted, akin to "an arrow piercing through the clouds, meeting thousands of troops." Although BitMEX co-founder Arthur Hayes commented that "there's nothing new," this does not prevent us from understanding XRP and the business model behind Ripple. Following the announcement, XRP experienced a surge of over 30%.

Therefore, this article will initially explain what Ripple and XRP are, their relationship, and how they operate in Web2 and Web3. Projects that combine Web2 and Web3 business models are worth learning from in the industry, especially in the current context of Crypto Mass Adoption, where many practical implementations still need to be pushed through Web2 models while leveraging Web3's advantages in ecological networks.

1. Ripple Labs - A Fintech Company

Ripple is a U.S.-based fintech company, also known as Ripple Labs, focused on providing blockchain-based solutions for cross-border payments and financial settlements. Its core goal is to optimize the international remittance process within the traditional financial system through blockchain technology, enhancing the speed of global financial transactions and reducing costs. Ripple's main products and services include (i) cross-border payments and remittances via RippleNet, and (ii) the recently launched RLUSD stablecoin.

The aforementioned blockchain-based technology relies primarily on the XRP Ledger network, which is an independent distributed ledger technology (DLT) used to record and verify transactions, while XRP is the native utility token that operates on this ledger. It is seen as an alternative to the traditional SWIFT payment network used by financial institutions.

The XRP Ledger or XRPL is a payment-focused blockchain network developed by Ripple in 2012, enabling financial institutions and payment providers to offer innovative financial services, including custodial services, digital wallets, and other decentralized applications (DApps).

After the initial release of the XRP Ledger, Ripple focused on helping financial institutions handle cross-border remittances and payments through blockchain distributed ledger technology. Over time, Ripple developed various cross-border payment products, which the team eventually integrated into a top-tier service called RippleNet.

RippleNet is one of Ripple's many products. Although Ripple has developed various financial products aimed at leveraging the XRP Ledger and XRP over the years, it ultimately rebranded many of these ideas under one name: RippleNet, a global payment network connecting banks, payment service providers, and other financial institutions, offering real-time settlement and currency exchange services.

2. XRP Ledger - Blockchain Ledger Network

As early as 2011, Jed McCaleb began developing a new digital currency consensus network and in 2012 reached out to Ryan Fugger, the founder of the peer-to-peer credit payment network RipplePay (now Ripple Payments), to further affirm the concept that Ryan Fugger had been developing since 2004. After discussions with the community, Ryan Fugger handed the platform over to Jed McCaleb, and the project was renamed Ripple. Subsequently, with further efforts from Jed McCaleb, Arthur Britto, and David Schwartz, the XRPL ledger was created in 2012, with XRP as its native token.

The XRP Ledger is a blockchain-based payment protocol designed to facilitate cross-border payments and central bank digital currency (CBDC) management. Unlike most blockchains, the XRPL ledger does not use proof of work (PoW) or proof of stake (PoS) consensus mechanisms. The network relies on a Cobalt-based consensus mechanism, a Byzantine Fault Tolerance (BFT) governance framework for open networks, and the Ripple Protocol Consensus Algorithm.

The XRP Ledger offers low transaction costs and high performance, with its native token XRP classified as a payment cryptocurrency. These tokens provide a means of storing and transferring value using a distributed network rather than centralized government systems. In this way, the primary use of XRP is as a medium for paying transaction fees on the XRPL.

Shortly after the launch of the XRP Ledger network, Jed McCaleb and Arthur Britto co-founded a company called NewCoin with Chris Larsen, which was eventually renamed OpenCoin and then Ripple Labs Inc. After the new company was established, the entity acquired 80 billion XRP (80.00% of the initial total token supply). The following year, Jed McCaleb left Ripple and later founded Stellar.

3. XRP - Native Token

XRP is the crypto asset within the XRP Ledger and serves as the native token of the XRP Ledger. The primary role of XRP is to provide a faster and lower-cost global payment solution compared to traditional financial systems.

XRP operates relatively independently and does not rely entirely on Ripple. The XRP Ledger is maintained by independent validators worldwide (such as universities and exchanges), and Ripple only holds a large amount of XRP and participates in technical development. Even if Ripple were to shut down, XRP could still exist. This independence also provides greater scalability for XRP, building a financial payment ecosystem based on XRP. For example, DeFi and tokenization: the XRPL supports the issuance of stablecoins, NFTs, and other assets (such as CBDCs); independent payment tools: users can directly use XRP for peer-to-peer transfers without going through RippleNet.

Thus, the value of XRP is not directly tied to the success or failure of Ripple Labs, and vice versa. Similarly, Ripple cannot restrict anyone from using the XRP Ledger network for their own services, although Ripple's large holdings of XRP may limit competition.

Ripple is committed to improving the global payment system through its technology, and XRP is one of the key tools to achieve this goal.

In short, Ripple is a private company providing financial payment services, while XRP is the native cryptocurrency used within the company's blockchain network to support fast and low-cost cross-border payments.

It is worth noting that Ripple is not decentralized like other public blockchains and holds a significant amount of XRP tokens. Instead, Ripple is a profit-driven entity that serves financial institutions, having initially developed the XRP Ledger and being a core contributor to the XRP network, while the Ripple team holds the majority of XRP tokens.

The core role of XRP is as a bridge currency for cross-border payments. In Ripple's On-Demand Liquidity (ODL) solution, XRP serves as an intermediary, replacing the "pre-funded liquidity pool" in traditional correspondent banking systems. For example:

U.S. bank converts USD to XRP → XRP sent to Mexico → Mexican bank converts XRP to pesos.

In this case, the consensus mechanism of the XRPL (non-proof of work) ensures transaction confirmation within 3-5 seconds, much faster than Bitcoin (10 minutes) or traditional banking systems, while avoiding capital occupation and exchange rate risks associated with pre-funding, and the transaction costs are extremely low.

4. RippleNet - Global Payment Network

RippleNet is the global financial payment network built by Ripple, aimed at connecting banks, payment service providers, remittance companies, and other financial institutions to optimize cross-border payment processes. It is not a public blockchain-based network, but rather a privatized enterprise-level solution primarily addressing the efficiency issues of traditional financial systems.

RippleNet utilizes blockchain technology to provide financial institutions worldwide with the ability to transfer funds, aiming to establish a unified global payment system. There is currently no unified global payment system in traditional finance; instead, various financial institutions have established isolated transfer systems for international payments. These systems do not interact well, making international payments both expensive and time-consuming.

In today's interconnected world, such outdated payment systems seem out of place. Despite high fees, various users still have to wait weeks to complete payments, limiting the number of users entering the international market.

RippleNet aims to solve these issues by providing a decentralized global banking network for everyone to use. By connecting to the network via application programming interfaces (APIs), users can transfer funds internationally faster and cheaper than traditional methods. This decentralized network claims to process payments in just three seconds, leveraging the global influence of its XRP token.

Technically, RippleNet is a suite of products that utilize the functionalities of the XRP Ledger blockchain network, rather than being an independent blockchain. In other words, all transactions made using RippleNet products are recorded on the XRP Ledger blockchain, but this does not mean that RippleNet itself is a blockchain.

Moreover, RippleNet also addresses the need for pre-funding accounts in cross-border fund transfers through its On-Demand Liquidity (ODL) solution, which uses XRP tokens to obtain liquidity. RippleNet supports nearly a hundred countries and pairs with over 120 fiat currencies, ensuring that payments can be easily made between countries.

Core functions and features of RippleNet:

• Real-time settlement: Traditional cross-border payments rely on correspondent banking networks, requiring multiple intermediary banks (taking 1-5 days), while RippleNet can complete transaction confirmations in seconds through direct peer-to-peer communication.

• Unified standards: Provides standardized APIs and protocols (such as ILP, Interledger Protocol), allowing financial institutions from different countries to seamlessly connect, eliminating format and compliance discrepancies.

• Multi-currency support: Supports instant conversion of fiat currencies, cryptocurrencies, and even commodities (such as gold) without the need for an intermediary currency (like USD) as a bridge.

• Cost reduction: By reducing intermediaries and liquidity pre-funding requirements, cross-border payment costs can be lowered by up to 60%.

RippleNet is further divided into several key products: xCurrent, xRapid, and xVia.

4.1 xCurrent

xCurrent focuses on banks, providing cross-border payments at a lower cost than traditional international settlements. Banks connect through an API that can convert traditional payments into XRP-supported blockchain alternatives.

xCurrent is designed to adapt to banks' existing compliance and risk capabilities, simplifying the installation process. xCurrent documentation states that the solution complies with all current policies, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

4.2 xRapid

While xCurrent provides cheap and fast cross-border payments, xRapid ensures that customers can obtain liquidity through XRP tokens. Traditional financing methods require businesses to pre-fund accounts abroad, as converting one fiat currency to another can take weeks.

xRapid offers near-instant conversion, releasing liquidity, also known as on-demand liquidity, and eliminates the need for businesses to pre-fund accounts abroad, allowing them to keep funds in their own accounts.

4.3 xVia

xVia is the API component of RippleNet, ensuring that customers can easily connect to the aforementioned services. xVia supports sending payments with detailed information, along with invoices and other details. According to RippleNet documentation, other advantages of RippleNet include supply chain payment management, international bill payments, real-time remittances, peer-to-peer payments, cash pooling, and global currency accounts.

The operational process of RippleNet (taking cross-border remittances as an example):

• Initiating end: Bank A (U.S.) initiates a transfer request to Bank B (Mexico) via RippleNet.

• Routing and verification: RippleNet automatically selects the optimal path (such as direct connection or through liquidity providers).

• Settlement: If using ODL, Bank A converts USD to XRP and sends it to Bank B, which immediately converts XRP to Mexican pesos.

• Completion: Funds arrive within seconds, with neither party needing to pre-fund the other's currency.

4.4 Who is using RippleNet?

Although RippleNet claims to be a global operating entity, one might wonder how many banks use RippleNet. This includes over 300 financial institutions globally, such as Santander and SBI Remit (Japan).

Ripple states that hundreds of banks are using their services, ranging from small entities to global institutions. For example, Bank of America, Santander, and American Express are large groups utilizing RippleNet services. Santander is a company that has processed over 450 million euros through RippleNet across six European and U.S. countries.

5. RLUSD Stablecoin

5.1 The Role of Stablecoins

Ripple is at the forefront of financial innovation, not only creating compliant, scalable, and enterprise-grade solutions but also connecting traditional finance with digital assets through its recently issued RLUSD stablecoin. The launch of the RLUSD stablecoin, with a focus on regulatory compliance, offers customers and users the opportunity to benefit from the stability and transparency uniquely provided by Ripple, marking an important milestone in Ripple's journey to build global financial services and support the value internet.

RLUSD will seamlessly integrate with the XRP Ledger and Ethereum network, providing a foundational asset for enterprises to build additional blockchain solutions. It offers a secure, fast, and scalable infrastructure for stablecoins, with functionalities supporting issuance, trading, and payments:

• Native stablecoin support: XRPL natively supports stablecoins without the need for complex smart contracts.

• Automatic bridging and DEX integration: Stablecoins on the XRPL can benefit from deep liquidity and seamless forex swaps.

• Institutional DeFi applications: RLUSD and other stablecoins can be used for lending, tokenization of RWA, and cross-border settlements.

This integration allows the Ripple USD stablecoin to play a role in many areas:

• Fiat to crypto gateway: Making it easier for users, traders, and businesses to convert between fiat and cryptocurrencies.

• Global remittances: Fast and cost-effective international transactions for individuals and businesses.

• Daily transactions: A reliable means for everyday transactions, serving as an alternative to cash or cards.

• RWA tokenization: Can be used as collateral support for tokenized assets on the XRPL and transactions involving them.

• DeFi integration: Users can trade, yield farm, stake, and use RLUSD as collateral for loans on XRPL and Ethereum dApps and DeFi platforms.

5.2 The Significance of RLUSD

The launch of the RLUSD stablecoin is an important step in Ripple's strategic layout, aimed at consolidating its leading position in the cross-border payment sector and expanding a broader financial ecosystem. With the rapid expansion of the global stablecoin market, the introduction of RLUSD directly responds to the demand from financial institutions for low-volatility crypto tools. While XRP has speed and cost advantages in cross-border settlements, its price volatility remains a concern for some conservative institutions. RLUSD, backed by a 1:1 dollar reserve and short-term government bonds, offers a compliant and stable settlement option, complementing XRP and allowing RippleNet users to flexibly choose settlement methods based on risk preferences, further optimizing capital efficiency and transaction experience.

This move also reflects Ripple's proactive adaptation to the regulatory environment. Against the backdrop of ongoing legal disputes with the SEC regarding XRP, RLUSD attempts to mitigate potential compliance risks through transparent audits and designs that comply with U.S. regulatory frameworks, maintaining the trust of institutional clients. At the same time, Ripple positions RLUSD as a multi-chain asset, planning to deploy it on public chains like the XRP Ledger and Ethereum, which not only enhances the cross-chain interoperability of its payment network but also lays the groundwork for future participation in central bank digital currencies (CBDCs) and institutional-level DeFi markets. For example, RLUSD could become a bridge connecting traditional finance with emerging scenarios like on-chain government bonds and collateralized lending, helping Ripple seize the initiative in compliant financial innovation.

From a market competition perspective, RLUSD leverages RippleNet's existing partnerships with over 300 financial institutions, providing a channel advantage for rapid deployment. Compared to general stablecoins like USDT and USDC, RLUSD focuses more on vertically integrating cross-border payment solutions, utilizing the low-cost and high-speed characteristics of the XRPL to target high-frequency cross-border settlement scenarios. Additionally, the launch of RLUSD is seen as a key to Ripple's ecosystem expansion—by attracting developers to build stablecoin-related DeFi applications on the XRPL, it indirectly enhances the utility value and on-chain activity of XRP, creating an ecosystem synergy.

However, this strategy still faces multiple challenges. Uncertainties in regulatory policies (such as the advancement of the U.S. Stablecoin Act), intense competition with established stablecoins, and pressures regarding the transparency of reserve assets may all affect RLUSD's market acceptance. If Ripple can balance technological innovation, compliance requirements, and customer needs, RLUSD may become a core pillar in its transformation from a payment service provider to a comprehensive financial infrastructure, but achieving this goal will still require time and market validation.

6. Conclusion

Ripple is a private fintech company in Web2 that has launched the XRP Ledger blockchain network, with XRP as the native token of that network. Ripple's technological foundation is the XRPL ledger, which is a distributed ledger technology, while XRP is the utility token that operates on this ledger.

At the same time, Ripple has integrated its cross-border payment solutions accumulated over the years to launch a payment solution called RippleNet aimed at financial institutions, with the core goal of improving efficiency and reducing costs. Part of RippleNet's services is realized through the XRP Ledger blockchain network.

XRP is an independent cryptocurrency that serves as an efficient bridge currency within RippleNet, but its value and application scenarios far exceed Ripple's business scope. The relationship between the two is similar to "the highway (RippleNet)" and "the fuel (XRP)," but XRP can also be used independently in other scenarios.

The launch of RLUSD is seen as a key to Ripple's ecosystem expansion—by attracting developers to build stablecoin-related DeFi applications on the XRPL, it indirectly enhances the utility value and on-chain activity of XRP. At the same time, RLUSD can also expand beyond the XRP ecosystem, creating an ecosystem synergy.