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What are Ripple and XRP – a scam or a SWIFT killer?

It was a matter of time before Ripple became a popular but controversial project. It has a great community and offers prompt client support, but is also heavily criticised by experts.In this article, we will tell you all about this platform, how it works, and why Forbes and Vitalik Buterin considers it to be a scam.

What is Ripple and XRP?

What is Ripple XRP

Statement by Ryan Zagone, Director of Business Development and Regulatory Affairs at Ripple, during a hearing in the UK Parliament. Source:

Ripple is a private, commercial organisation that created RippleNet to exchange digital and fiat assets. The network runs on top of an XRP Distribution Ledger (XRPL) with the XRP token. At the same time, RippleNet is neither a blockchain nor a cryptocurrency. In addition, Ripple claims that they are legally and organisationally unrelated to XRP Ledger.

Therefore, we cannot say that Ripple and XRP are the name and ticker of the same cryptocurrency (such as Bitcoin and BTC). As a project, RippleNet is a payment gateway created by Ripple, while XRP is a separate cryptocurrency. According to the leadership of the startup, any cryptocurrency could have been used instead of XRP, but it was found the most suitable. Although the brand leadership owns 60% of all XRP money supply, they claim it is simply a “gift” from the developers of the XRP Ledger open source.

What tasks does Ripple solve?

Ripple System

The structure of the Ripple ecosystem and its capabilities. Source: Vontobel investment bank

The project’s mission is to create a product that will connect cryptocurrency exchanges, state fiscal authorities, banks, payment systems and ordinary users to provide instant and cheap payments.

For private users, Ripple created the One Pay app integrated into RippleNet. It allows you to send money around the world instantly, securely and for a fraction of a cent. For payment service providers the company developed:

  • xVia. A unified API that allows financial service providers to interact within the same ecosystem without the long and expensive integration of their own payment systems with each individual counterparty. At the same time, xVia also makes it possible to conduct transactions through other network participants and attach any information, for example, invoices.

  • xRapid. A protocol designed to provide liquidity for cross-currency transactions on demand that uses the XRP token as an intermediary currency (banks are now using USD) by default. This protocol significantly reduces the time and cost of transactions.

  • xCurrent. A protocol for ensuring interoperability between different registries and networks, that, unlike xRapid, does not use XRP by default. Instead, xCurrent is based on the Interledger Protocol (ILP), created for direct communication between different payment systems (for example, between Bitcoin, PayPal and USD).

Benefits of XRP cryptocurrency

As stated above, XRP is a cryptocurrency formally unrelated to Ripple that RippleNet uses as an intermediary token for certain transactions. The advantages of this integration are as follows:

  • Low transaction costs. When processing each transaction on the RippleNet network, the system deducts 0.00001 XRP or USD $0.00000249 from the initiator. This is not a commission that is in favor of the validator, the system owner, or anyone else. The platform simply debits these coins from the sender’s account to destroy them. It is necessary to protect against spam payments and reduce the risks of manipulating the currency rate.

  • Lack of mining. The cryptocurrency uses an original consensus algorithm, which involves the creation of a small pool of trusted nodes to validate transactions. At the same time, each participant chooses which nodes he will entrust the verification of his transaction (as in Stellar).

  • High throughput. In theory, the network is capable of processing up to 1,500 operations per second (Bitcoin – 7, Ether – 20, Visa – 24,000).

  • High speed. XRP Ledger transactions are confirmed within four seconds.

Ripple vs Bitcoin vs Stellar

The comparative analysis of the Ripple, Bitcoin, and Stellar main indicators is presented in the table below. There are fundamental differences, not only in the means of project implementation, but also in its purpose.

Bitcoin (BTC)

Ripple (XRP)

Stellar Lumens (XLM)

Target audience

Private persons

Banks, financial institutions

Individuals, business, banks, fiscal structures

Management structure

Open source software

Commercial company

Non-profit organization





Consensus Algorithm

Proof of Work (PoW)

XRP Ledger Consensus Protocol

Stellar Consensus Protocol (SCP)

Confirmation speed

From 10 minutes

4 seconds

2-5 seconds



1500 TPS

1000 TPS

Commission fees (19.10.2020)

0.00016 BTC or USD $1.8

0.00001 XRP or USD $0.00000249

0.00001 XLM or USD $0.00000087

What do experts criticise Ripple for?

How Ripple make money

Ripple’s uncertain business model by Jason Bloomberg. Source: Forbes

The main critic of the Ripple startup is IT analyst and Forbes expert, Jason Bloomberg, who stated in an article on JPM Coin that Ripple has all the signs of fraud. He then authored a separate publication “Is Ripple a scam?” where he went over the Ripple’s issues in depth.

Here is a short summary of Bloomberg’s main points.

First, Ripple created an open source XRP Ledger “community” to hide the fact that they issued hundreds of millions of XRP, most of which they kept for themselves. Not that no one else has done this, but Ripple is in every possible way denying its involvement in the XRP project, although the company has created this community and runs it.

Secondly, marketers support Ripple because of its big clients such as Union Credit, UBS, Santander, NBAD, Axis Bank etc. However, it becomes clear that most of these companies are “partners”, not customers. To make things worse, Ripple even pays them to become partners.

To this end, the company has established a special RippleNet Accelerator blueprint, which is funded by XRP tokens received by Ripple as a “gift”. The Ripple startup issues tokens, sells them for fiat currencies, which it then spends to create the illusion of real customers.

Third, the startup states their product solves the liquidity issue in cross-currency banking through XRP mediation. However, for XRP to act as an intermediary, banks should have considerable XRP reserves to process transactions.

This approach cannot work for two reasons:

  • Banks and other network members do not want to hold capital in XRP due to the coin’s high volatility. A currency whose price has fallen by 80% today and will rise by 100% in a month simply cannot be a reliable intermediary.

  • Reserving funds in XRP does not solve the basic problem with money transfers from regions with more stabilised local currencies to countries with less stable currencies, since such transactions usually go in only one direction. For instance,converting dollars to Guatemalan quetzal will not cause any problems, since everyone is willing to accept dollars. However, the reverse operation will rarely be possible because few people need quetzal.

Fourth, practice has shown that Ripple’s technology simply does not work the way its creators explain, which is why most statements about integration with large banks and other payment services ultimately did not lead to anything. In particular, Ripple was tested by American Express, Santander, Western Union. These companies did not further work with Ripple since the transfers were not instant (took up to two days), and the payment price was also higher than expected.

Fifth, the real Ripple business model comes down to inflating the demand for XRP cryptocurrency and selling it at its peaks.

How to buy/sell XRP?

Buy / Sell Ripple (XRP) on EXMO

You can buy XRP cryptocurrency on most cryptocurrency exchanges. The exception is American exchanges that do not have the coin in their listings. The reason is simple: local regulators may consider XRP to possess security flaws and impose large fines or sanctions as a result.


The startup Ripple and the XRP coin are projects with a dubious reputation.

The founder of Ethereum network, Vitalik Buterin, also expressed deep concern regarding the strangeness of the Ripple.

Buterin Tweet

Source: Twitter

Experts are also sceptical due to the dubious business model and the lack of real results of integrating Ripple’s payment solutions into existing financial systems.

All this indicates that investing in XRP is a rather risky decision, which is better left to experienced traders and investors.