XRP, a cryptocurrency that has mostly maintained a low profile, is the native coin from Ripple. Most of the media coverage that the coin has received has been negative, revolving around the SEC lawsuit.
While adding a certain level of risk to the crypto, the lawsuit also seems to have created a special investment opportunity. If you are considering investing in XRP, it is important to learn everything about this coin.
So, what is XRP? Why you should consider investing in it? Is it worth taking the additional risk? Find out the answers to these questions.
What is Ripple?
Ripple is a payment protocol based on blockchain technology. It is used for processing international money transfers. The platform has a reputation for quick processing speeds and low transaction fees. It has partnerships with hundreds of institutions that rely on its technology.
Ripple has a native cryptocurrency known as XRP. Some of the key features of Ripple are as follows:
- Ripple works similar to a blockchain as a transaction takes multiple nodes to process.
- It is different from Bitcoin in that it doesn’t work on a proof-of-work (PoW) model
- Ripple has a consensus-based model
- The network can process 1500 transactions per second
- Due to its fast speed and efficiency, it is gaining popularity with banks and payment processors
Ripple is not exactly decentralized. Its developers have a certain degree of control over the system that protects Ripple against malicious users. It can control the servers that are allowed on the network.
How Does Ripple Work?
RippleNet is designed to provide quick, affordable, and simple cross-border transactions for financial institutions. Thus, the service sits in competition with SWIFT. Some of the advantages offered by Ripple include the following:
- The average transaction process takes just 5 seconds
- XRP crypto can be used as a bridge currency
- The transaction fee is just 0.00001 XRP
The use of the XRP coin provides financial institutions with a much more affordable way of trading currencies. Banks and other financial institutions can hold XRP in place of different types of fiat money.
As mentioned above, the XRP crypto is based on a consensus model for verifying transactions. The developers compare transactions to the latest version of the XRP ledger before accepting legitimate transactions. A transaction can be verified only when a majority of validators have accepted it.
Ripple – Potential Meets Risk
One of the most profound risks Ripple currently faces is the lawsuit it has on its hand from the United States Securities and Exchange Commission (SEC). The company sold XRP to its investors to raise around $1.3 billion. The funds were raised to develop its platform. According to the SEC, this was an illegal move as it was an unregistered security offering.
According to Ripple, XRP is not a token but a virtual currency. It claims that no rules were broken with its action.
The lawsuit proceedings began a year ago and since then XRP’s value has grown. While the digital currency has experienced lots of volatility, it is currently 60% more valuable than it was when the SEC lawsuit was announced.
Should You Invest in XRP Tokens?
Your decision to invest in XRP coins depends on two factors:
- How much risk you are ready to take?
- How bullish you are on the potential of the crypto market?
If the lawsuit goes in Ripple’s favor, the crypto is highly likely to have a price rally. At the same time, that is a big risk to take when you consider there are many other cryptos with great potential.
When it comes to crypto investment, it is important to diversify your portfolio. You should also include blockchain networks that run smart contracts like Ethereum. The cryptocurrency industry is currently addressing two key developments:
- Improving payment processing
- Vast opportunities created by smart contracts
There is generally a significant risk and volatility associated with investing in cryptocurrencies. But the main reason not to fear investing in Bitcoin is its increasing value. Missing out on the opportunity that lies ahead in the big crypto boom is considered to be even bigger.
If you are an investor who is ready to commit to long-term investment and can bear the volatility that is common to cryptocurrencies, then it is recommended to find high-quality crypto assets or even coins such as XRP to include in your portfolio.
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