Ripple is formerly known as Opencoin, a technology company that develops the Ripple payment protocol. Through the use of blockchain and modern APIs, Ripple aims to enable financial institutions who are part of the network—RippleNet—to send money globally, instantly, reliably and for fractions of a penny. Ripple established the XRP Ledger (previously named Ripple Consensus Ledger) in 2012, a decentralized ledger built on open-source technology and supported by a network of peer nodes. Currently, XRP primarily serves as a bridge currency for Ripple's xRapid product, which facilitates the exchange of value between fiat currencies and digital asset exchanges, leveraging XRP's liquidity as a bridge currency. Ripple’s mission is to build breakthrough crypto solutions for a world without economic borders.
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- How to lend XRP?
- How do I choose a lending platform?
- How is the yield generated?
- Lending and Borrowing: On custodial lending platforms such as Binance and Nexo, XRP token holders can contribute their XRP to liquidity pools, which can then be accessed by borrowers who provide collateral assets. These borrowers take out loans by borrowing against the collateral assets they have deposited. In exchange for the loan, borrowers pay an annual percentage rate (APR) to the token holders (i.e. lenders) who have added their XRP to the liquidity pools.
- What are the risks of lending XRP?
- Counterparty risks: If you use a centralized lending platform, you may be exposed to counterparty risk. This is the risk that the other party in the transaction may not fulfill their obligations and default on the contract.
- Protocol security risks: The collateral for XRP may drop below the market value of XRP lent out, which implies a collateral risk. There is also a risk of unknown bugs in the Ripple Ledger protocol and the XRP investment in general.
- What is XRP?
- How is XRP minted?
- What is Ripple's consensus mechanism?
- What are the tokenomics of XRP?
- 20%: retained by the founders of XRP. Chris Larsen and Jed McCaleb each received 9.5 billion XRP. Arthur Britto received 1 billion XRP
- 77.8%: allocated to Ripple
- 0.2%: airdropped as an experiment to try and expand usage as part of the launch
To earn a return on your XRP, you can lend them out to custodial lending platforms such as crypto exchanges to start earning interests. We suggest using a Ledger Hardware Wallet to maintain complete control over your funds. Before lending your tokens, ensure they are stored on your Ledger wallet and then please refer to individual lending platforms for lending instructions.
Lending XRP on these platforms is essentially at a low risk due to the collateral requirement. Borrowers must deposit a significant amount of crypto assets as collateral to secure an XRP loan with low transaction fees for deposit and withdrawal. In the event of non-repayment, the platform will sell the collateral to repay the XRP lender. However, please still refer to potential risks of lending XRP in the section below for more information.
Do not fall for high APR %: When you lend your crypto, you will usually be quoted an APR for your investment. Some lending platforms may offer very high APRs as a way to attract investors, but these high APRs may be unrealistic and involve additional risk.
Stick to well-known custodial lending platforms: Look for platforms that have liquid markets.
The lending yield on XRP is generated from:
We strive to make lending as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular lending option is appropriate for you.
Keep in mind that this is not a comprehensive list of all potential risks associated with lending.
Ripple is a technology company and XRP is an open-source digital asset independent of Ripple. Ripple uses XRP in its solutions because it’s fast, efficient, reliable and carbon-neutral—and because it seamlessly supports our customers’ compliance efforts. XRP is the native asset of the XRP Ledger.
XRP Token Utilities:
Gas fees: XRP can be used for paying on-chain transaction fees, as with other cryptocurrencies.
Liquidity on-demand: XRP is used to source liquidity on-demand and reduce the amount in nostro accounts required to make global payments.
Facilitating transactions: Ripple also funds the Interledger Protocol, a software platform that aims to facilitate transactions between cryptocurrencies and bank ledgers. The Interledger Protocol does not require the use of XRP, but it can be connected to the XRP Ledger.
Enabling developer activities: XRP also leverages RippleX, which allows developers and entrepreneurs to integrate blockchain technology into their applications with tools and services built on top of the XRP Ledger.
Miners cannot directly mine Ripple (XRP) but they can mine other cryptocurrencies like Bitcoin and Ethereum which can then be exchanged for XRP through a currency exchange platform. The unavailability of mining for XRP is due to its centralized nature.
XRP runs on the blockchain known as XRP Ledger (XRPL), which is a decentralized public blockchain that uses the consensus protocol to verify transactions. In consensus protocol, designated servers—called validators—come to an agreement on the order and outcome of XRP transactions every 3-5 seconds. All servers in the network process each transaction according to the same rules, and any transaction that follows the protocol is confirmed right away. All transactions are public, with strong cryptography to guarantee the integrity of the system.
The XRP Ledger is maintained by a network of independent validators who constantly compare their transaction records. These servers can join the network and become Ripple validators, but to ensure reliable consensus, Ripple recommends a list of trusted nodes called the “Unique Node List” (UNL) for validators to consider.
The consensus process involves multiple rounds where UNL validators exchange ledger candidates, adding and subtracting transactions until their proposals match those of their trusted validators. Once a supermajority (80%) of UNL nodes have matching ledgers, each server computes a new ledger hash from the agreed-upon transactions and compares results. Once a supermajority (80%) of validators agree on the hash, the ledger candidate is considered final.
At the initial launch of the cryptocurrency, 100 billion XRP tokens were created, and the amount has been the same ever since then. That’s why XRP is known as a pre-mined cryptocurrency. However, the maximum token supply was not released into the market all at once. Instead, only a small amount is available to trade on the exchanges freely.
Initial Token Distribution
100 billion XRP was pre-mined in January 2013 and distributed as follows: