The relationship between Ripple and XRP has been of interest with many finding it difficult to distinguish the between the two. According to Brad, Ripple’s CEO, Ripple as a blockchain platform was created to solve the problem of making cross border payments at a massive scale but at a low cost. The platform is open source to allow for any set of intermediaries to facilitate such payments on the platform. Different currencies can be used on the platform besides the platforms native currency. As such, Ripple only provides Ripple connect software to companies. The software uses the InterLedger protocol (ILP) to enable financial institutions make payments across borders without the need to incur costs associated with changing between currencies.
XRP on the other hand is simply a tool used on the Ripple platform to enable these transfers. XRP exists as a separate entity from Ripple. It is created to compete with other intermediaries who can be used on the Ripple platform to facilitate fund transfers. The benefits offered by XRP, which it hopes will give it an edge and make it the preferred platform on XRP include fast transaction speeds that are estimated to be 1000 times faster and 1000 times cheaper than bitcoin transactions. It is very scalable with XRP consistently handling 1,500 transactions per second. It can even be scaled to handle the same throughput as Visa. In Brad’s words, XRP is simply the most efficient digital asset designed to facilitate Ripple in solving the problem of cross border payments.
Financial institutions have continued to adopt Ripple’s connect software to facilitate their cross border transactions. The use of XRP as the main medium for the transactions has however remained low among the financial institutions. Like other crypto currencies and digital assets, XRP has in the past experienced a lot of fluctuations making it less desirable for financial institutions to use as a medium for cross border transfer of value. Banks have preferred to use more stable fiat currencies such as the USD and the euro on the Ripple connect network. For transfers between lesser known currencies, Ripple is advocating for institutions on the platform to use the XRP tokens. However, with the uncertainty regarding digital assets and the concerns about how governments will react in terms of legislating the industry, it is still unlikely that banks will fully adopt the use of XRP in the near future. It is however Ripples hope that XRP offers high levels of efficiency and functionality to make it the preferred means for banks on the Ripple network.
By making Ripple open to other currencies, the company has created more opportunity for adoption of the use of their software as financial institutions are not limited to only using a single currency. However, this creates an avenue for other players to compete with XRP on the network therefore reducing the demand for XRP and consequently its value. It is however important to note that the value of Ripple is not directly tied to the performance of the XRP token. RippleNET helps Ripple connect banks, payment providers, digital asset exchanges and corporate for efficient cross border transactions. RippleNET provides users the option to use XRP but remains open to other currencies as well.
The success of Ripple is pegged on the solutions it provides for financial institutions enabling them have a smooth experience in cross border transactions. On its own, Ripple can succeed with other assets used on the platform. XRP is however dependent on Ripple in order to succeed. It is possible to see its value grow in the future if institutions adopt its use for most of their transactions on the Ripple network.