Ripple (XRP) Explained: What It Is and How It Works

XRP is one of the best-known cryptocurrencies, but it is also often misunderstood. Many people confuse Ripple (the company), XRP (the coin), and XRPL (the blockchain). In this beginner’s guide, we explain what is XRP, how it works, and why it matters in 2025.

Unlike Bitcoin, built as digital money, XRP was designed for speed and low fees in cross-border payments. Today it powers Ripple’s payment network, trades on major exchanges, and has gained new attention after the SEC vs Ripple case gave legal clarity in the U.S.

TL;DR

• XRP is the cryptocurrency that runs on the XRP Ledger (XRPL), a blockchain built for speed and low fees. Transactions settle in seconds and cost only a fraction of a cent.
• Ripple, the company, develops Ripple Payments and On-Demand Liquidity (ODL), which use XRP as a bridge asset for cross-border money transfers.
• The SEC vs Ripple summary: XRP is not considered a security when traded on exchanges, so it is once again listed in the U.S.
• In 2025, XRP is used by banks, remittance firms, and developers on XRPL. ETF filings, including a possible XRP spot ETF, are under review.
• You can buy XRP on major exchanges with bank transfer or credit card and store it in an XRP wallet or hardware wallet for security.

Ripple vs XRP vs XRPL: What’s the Difference?

Many beginners ask what is Ripple or what is XRP, and the terms often get mixed up. To avoid confusion, it’s important to separate the three: Ripple, XRP, and XRPL.

Ripple (The Company)

Ripple is a U.S.-based fintech that develops blockchain payment solutions for banks and institutions. Its main products are Ripple Payments and On-Demand Liquidity (ODL), which help companies move money quickly across borders. Ripple works with traditional finance while leveraging blockchain, aiming to make international payments faster and cheaper.

XRP (The Cryptocurrency)

XRP is the digital asset connected to Ripple but not owned by it. It can be bought and traded on exchanges just like Bitcoin or Ethereum. Unlike Bitcoin, XRP was not created to replace money but to act as a bridge asset for payments. This means it can swap one currency for another in seconds with very low XRP fees. XRP is also the native token of the XRP Ledger.

XRPL (The XRP Ledger Blockchain)

The XRP Ledger (XRPL) is the decentralized blockchain where XRP transactions occur. It uses a consensus mechanism instead of energy-intensive mining. Independent validators follow a Unique Node List (UNL) to approve transactions in seconds. XRPL is open-source, supports token issuance and NFTs, and processes up to 1,500 transactions per second, making it one of the fastest blockchains today.

How Does XRP Work?

XRP was designed to make moving money fast and inexpensive. Instead of proof-of-work mining, the XRP Ledger relies on its own consensus system to confirm transactions within seconds.

Consensus and Validators

The XRPL uses consensus to keep the network secure. Independent validators check and agree on transactions. These validators follow the same Unique Node List, which helps them quickly confirm which transactions are valid.

Running a validator doesn’t require heavy computing power. It needs about the same resources as running an email server, making XRPL far more energy-efficient than proof-of-work chains like Bitcoin.

Transaction Speed and Costs

XRP is built for speed. Transactions usually settle in three to five seconds, no matter where the sender and receiver are. The XRPL can handle up to 1,500 transactions per second, giving it an advantage over most other blockchains.

Costs are also extremely low. Each transaction requires just a fraction of a cent. Unlike other blockchains, this fee is not paid to validators but burned, permanently removing that amount of XRP. This helps prevent spam and slightly reduces the overall XRP supply over time.

Escrow and Supply Schedule

When XRP was created, the entire supply was generated at once. To prevent all tokens from entering the market immediately, Ripple locked 55 billion XRP into escrow accounts. Up to 1 billion XRP is released each month, and any unused tokens are returned to escrow, keeping the schedule predictable.

This makes XRP’s supply transparent. Investors know the market cannot suddenly be flooded with tokens. While some critics argue escrow gives Ripple too much influence, the system adds more stability compared to cryptocurrencies with no fixed release plan.

Ripple Payments And On-Demand Liquidity (ODL)

Ripple’s software is one of the main reasons XRP became so well known. While the cryptocurrency itself is important, it is Ripple’s payment network that caught the attention of banks and payment providers around the world.

RippleNet Explained

Ripple built a global payment network originally called RippleNet, now offered as Ripple Payments. It connects banks, remittance firms, and financial institutions so they can move money instantly across borders.

Unlike traditional systems, Ripple Payments is designed for real-time settlement. Instead of waiting several days for an international bank transfer, money can arrive within seconds. The system also includes messaging tools that let institutions communicate during transfers, reducing errors and delays.

How ODL Uses XRP As A Bridge Asset

A major Ripple product is On-Demand Liquidity (ODL), which uses XRP as a bridge asset between currencies.

For example, if a bank in Mexico wants to send money to the Philippines, it does not need to hold pesos abroad. Instead, it converts pesos into XRP, transfers XRP instantly over the XRP Ledger, and converts it into Philippine pesos at the destination. The XRP exists only for a few seconds during the process.

This approach lowers costs and eliminates the need for banks to tie up funds in multiple foreign accounts.

Ripple Vs SWIFT: How They Differ

Before Ripple, international payments relied mainly on SWIFT, a network that has been used for decades. SWIFT does not move money itself, it only sends instructions between banks. Because of multiple intermediaries, time zones, and manual checks, transfers can take days and sometimes fail.

Ripple Payments provides an alternative. With real-time settlement and two-way communication, transactions are confirmed almost instantly. Fees are lower, transparency is higher, and businesses no longer need to maintain many foreign currency accounts.

SWIFT has improved with its gpi system, but Ripple and ODL with XRP still offer faster settlement and greater efficiency.

Is XRP Legal? SEC vs Ripple Case Explained

For years, one of the biggest questions around XRP was whether it should be treated as a security in the U.S. The SEC vs Ripple case, which began in 2020, finally brought answers.

Timeline Of The Case (2020–2025)

What This Means For Investors And Exchanges

The ruling confirmed that XRP is not a security when traded on public exchanges. This allowed major U.S. platforms like Coinbase and Kraken to relist XRP, restoring liquidity and confidence.

However, the court also found that Ripple’s direct institutional sales violated securities law. The company must now follow strict rules for any future institutional offerings.

For everyday buyers, the outcome means you can buy XRP in the U.S. legally in 2025. The case also set a precedent for the wider crypto industry, showing that not every token should automatically be classified as a security.

XRP Today Adoption And Real World Use Cases

With legal clarity in place, focus has returned to XRP’s adoption. It was designed to improve payments, not to replace national currencies, and this is reflected in how it is used today.

Banks And Financial Institutions Using Ripple

Ripple has built partnerships with hundreds of banks, payment providers, and remittance firms worldwide. These organizations use Ripple Payments to settle transfers instantly. In certain payment corridors, ODL with XRP has reduced settlement times from days to seconds.

The biggest advantage is capital efficiency. Banks no longer need to hold large sums in foreign accounts. Instead, they use XRP as a bridge asset to move value quickly between currencies.

Cross-Border Payments And Remittances

Remittance companies also use XRP to help people send money abroad. Traditional remittances often involve high fees and slow processing. With XRP, transfers are nearly instant and much cheaper.

For migrant workers sending money home, this means more earnings reach their families. In developing markets, these savings and faster delivery are especially valuable.

XRPL Ecosystem

The XRP Ledger (XRPL) has grown beyond payments. It now supports:

• A built-in decentralized exchange for peer-to-peer trading
• The issuance of custom tokens, including stablecoins
• Support for NFTs, enabling cheap and fast digital collectibles

By 2025, XRPL is also being tested for tokenizing real-world assets, expanding XRP’s role well beyond payments and making it a valuable platform for developers and businesses.

XRP ETF Watch In 2025

An exchange traded fund (ETF) makes it easier for investors to gain exposure to an asset without holding it directly. Bitcoin and Ethereum already have spot ETFs, and many now wonder if XRP will be next.

What An XRP ETF Would Mean

An XRP spot ETF would let traditional investors buy and sell XRP on stock exchanges. This could boost liquidity, attract institutional money, and raise XRP’s profile in mainstream finance. For beginners, it would also remove the need to set up a crypto wallet or use exchanges directly.

Current Filings And SEC Status

In 2025, several asset managers have filed applications for an XRP ETF. The U.S. Securities and Exchange Commission (SEC) is reviewing these proposals. Deadlines have been extended, with the next decisions expected later this year.

While no approval has been granted yet, the fact that serious applications exist shows how far XRP has come since the SEC vs Ripple case.

Expectations And Risks

Analysts are divided. Some believe the legal clarity after the SEC vs Ripple ruling makes approval likely. Others think the SEC may delay further or add strict conditions.

Even if approved, an ETF does not guarantee price growth. It simply makes XRP easier to access for investors who prefer traditional markets. Anyone interested should watch developments closely, as regulatory decisions can shift quickly.

Regulation To Know In 2025

Regulation plays a key role in how XRP is traded and used. In 2025, both the U.S. and Europe have new frameworks shaping XRP’s future.

United States FIT21 And Future Oversight

In the U.S., lawmakers are working on the Financial Innovation and Technology for the 21st Century Act (FIT21). This bill would divide oversight between the SEC and the Commodity Futures Trading Commission (CFTC).

For XRP, the most important points are:

• The 2023 ruling confirmed XRP sales on exchanges are not securities.
• FIT21 could give exchanges more certainty when offering XRP.
• Clearer rules may attract larger institutions to use XRP-related services.

European Union MiCA Framework

The Markets in Crypto Assets (MiCA) regulation is rolling out in Europe. MiCA sets licensing requirements and consumer protections for crypto companies.

What MiCA means for XRP:

1. Exchanges must meet higher standards, making trading safer.
2. XRP is treated like other tokens, ensuring equal access across the EU.
3. Investors benefit from more transparency and protection.

Global Outlook

Beyond the U.S. and EU, many countries are creating their own frameworks. Japan and Singapore already allow regulated XRP trading, while others are adding licensing systems.

Overall, the trend is toward more regulation. For XRP, this usually means more legitimacy and broader adoption.

How To Buy XRP In 2025

Buying XRP today is far easier than a few years ago. Most major exchanges relisted XRP after the SEC ruling, and you can purchase it with common payment methods such as bank transfer or credit card.

Step 1: Find A Crypto Exchange

Choose a reliable exchange that supports XRP. Look for:

• Ease of use: A beginner-friendly interface
• Fees: Compare trading and withdrawal costs
• Payment options: Bank transfer, debit or credit card
• Reputation: Strong security and positive reviews

Step 2: Sign Up And Verify

After choosing an exchange, create an account and verify your identity. Most platforms require an ID and proof of address to comply with regulations.

Step 3: Deposit Funds

Exchanges usually support:

• Bank transfer (cheapest)
• Credit or debit card (faster but higher fees)
• Instant services like PayPal or Skrill (availability varies)

Step 4: Buy XRP

Once funded, buying XRP is simple. Enter the amount, check the price and fees, and confirm. The XRP will appear in your exchange wallet within seconds.

Step 5: Store XRP Safely (Wallets And Security Tips)

It is not recommended to keep large amounts of crypto on an exchange. Instead, transfer your XRP to a personal wallet.

Tips for storing XRP safely

Keeping your XRP secure is just as important as buying it. Follow these best practices:

1. Back up your seed phrase offline and keep it in a safe place.
2. Enable two-factor authentication (2FA) on your accounts.
3. Never share your private keys.
4. Use a hardware wallet for XRP if you plan to hold long term.

For a full breakdown of storage options, see our comprehensive guide article on the best XRP wallets out there.

Risks And Things To Consider

Like any cryptocurrency, XRP carries risks. Before you buy or use it, it is important to understand what may impact your investment.

• Market volatility: XRP’s price can change quickly. While legal clarity has boosted confidence, it is still subject to the same swings as other digital assets. Global news, sudden market events, or shifts in sentiment can all move the price sharply.
• Regulatory changes: The SEC vs Ripple case gave XRP clearer status in the U.S., and Europe’s MiCA framework has made trading safer. Still, global regulation is evolving. New rules could affect how XRP is bought, sold, or used.
• Competition from other blockchains: XRP is designed for fast, low-cost payments, but it faces competition from Stellar, Solana, and other payment-focused blockchains. If rivals grow faster, XRP will need to maintain its edge in speed, adoption, and partnerships.

Other considerations:

• Holding XRP does not give ownership in Ripple, the company.
• XRP’s supply schedule is predictable but managed through XRP escrow, which some critics view as centralized.
• Technical risks, such as bugs or vulnerabilities, are unlikely but possible in any blockchain.

In short, XRP has strong advantages but is not risk-free. Balancing potential rewards against these risks is key before deciding how much to include in your portfolio.

Our Final Take-Away

XRP is built for payments, not mining. It runs on the XRP Ledger, which processes thousands of transactions per second at a cost of fractions of a cent. Ripple, through Ripple Payments and On-Demand Liquidity, uses XRP as a bridge asset to let banks and remittance providers move money instantly across borders.

After the SEC vs Ripple summary ruling, XRP gained legal clarity in the U.S. and was relisted on major exchanges. With Europe’s MiCA regulation, growing adoption, and XRP ETF 2025 filings under review, XRP remains one of the most important cryptocurrencies to watch this year.