There are two ways to purchase Ripple (XRP) online. The first and slightly more complex route is to purchase the cryptocurrency from an online exchange. Digital asset exchanges pool buyers and sellers together; a buyer states the price at which they are willing to purchase XRP and the exchange matches the buyer with a seller. There are dozens of digital asset exchanges which allow users to buy Ripple, many of the most popular are listed below.
An alternative (and more quickly accessible) route to purchasing XRP is through a CFD broker (this option is not available in the USA). CFD brokers allow investors to speculate on the price of the Ripple cryptoasset (XRP) through the buying and selling of contracts. Instead of having to purchase and secure the cryptoasset, the contract will entitle the holder to the upside of any price movement. Purchasing XRP through a CFD broker is effectively the same as buying XRP tokens if the investor is purely interested in price speculation. A list of the CFD brokers which list XRP are also shown below.
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Buying XRP in a few simple steps
This article will go into much further detail about Ripple and the steps taken to purchase and transact XRP. For a brief, general and high level overview see below:
- Register an account at your chosen exchange or CFD broker
- Complete necessary “Know Your Customer” (KYC) and Anti-Money Laundering (AML) checks. It is often best to do this first to avoid delays during withdrawal
- Deposit fiat currency (USD, EUR etc)
- If using an exchange, create a market or limit order to purchase XRP. If using a CFD broker then simply click “buy” next to the Ripple cryptoasset
- XRP will then be credited to your exchange’s Ripple wallet or a position will be made visible on your CFD platform
When using an exchange, it is advisable to move your XRP to a separate wallet where you can control the private key (further detail below). Details on securing XRP and the importance of moving cryptocurrencies out of exchange wallets can be found further below in this article. For purchases which are relatively small, storing XRP on the exchange may be suitable. Investors using CFD platforms need not worry about this aspect of security.
What is Ripple?
Ripple is a private company founded in 2012 by Jed McCaleb and Chris Larsen. The company, which was initially incorporatede as “OpenCoin”, rebranded to “Ripple Labs” in 2013 and then “Ripple” 2 years later. Ripple’s goal was to create technology that would enable faster, cheaper (60% cheaper) and more secure inter-bank payments. Ripple has now established a number of partnerships with several major banks including Santander and Reisebank with more to follow. To get a flavor of how the Ripple platform works, see this demo of an inter-bank payment between ATB and Reisebank.
How does XRP fit in?
Despite XRP and Ripple being interchangeable terms for many investors; the two are defined separately. Ripple – the private company – has created a technology platform that enables inter-bank payments in an array of different currencies (including fiat). XRP is a token which can be used on the Ripple platform and offers faster and cheaper transactions over its fiat (USD, EUR etc) counterparts. It is anticipated that banks who partner with Ripple will eventually make the move from fiat currency to XRP as it is more cost effective to use. Such a move would require that banks stocked up with reserves of XRP, taking swathes of the token out of circulation and driving the price upwards.
When considering any cryptoasset as an investment, it is important to have an understanding of how the coins are distributed and what the long-term inflation rate looks like. Does XRP have a high inflation rate? Will more tokens come into circulation and therefore dilute an investment over time?
When XRP launched, a fixed limit of 100bn tokens were introduced into the system. Ripple holds 61bn XRP with 38bn XRP out in the wild. Ripple has now locked 55 billion of their XRP in a cryptographically-secured escrow.
We use Escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use. You can expect us to continue to use XRP for incentives to market makers who offer tighter spreads for payments and selling XRP to institutional investors.
Ripple expects that each month, some of the unlocked XRP will be unused, possibly as much as 500M XRP. This unused XRP will be returned and locked into a new escrow, extending the period at which XRP is released.
On the flip side to XRP supply is XRP demand. Simple supply and demand economics say that an increase in adoption (specifically, the buying and holding of XRP) will place upward pressure on the price of XRP. Outside of speculation, the main source of real demand for XRP is the need for banks to hold XRP in order to access the speed and cost savings of the token. Banks are just one (admittedly very large) sector with which Ripple is placing its focus.
Ripple is not just for inter-bank payments.
Ripple’s vision is for “value to be exchanged as quickly as information”. This “Internet of Value” is not a new concept and many blockchain assets also share the same vision. Allowing value to be exchanged instantly (and globally) without censorship seems to be an inevitability at this stage. However, Ripple’s leadership and highly skilled team of developers and researches have positioned the company and XRP as one of the most likely to realize this vision first.
The current CEO, Brad Garlinghouse has become a figurehead for Ripple and the XRP brand (follow Brad on Twitter) and he speaks very publicly about the role of XRP in the Internet of Value. Brad is committed to Ripple shareholders, however he also makes it clear that his intention is to facilitate the growth of the XRP ecosystem.
From the Q&A, Brad states that “The progress we’ve made in cross border payments is one piece of that internet of value … I look at the years ahead and see growth in the core of what we’re doing, and in other vertical opportunities”. Ripple is likely to be much more than an exclusively bank-oriented payment channel.
Ripple lists their platform’s current use cases as:
- Bank payments
- Payment providers
- Digital asset exchanges
- Corporates (payment tracking, capital efficiency and rich data transfer)
These are just a handful of potential verticals and no doubt XRP will also find its way into the highly anticipated machine to machine economy.
Private vs Public Blockchains
The Ripple blockchain differs from public blockchains like Ethereum and Bitcoin. With a public blockchain, anyone can download a copy of the ledger and begin validating transactions, obscuring their identity if they wish. Validators who do not agree on consensus are simply ignored from the network, maintaining an honest history of the blockchain.
In the case of XRP, there are 5 core validators which are run by Ripple but many more are run by private individuals and groups not associated with Ripple. Validators on the Ripple network need to be identified via a domain name if they wish to be included in the network.
Advocates of the public blockchain approach place a great deal of importance on the number of nodes in a network (see “The Centralization Problem” below). Bitcoin and Ethereum have many thousands of validating nodes, however Ripple only has dozens. While Ripple isn’t entirely a private network, it lies somewhere in between private and public. This approach creates some centralization issues, however it also minimizes the headaches of malicious actors. Given that Ripple is a private company with shareholder value to consider, the need to retain some control at this early stage would appear to be very sensible. Brad Garlinghouse has said on several occasions that the XRP ledger will become more decentralized over time, scaling up the number of validators as the ecosystem grows.
Is it too late to buy Ripple (XRP)?
XRP is a challenging asset to get hold of for new investors. For many, the process of purchasing and securing Ripple through an exchange seems all too daunting. This friction is still in play today, providing a strong advantage to those investors who want to get in before it becomes a simple process.
XRP is showing the potential to be the leading cryptocurrency in a globally redefined financial landscape. This landscape – in its current form – is worth trillions of dollars, and the current market cap of Ripple (XRP) is just a fraction of where it could be in 5 years time. Ripple is one of many cryptocurrencies that are enabling better cross-border payments, Stellar (which was created by a Ripple co-founder) provides a similar platform and has also seen a great deal of success. It would be a mistake (and unsettling) to think that XRP will achieve complete domination across all financial markets, however even if Ripple were to achieve a small fraction of global adoption then the price of XRP would stand to rise by many thousands of percent.
XRP is not yet listed on Coinbase.com. Coinbase is the leading platform for purchasing cryptocurrencies and currently only lists a handful of the major coins. Litecoin’s growth in 2017 can be largely attributed to the growth in Coinbase’s member base – many new investors seeing it as a “cheap Bitcoin” and buying it up in droves. Ripple is anticipated to be listed on Coinbase early in 2018, and such a listing could see the price increase feverishly as the cryptocurrency is opened up to many millions of Coinbase users.
The winning cryptocurrencies will have trillion dollar market caps in the years ahead. If you believe that XRP will be one of those winners (and there is likely to be several if not dozens) then it is absolutely not too late to buy Ripple.
Understanding how Ripple transactions work is essential for moving funds safely. XRP transactions work (from a user’s point of view) in a very similar way to that of Ethereum or Bitcoin. Learning how to transact cryptocurrencies will enable an investor to move funds from their exchange wallet to a separate wallet where the private keys can be secured. This brief guide will explain how to send and receive an XRP transaction from an exchange wallet to a secure wallet under your control. In this case, we are using the GateHub wallet as our example.
A Ripple wallet address takes this structure:
Aside from the leading ‘r’ a Ripple wallet address – like many other crypto addresses – is unmemorable and seemingly random. However this wallet address is tied to a particular private key, and any XRP sent to the address below would be credited to the balance of the associated private key. You do not need to know how public key cryptography works (although you can read about that here) but instead know that your wallet address is coupled only to your private key. Of course without understanding the technical nature of how the private key is generated, some trust needs to be placed in the wallet software; however many wallets have code which is open source and have been reviewed by numerous security experts, GateHub being one of them.
With an account registered on GateHub.net and a Ripple wallet address copied, you can now safely use this wallet address to receive XRP. Using the Bitstamp.net exchange as an example, we would now copy and paste (never type a wallet address manually) our address into the withdrawal field and click submit.
Once the withdrawal has been submitted, the exchange will process the payment and the XRP transfer will be made immediately to your GateHub wallet. Exchanges can take several days to process withdrawals, however the actual transfer of XRP is instant.
Securing Ripple (XRP)
Cryptocurrencies have been the target of hackers for many years, and the threat will only become greater as their value grows. Once an investor buys Ripple, the responsibility of security is with that investor. Unlike the traditional banking sector, there are no 3rd parties or middlemen who can help you retrieve lost funds. Whether your XRP is lost through a theft or through a forgotten password, the options for recovery are limited (or non-existent). Those who choose to trade on a CFD platform above do not have this security threat, although they must trust the platform with which they trade. The Ripple CFD brokers that we list are all regulated by a number of top financial regulators.
Ripple Hardware Wallets
Using a wallet like GateHub is widely accepted as a secure method of storing XRP. However, those who wish to take security into their own hands may opt to purchase a hardware wallet. This type of storage is also known as “cold storage” whereby the wallet’s private key is protected by hardware that exists offline. The hardware can be connected to a computer which provides a user wallet interface for sending and receiving XRP. Hardware wallets made their code open source (the community can take over if the company fails) and the hardware and software has been thoroughly tested by cryptographic experts.
Those looking for the highest level of security for their Ripple XRP should consider a hardware wallet. The Ledger Nano S is one such wallet which has been popular among investors for several years. A competing hardware wallet – Trezor – does not yet support Ripple but support is expected in 2018.
The hardware security options for Ripple holders will increase as the ecosystem expands. This article will stay up to date with the latest available options for investors.
2 Factor Authentication
If you are interested in investing in a cryptocurrency such as Ripple then it is essential that you are familiar with 2 Factor Authentication (2FA). The most popular 2FA application is the Google Authenticator app which is installed to a user’s smartphone. When logging into an XRP wallet, Ripple exchange or any other account which requires security, the Google Authenticator app will create a One-Time Password (OTP) which must be used on top of the password. 2FA is not enabled on wallets or exchanges by default, however it is strongly recommended that every user implements this additional security layer across any sensitive login.
A warning about 2FA via SMS
Some accounts allow users to setup 2FA via SMS. This security layer is the same as the above, with the only difference being that the OTP is generated over SMS as opposed to through an app. This may seem like an equally secure option, however such a 2FA setup can make your account less secure than no 2FA at all. The reason for this is that some hackers, who adopt “social engineering” tactics, are able to convince cellphone providers that a phone number be ported to a new device. If one customer service agent at such a cellphone provider is manipulated into porting the number, then 2FA becomes redundant as OTPs are revealed to the hacker. Worse still, some platforms will allow users to access accounts or change passwords based on 2FA via SMS alone. This method of security should be avoided at all costs.
The centralization problem
Many cypherpunks and developers consider absolute decentralization to be essential to the success of a blockchain project. The more decentralized a system, the harder it is to attack. Decentralization in a blockchain network typically refers to mining, development, exchanges or nodes/validators but can apply elsewhere. Bitcoin suffers from mining centralization as a result of ASIC mining. Ethereum suffers from centralization of development, where if the Ethereum Foundation was to disappear, the project would be set back enormously.
In the case of Ripple, validators and developers suffer from a degree of centralization. Centralization is a risk because it requires trust. Any requirement of trust (at any scale) has the potential undermine a network. For example, Ripple validators could censor transactions, or the development team could decide to alter course of XRP with no need for economic consensus.
The reality of the centralization problem is – in this author’s opinion – overblown. To the contrary, an element of centralization is arguably a key factor in the rapid growth of many smaller projects which launched well after Bitcoin. Ripple and Ethereum are two perfect examples, whereby the economic value of the network has increased to $100bn+ in a matter of years in spite of centralization concerns. In the words of Brad Garlinghouse “we are successful in part because we have been very focused on solving a specific problem”. Without this level of centralized leadership and development, the Ripple team could not have produced the results that we see today.
This does not mean that centralization is not an issue – in the long run it very much is – it simply means that in the short run it can achieve much greater progress than a decentralized counterpart. The key factor is whether decentralization is part of the network’s roadmap, and for Ripple (and Ethereum for that matter) it very much is.
This list is not exhaustive, however it will be maintained and updated as new wallets are released. For the time being, it lists the Ripple wallets that we know – with a high degree of certainty – to be safe for storing XRP.
Ripple investment strategies
Buying Ripple is – on the face of it – very simple. Holding Ripple is not so easy. This is the most volatile asset class of a generation, and an uneducated investment can send newcomers into a frenzy of euphoria, panic and despair. There is no doubt that cryptocurrencies will be at the heart of the largest wealth transfer of modern times, but that wealth transfer can only be taken advantage of if the investor believes in the fundamentals. It is the investors who can weather the storms (and there will be storms) and come out the other side who will be rewarded with the best returns.
Here are 3 core tenets of investing in Ripple that will help a new Ripple buyer get started in the space. Further strategies from my time in cryptocurrency can also be found below.
- Understand XRP
- Trade on fundamentals
While this guide goes some way to providing a long-term outlook on XRP, there is always more that can be learned. Follow Twitter, YouTube, Reddit and the mainstream media to get a full picture of what is going on. Never look at one channel in isolation and always remain ultra-sceptical of the stories that you read. Consider using XRP for a few payments or making transfers among friends and family. Using this technology will be a revelation for anyone new to crypto and a key step into understanding the fundamental value of Ripple.
If the price crashes (20-40% is not uncommon) then pause and look at the fundamentals. Has anything fundamentally changed about Ripple’s value proposition? Wild speculation will cause major price fluctuation, but as long as the fundamentals hold then the long-term trend is likely to be in an upwards direction. Trading on rumours or news can be catastrophic; understand the technology and avoid trading on arbitrary price movements no matter how drastic (upwards or downwards) they are.
This article does not promote day trading (the practice of buying and selling XRP over the very short term). Time and again the best strategy – across all fundamentally sound cryptoassets – has been to buy and hold. If you choose to build a portfolio of cryptoassets to balance risk (recommended) then trading in order to rebalance fund allocation is absolutely sensible.
For more detailed investment strategies, see these 6 investing takeaways from 6 years in crpyto.
Investor resources for XRP
There is a wealth of information available to those willing to put in the time to understand Ripple. These are just a few of the best resources for individuals/businesses to follow as a means of keeping up to date with the technology. If you would like to submit a Ripple resource, please email [email protected].
- XRP Chat
- Ripple Subreddit
- XRP Subreddit
- Brad Garlinghouse
- Ripple Insights Blog
Hugely popular discussion forum for all things XRP. Discuss everything from price speculation through to technology and use cases.
Largest community for Ripple enthusiasts, an eclectic mix of users, developers and investors.
A smaller but active subreddit with a focus on the Ripple blockchain token – XRP.
Ripple CEO who stays relatively active on Twitter.
Updates directly from Ripple with plenty of insight into the XRP ecosystem.