In 2012, a company called Ripple launched the XRP Ledger, a decentralized blockchain designed for rapidly settling global payments. XRP (CRYPTO: XRP) is the ecosystem's native cryptocurrency, used to pay fees and bridge fiat currency exchanges, speeding up transactions and minimizing costs. However, Ripple went on to launch a comprehensive payment network that now supports a range of alternatives, including stablecoins.
This is gradually eroding XRP's utility, contributing to a 72% decline in the token's value from last year's peak of $3.65. In fact, on Aug. 11, XRP briefly traded below $1 for the first time since 2024. This Rare Signal Is Flashing Again.
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The global banking system is highly fragmented. Some financial institutions use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, while others don't, so transacting with one another often requires an intermediary. This creates friction, slows processing times, and adds costs.
Ripple Payments facilitates communication between banks, no matter what existing infrastructure they use, allowing them to settle transactions with one another directly and, therefore, instantly. XRP can standardize those transactions; for example, an American bank sending money to a Mexican bank via Ripple Payments might have its U.S. dollars converted into XRP tokens, which are then converted into Mexican pesos at the receiving bank. This whole process takes just a few seconds, and it can eliminate costly foreign exchange fees that would normally come with converting U.S. dollars directly into Mexican pesos.
In fact, such a transaction through Ripple can cost as little as 0.00001 XRP tokens, or a fraction of one U.S. cent. But not every bank will use XRP because of its extreme volatility, which can result in steep losses if they need to hold tokens for an extended period. Ripple launched a U.S. dollar-backed stablecoin, Ripple USD (CRYPTO: RLUSD), in late 2024 to address this issue.
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