XRP Explained Like You're 10 Years Old!

[00:00:00]XRP is the sixth largest cryptocurrency in the world. And chances are, even if you're not deep into crypto, you've heard about XRP, or you might even own some. But why? What problem does XRP actually aim to solve? And does it actually have a future? Well, anytime I go to research XRP, it feels like it's all hype, speculation, and whatifs. And that's not what I'm interested in. And I'm guessing you're not interested in that either. You probably just want to know the facts. So, in this video, I'm breaking down all the facts about XRP and how it works so you can make your own decision. And for complete transparency, I'm not pro XRP. I'm not against XRP. I'm simply curious about what it actually is, what problem it aims to solve, and whether it actually makes sense. Okay, before we really get into what XRP is and the problem it aims to solve, I want to clear up three terms that often get mixed up. Ripple, the XRP ledger, and XRP. Ripple is a private company that builds payment products and works with other companies that want to use XRP. The XRP ledger is the network that processes and records XRP transactions. And XRP is the digital currency that moves through that network. Now, it's important to point out that Ripple did not create XRP. XRP was created in 2011 by three engineers, David Schwarz, Jed MB, and Arthur Bridto. Then in 2012, Silicon Valley entrepreneur Chris Larsson joined them to help build the business side around the technology. Shortly after XRP launched though, the group created a company called Newcoin, which eventually became Ripple, which is what we know today. The reason Ripple is so closely connected to XRP today though is because the original team gave the company 80 billion XRP so it could help build real world uses for it. And as we'll talk about later, that decision eventually became one of the biggest controversies surrounding XRP today. But what is XRP really and what problem does it aim to solve? XRP is a digital currency that is used as a form of payment and liquidity on the XRP ledger. The XRP ledger is open-source and decentralized, meaning it isn't controlled by one single person or company. Instead, computers around the world help process and confirm transactions. Because of this, the XRP ledger can operate 24 hours a day, 365 days a year. And since launching in 2012, the XRP ledger has only gone offline a small number of times. That said, XRP works differently than other cryptocurrencies like Bitcoin, where new coins are created over time through a process called mining. With XRP, all 100 billion coins were created from the beginning. This is called being premined, and no more XRP can ever be created. So XRP's total supply is permanently capped at 100 billion coins.

[00:02:42]Now the simplest, most drycut explanation of XRP that I found is that it's a cryptocurrency designed to make moving money faster and cheaper, especially when sending money between different countries, currencies, and financial systems. For example, if you've ever transferred money to someone, whether in your own country or internationally, you've probably used an app like PayPal, Zel, or Wise. And when you send that money, you generally have two options. Option one, receive the money instantly for a fee. Or option two, wait a few days and receive it for free. Well, what if you could receive it almost instantly for virtually no cost, and what if sending money between different financial systems was easier?

[00:03:19]For example, imagine being able to send money from your PayPal account to someone's Zel account without all the friction and cost in between. That sounds a lot better, right? Well, that's essentially the problem XRP and the XRP ledger aim to help solve. Transactions on the XRP ledger typically settle in about 3 to 5 seconds and cost a fraction of a cent. And because the XRP ledger operates 24 hours a day, 7 days a week, transactions can be processed at virtually any time. But here's the part that actually matters. The goal isn't necessarily for you to send XRP to someone in another country and have them spend XRP. Instead, XRP can be used as a middle step when moving money from one currency to another. For example, a payment company could take US dollars, convert those dollars to XRP, send the XRP across the XRP ledger in seconds, and then convert that XRP into the currency needed on the other side. So, instead of needing to keep large amounts of money sitting in bank accounts around the world, just in case someone needs to make a payment, XRP can be used to move that value when it's actually needed. In other words, XRP can help connect people in companies that need to exchange value in real time for almost no cost. But that brings us to the much bigger question. Do we actually need XRP to do this? And in my opinion, this is the most interesting question because I think a lot of people believe the future of XRP depends on whether or not it will be used in the future. From a purely technical perspective, other blockchains can already move value quickly and cheaply. Salana, for example, is also extremely fast and has low fees. So XRP's speed and low cost are not unique.

[00:04:52]You could theoretically use stable coins and other cryptocurrencies to accomplish this same goal. In fact, Ripple itself now markets crossber payment infrastructure that includes stable coins, which reinforces that XRP is not the only possible tool for solving this problem. Meaning XRP's advantage isn't that it's the only technology capable of doing this. It's that XRP and XRP ledger were specifically designed around moving and exchanging different cryptocurrencies. and Ripple has spent over a decade trying to build the institutional infrastructure needed to actually use it for that purpose.

[00:05:23]Something else worth pointing out is that XRP has already been recognized as a commodity in the US. That matters because it gives XRP more legal clarity, making it easier for exchanges, companies, and investors to use it without much uncertainty over how regulators will treat it. So, there's more confidence in it, which is really important. But aside from adoption, there are some concerns I constantly see investors bring up. Again, this is just data. What you choose to do with this data is completely up to you. The first concern is the large amount of XRP still controlled by Ripple. At the time I'm making this video, Ripple still controls roughly 37% of the total supply. Most of that XRP is locked in escrow, which means Ripple can't access all of it at once. Instead, up to 1 billion XRP is unlocked each month, and whatever Ripple doesn't use is usually locked back up again. But the concern still exists.

[00:06:12]Ripple still controls a huge amount of XRP that can enter the market over time.

[00:06:16]If too much is sold, that extra supply could make it harder for the price to rise or even push the price down.

[00:06:23]Another concern is how the XRP ledger is run. The network relies on a smaller group of trusted computers to confirm transactions instead of using a much larger open system like Bitcoin. This matters because the more a network depends on a smaller group, the more influence that group can have over how the network runs. And as investors, that means you're placing more trust into fewer people to keep the system fair, secure, and reliable. Arguably though, I think most people are really only concerned about one thing. Will XRP be worth more in the future? Now, I'm not the type of person to do price predictions. In fact, I think it's irresponsible. But I do think it's worth understanding the two main arguments that I've seen. Let's start with why some people think XRP will never amount to much of anything. There are over 100 billion XRP in total. That matters because the more XRP exists, the more money it takes to push the price of each token higher. For example, if XRP were $100 each, all 100 billion XRP would be worth $10 trillion combined. Right now, the total value of XRP is $69 billion.

[00:07:26]That's why some people look at the supply and say prices like $100 or $500 are unrealistic. But the other side argues that this misses the whole point of what XRP is trying to do. If XRP ever becomes heavily used to move money between banks, countries, and different payment apps, it could be used to move massive amounts of money every single day. And the argument is that XRP itself would need to be valuable enough to handle those large payments without causing huge price swings. Here's the simple math. If you need to move $1 trillion, but the XRP available for those payments is only worth hundred billion, there may not be enough value available to move that much money smoothly. So, as more money moves through XRP, the total value of XRP may also need to go up. And because there is a limited amount of XRP, that could mean each XRP needs to be worth more money.

[00:08:15]That is the main argument behind some of the really high XRP price predictions I've seen. The idea isn't simply that more people need to buy XRP and the price will go up. The argument is that if XRP is ever used to move trillions of dollars in real payments, the price may need to be much higher so the XRP being used can handle that much value. Whether that actually happens depends on how widely XRP is adopted and how much of the world's money actually moves through it. But like I said, I'm not pro XRP.

[00:08:43]I'm not against it and I can't tell you whether you should buy it or not. But if there's one thing I've learned after being in crypto for over 6 years, it's this. No matter what crypto you buy, you need to know how to protect it. Because whether XRP goes to $5, $10, or $100, none of that matters if you lose it first. The safest way to hold XRP is to buy it on an exchange, then move it to a cold wallet you control. So, if you want to see exactly how cold wallets work, how to choose the right one for your XRP, and how to move your crypto safely, watch my full cold wallet master class in this next video. I'll see you over there. God bless.