A Beginners Guide to Ripple and Tether

A Beginners Guide to Ripple and Tether

Ripple is a platform and a digital coin. The venue is a real-time payment and settlement system and a currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company. Ripple was introduced in 2012, built on open-source protocol, and supports tokens representing fiat currency and cryptocurrency. Ripple enables secure, global financial transactions of any size with no chargebacks. The cryptocurrency token is known as XRP.

What is Tether?

Tether is a blockchain-based cryptocurrency. The digital coins are backed by equivalent traditional fiat currencies, such as the dollar, the euro, or the Japanese yen. Tether tokens are traded on the Tether network and are transacted using the token USDT.

Who Introduced Ripple?

Ripple was created by Jed McCaleb and built by Arthur Britto, David Schwartz, and Ryan Fugger. The digital coin debuted in 2005 as a financial service to provide secure payment options to members of an online community. Ryan Fugger had developed a system called OpenCoin which would transform into Ripple. The company also created its form of digital currency, referred to as XRP to allow financial institutions to transfer money with negligible fees.

How is Ripple Different From Bitcoin?

As of 2018, more than 100 banks had signed up for the Ripple payment system, but most of them were only using Ripple’s XCurrent messaging technology while avoiding the XRP cryptocurrency due to its volatility. Ripple does not work on a blockchain like Tether or bitcoin. Instead of using the mining concept, the Ripple network uses a unique consensus mechanism through a network of servers to validate transactions. The validation is created by conducting a poll through the servers or nodes on the web, determining the transaction’s authenticity. This scenario enables almost instant confirmations without any central authority. The upshot is that the transaction process is decentralized and yet faster and more reliable than many of its competitors. XRP transactions are confirmed within seconds at meager costs.

Is Tether a Stablecoin?

Tether is a cryptocurrency that is part of a group called stable coins.  The goal of stable coins is to reduce volatility and keep cryptocurrency valuations steady. This type of coin differs from other cryptocurrencies that can have volatile swings in prices. The lack of volatility is used as a medium of exchange and a way to store value instead of being used as a medium of speculative investments. Tether belongs to a group of stable coins that are backed by fiat stable coins. This scenario means that a fiat currency like the U.S. dollar, the euro, or the yen, backs each crypto coin in circulation.

What Happened to Ripple?

A class action was filed against Ripple in May 2018. The suit alleges that it led to a scheme to raise hundreds of millions of dollars through its XRP tokens. The complaint says that Ripple created billions of coins out of thin air and then profited by selling them to the public.  

The U.S. Securities and Exchange Commission initiated legal action against Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen on December 21, 2020, for selling unregistered securities. In the lawsuit, the SEC claimed that XRP was security instead of a commodity. The suit says that XRP is generated and distributed by Ripple Labs in a centralized fashion. The SEC stated that Ripple executives sold 14.6 billion units of XRP for more than $1.38 billion to fund its operations. Coinbase, the largest U.S. exchange, delisted trading XRP tokens in the wake of the suit by the SEC.

The Bottom line is the XRP and Tether are tokens that are created and used differently. While XRP is designed in a non-mining manner, it’s used as a payment system. Tether is a stable coin backed by a fiat currency and removes the volatility of other cryptocurrencies.

Cristina Macias
Cristina Macias is a 25-year-old writer who enjoys reading, writing, Rubix cube, and listening to the radio. She is inspiring and smart, but can also be a bit lazy.