Skip to content

Is XRP Eco Friendly? (Explained)

  • by

Cryptocurrencies have come under sharp criticism recently from the public because people believe they harm the environment. Bitcoin is reportedly using as much energy in a year as does the entire country of Argentina.

As the world increasingly embraces eco-friendly ways of doing business, blockchain investors are also looking to invest in crypto projects that are more energy-efficient . One of those projects is Ripple and its blockchain asset is called XRP.

Below, we’ll discuss what Ripple is used for, how it impacts the environment, and some of its pros and cons.

Is XRP eco-friendly?

XRP is an eco-friendly cryptocurrency. In fact, it claims to be one of the most energy-efficient digital assets in the market.

Before we continue with this discussion, it’s worth mentioning that Ripple and XRP are not the same thing and aren’t interchangeable as most people often do.

Ripple is a fintech company that operates a global financial payments system and is an important entity within the XRP Ledger ecosystem.

XRP, on the other hand, is the native cryptocurrency used for value transfer within the XRP Ledger. This is the part of Ripple that we’ll focus on in this guide.

The XRP Ledger uses a consensus mechanism comparable to the popular Proof of Stake (PoS) mechanism.

A few select individuals and institutions have been chosen to validate transactions and agree on the true version of the XRP Ledger.

The consensus happens every 3-5 seconds making XRP Ledger transactions fast. In comparison, Bitcoin’s ledger is updated once every ten minutes.

Also read: Is XRP vaporware?

The XRP Ledger is eco-friendly in two main ways:

Energy-efficient consensus mechanism

The XRP Ledger protocol uses preselected transaction validators as opposed to incentivizing competition which often leads to energy waste.

Ripple says that the energy used to confirm transactions on the XRP Ledger is “negligible.”

Additionally, since the validation process is less strenuous than mining, computers used for validation last longer.

Tokenomics

When the XRP Ledger was created in 2012, its entire token supply was minted right then, meaning that there are no new coins being created now.

As a result, there’s no incentive for validators to compete for new coins and neither are computers used to create any.

What is XRP used for?

Ripple’s XRP has three main uses:

Value transfer: XRP is used within the XRP Ledger as the asset that is transferred between wallet accounts. Confirmation times are between three and five minutes.

Speculation: One of the most prevalent uses of digital assets is speculation by traders and investors. XRP is one of the most popular trading assets on public cryptocurrency exchanges.

Store of value: XRP can also be held over the long term with owners aiming to conserve the value of their investments.

What is the impact of XRP on the environment?

Ripple claims that XRP’s impact on the environment is “negligible.” XRP uses minimal energy thanks to its unique consensus mechanism dubbed XRP Ledger Consensus Mechanism.

According to independent research, the XRP Ledger blockchain uses minimal energy compared to other more prominent networks such as Bitcoin and Ethereum.

Basically, transaction validators are preselected to perform oversight duties on the network and they all agree on the history of transactions every three to five minutes.

This process doesn’t entail any competition to create the next block as mining blockchain networks operate. For that reason, XRP is extremely energy-efficient.

What are the pros of XRP?

  • Transactions on the Ripple Ledger are fast and cheap with confirmation times ranging between three and five seconds.
  • XRP is eco-friendly.
  • XRP benefits from Ripple’s inroads within the conventional financial world as leading financial institutions are already using the fintech company’s cross-border payment systems.
  • Ripple is well-established and XRP is one of the oldest blockchain assets.

What are the cons of XRP?

  • XRP Ledger’s consensus mechanism encourages centralization of the blockchain.
  • Beginners have a hard time differentiating between Ripple and XRP.
  • Ripple is more popular among institutions who use RippleNet rather than the XRP Ledger to make international transfers.
  • XRP is not easily accessible within the United States because its parent company, Ripple, is battling a legal suit brought against it by the SEC over an alleged sale of unregistered securities.

Is XRP a good eco-friendly alternative to Bitcoin?

Ripple’s XRP is a great eco-friendly alternative to Bitcoin. When comparing the two blockchains, XRP’s consensus mechanism is more energy-efficient, scalable and cost-effective.

In the Bitcoin network,  the transaction ledger is updated every ten minutes while on the XRP Ledger, it’s done every three-five seconds.

Bitcoin uses mining to achieve consensus, a process that has been criticized for being energy-inefficient. It’s slow and the machines used are highly specialized.

On the other hand, the XRP Ledger employs a system that preselects transaction validators, thereby eliminating the block generation competition.

Additionally, once the validator machines become less efficient, they can be repurposed as opposed to being discarded.

Also read: Terra Luna Vs Bitcoin (What’s The Difference?)

Is XRP more eco-friendly than Solana?

Both XRP and Solana use somewhat similar mechanisms to achieve consensus. Solana relies staking whereby stakeholders are chosen by the system to create the next block whereas validators on the XRP Ledger are also preselected.

These mechanisms are both energy-efficient and lead to fast transaction times.

Also read: Is Solana eco-friendly?

Final thoughts

XRP is an innovative digital asset with a vibrant community behind it. The project has implemented a highly innovative consensus mechanism that is eco-friendly, scalable, and cost-effective.

However, if you decide to invest in XRP, it is worth noting that XRP’s parent company Ripple is currently fighting a legal battle with the SEC whose result might affect its viability as an investment asset.