XRP is the cryptocurrency that is used by the RippleNet platform. The ripple cryptocurrency has managed to reach a total of $717.07 million net of purchases in the fourth quarter. In the course of this article, we will be reviewing whether XRP is a good cryptocurrency investment to make in 2022.
What is XRP?
This is a cryptocurrency that came to light in 2012 after it was created by the company Ripple. Just like other cryptocurrencies in the market, it is digital and does not have any physical coins or notes. This cryptocurrency is a blockchain-based token by virtue of its market capitalization. The transactions that are made with this cryptocurrency do not use blockchain mining like bitcoin. Rather, it makes use of a consensus mechanism through a group of bank-owned servers to confirm its crypto transactions.
Why It Is Risky To Invest In XRP in 2022
XRP boasts of the eighth largest cryptocurrency cap. It is an actively traded coin, but investing in it comes with a lot of risks. In the course of subsequent paragraphs, we will be looking at the dangers of investing in XRP in 2022.
1. The Company That Owns XRP (Ripple) Is Being Sued By The SEC
The cryptocurrency known as XRP is used by Ripple. Ripple is an organization that runs a platform for currency exchange and cross-border transactions known as RippleNet. Ripple had a deal with MoneyGram that spanned two years. They were MoneyGrams’ partner for cross-border foreign exchange and border payment using digital assets. However, the partnership between Ripple and MoneyGram came to an end before the two years were up.
The SEC also known as the “Securities and Exchange Commission”, charged Ripple with raising over $1.3 billion with the aid of unregistered securities offering a digital asset known as XRP. MoneyGram went on to stop the transactions they had with the Ripple platform when the SEC filed a lawsuit against them.
The argument of Ripple is that their cryptocurrency XRP, is a virtual currency and not an asset. Meaning that the complaint by the SEC will not apply.
It is not advisable for you to invest in Ripple’s XRP in 2022 till the court case with the SEC is cleared.
2. The Price of XRP Is Volatile
Did you know that every month, over 1 billion XRP coins are released? In the case of market volatility, Ripple owns a backlog of 65 billion coins. In 2022, the volatility of this coin can cause your investment to go up and down quickly.
Imagine XRP losing its value in short periods of time. That is why as an investor, you should not invest anything into the XRP that you cannot afford to lose.
3. There is No Consumer Protection With Ripple’s XRP Coin
When you make an investment with Ripple’s XRP, you will be expecting returns based on the cryptocurrency. It is important to note that this coin is not subject to consumer protection beyond anti-money laundering requirements.
Cryptocurrencies are not regulated the way normal finance is regulated. What this implies is that you will not have any protection should things go wrong.
3 Ways The Ripple (XRP) Is Different From Other Cryptocurrencies
It is important to note that XRP is a popular altcoin, but it differs very much from XLM, Litecoin, Bitcoin, Ethereum, and others in a lot of significant ways. Here are three ways XRP is different from other normal cryptos:
1. XRP Does Not Make Use of Blockchain Technology
Unlock Bitcoin and other popular cryptocurrencies XRP does not operate on blockchain technology. The Ripple company makes use of a unique technology known as the Ripple Protocol Consensus Algorithm (RPCA). This technology uses a distributed consensus mechanism that verifies transactions on the network.
But it doesn’t seem to ever occur he has to be a consensus that is verified on the network. One practical example is when a participating node can verify the authenticity of a transaction without a central authority by making use of a poll.
2. Ripple’s XRP is Centralized
There has been an ongoing debate as to whether or not the cryptocurrency of the Ripple company is centralized. While other cryptocurrencies are decentralized, the Ripple XRP coin is centralized. The reason for this is that it makes use of nodes to process transactions through a voting system.
3. It Is Not Possible To Mine XRP
It is important to note that it is practically impossible to mine XRP. Of recent, there are a large amount of XRP coins in circulation but they are not permitted to the action of miners. Instead, it is pre-mined and capped at 100 billion tokens. It is important to note that XRP tokens, and released on a periodic basis buy ripple from Escrow.
Ripple XRP currently is facing a lawsuit from the SEC. In addition to being a very volatile cryptocurrency, it is not advised to risk investment into it this 2022. It is constantly gaining and losing value in the market.