How to buy XRP: A beginner's guide for buying XRP
The mainstream world of value transfer has transformed significantly through the ages, from the barter system and money to bank transfers and credit cards. The launch of Bitcoin (BTC) in 2009 ushered in another wave of innovation based on blockchain technology. Bitcoin and the thousands of subsequently created digital assets have established a value transfer system that is faster than banks and requires no third-party involvement, due to distributed ledger technology.
Born in 2012, XRP is one blockchain-based asset that aims to improve the payment world. XRP operates on its own blockchain, the XRP Ledger (XRPL). XRP and the XRPL are used in specific ways by Ripple, but the company has stated that the asset and its blockchain are independent of Ripple.
The XRP coin can serve several purposes as a payment vehicle or as a speculative asset. An example of XRP as a form of payment might include paying a friend an amount of XRP in exchange for lawn care. Buying XRP as a speculative asset, in contrast, means purchasing the asset with hopes of selling it later for a higher price, profiting on XRP’s price swings in the market. Using XRP requires buying or receiving the asset. Interested parties can buy XRP via various avenues. This article explains several available methods to purchase XRP.
Receiving XRP, or storing it after purchase, requires an XRP wallet. For more on XRP wallets, read — XRP wallets: A beginners guide to storing XRP
Centralized crypto exchanges
Numerous centralized crypto exchanges host XRP buying and selling. Such exchanges generally require users to set up an account complete with login details. Choosing a strong password and two-factor authentication (2FA) can add security to users' accounts. Two-factor authentication is a code that you receive via phone or mobile app, which you must input each time you log in to your account. If using an app, the 2FA code changes based on time, whereas text message-based 2FA sends a new code upon each new login.
Centralized crypto exchanges generally require users to provide certain personal information, such as location and name. Certain exchanges also ban customers of specific geographic regions. Make sure to research and comply with whatever laws apply to you and your jurisdiction. Centralized crypto exchanges vary in the information they require for account creation and usage. Some exchanges have verification levels based on the amount of personal information customers provide with higher verification levels allowing greater exchange functionality, such as higher withdrawal limits.
Buying XRP on a centralized crypto exchange typically involves sending fiat money (United States dollars, Euros, Japanese yen, etc.) over to the exchange via bank transfer and then using those funds to buy XRP. Some crypto exchanges also let customers use payment cards to purchase digital assets. Depending on the exchange, you can pay for XRP with other crypto assets, known as crypto-to-crypto pairings. Assets on crypto exchanges have pairings, which means you can trade between the two assets listed in the pair. Trading an XRP/BTC pair, for example, means trading Bitcoin for XRP, and vice versa. For this type of purchase, in this example, you would need to send BTC to the exchange and then use it to buy XRP or spend BTC that is already held on the exchange which you may have purchased via fiat or a different crypto asset.
Exchanges typically offer digital asset purchasing via limit and market orders. A limit buy order lets you set an order for the amount of XRP you wish to buy at the price you want to pay. The order fills if the market price on the exchange reaches your specified price level and there is enough selling pressure to fill your order at that price. In contrast, a market order is executed right away, at the limit sell order(s) price closest to the going rate on the exchange.
Buying crypto peer-to-peer (P2P) essentially means purchasing digital assets directly from another party. This can be completed by meeting up with someone in person. One example might be meeting up with a family member who owns XRP, determining a price based on the going market rate of XRP and the seller’s desired fee/premium and then conducting the transaction for cash. You need to set up an XRP wallet for the transaction and have the family member send you the XRP. This would require an internet connection for the transaction.
It is unwise to conduct in-person P2P XRP transactions unless you know the other party well. Conducting financial transactions with strangers can be dangerous.
Decentralized exchanges (DEXs)
Decentralized exchanges (DEXs) have become much more commonplace in the cryptocurrency industry. Essentially, at their core, DEXs facilitate crypto buying and selling without a third-party intermediary, such as crypto exchange companies in the case of centralized crypto exchanges. Instead, DEXs rely on code and technology to carry out transactions between parties.
For a better understanding of DEXs, read: What are decentralized exchanges, and how do DEXs work?
DEXs typically function on a main blockchain, depending on the DEX. Therefore, only facilitating buying and selling of assets built on DEX's native blockchain. However, some assets, sometimes called pegged or wrapped, have been created as versions of crypto assets that run on a separate blockchain than the one on which they were built. For example, a token built on a blockchain other than the XRP Ledger (XRPL), with each token holding actual XRP backing, would then essentially allow XRP trading on a DEX that runs on a separate blockchain. XRPL is a decentralized public blockchain that enables users to connect their computers to the ledger's peer-to-peer network.
Certain crypto wallets also allow holders to trade crypto assets via wallet interfaces. Additionally, platforms exist for instant crypto-to-crypto trading. These platforms essentially list two boxes — one for the asset you want to buy, and the other for the asset you wish to trade for the desired asset. The platform then walks you through the steps to swap the two assets. Fewer on-ramps exist for XRP ownership than are present for Bitcoin or Ethereum (ETH), two of the crypto industry’s most established assets. As shown, however, methods still exist for buying XRP. Before diving into the asset in any capacity, make sure your intended actions comply with any applicable regulations for your jurisdiction.