The hype and hysteria in the distributed ledger, blockchain, and cryptocurrency space are on the rise, and one name that keeps increasingly surfacing in that sector is Ripple. People often ask how does ripple differ from bitcoin (still the best-known blockchain based digital asset.) So in this post, we will slate ripple vs bitcoin, and we will examine what exactly Ripple is and what distinguishes it from Bitcoin.
Ripple v Bitcoin
While Bitcoin is a cryptocurrency designed to be a means of payment for goods and services, Ripple is a payment environment, currency exchange and remittance system intended for payment networks and banks. The purpose is to provide a method for direct transfer of assets (e.g., gold, money, etc.) that settles in almost real-time, and is a more straightforward, cheaper, and secure alternative to transfer systems used by banks today, like the SWIFT payment system.
Bitcoin is based on blockchain technology, while Ripple doesn’t use blockchain but uses a distributed consensus ledger utilizing a network of authenticating servers and cryptocurrency tokens called XRP (seldom referred to as Ripples).
The actual cryptocurrency of the Ripple network, XPR, is a token which is used on the network to expedite transfers of money between various currencies. Conventional settlement systems commonly use US dollars as a standard currency for converting between other currencies. This typically attracts currency exchange fees and takes time to process, which is why international bank transfers often take two to three days to process. By first converting the value of the transfer into XRP, instead of USD, exchange fees are bypassed, and processing of payments will happen in seconds.
Banks like Santander, Fidor Bank, the Commonwealth Bank of Australia and Japan Consortium alongside its 61 member banks have all stated that they are trialing or executing applications using the Ripple Network payment system.
XRP is a token used for representing the transfer of value in the Ripple Network. Unlike bitcoin, where new coins are produced as compensations for participants contributing computing power to keep the blockchain network functioning, Ripple produced 100 billion XRP coins right at its inception.
Ripple recently added an innovation whereby, via escrows, a smart contract platform, the company releases 1 billion of its XRP holding to itself every month to fund its business enterprises, incentivize clients, and sell to authorized investors. The company makes sure to return all unused tokens into escrow. According to inside sources, in January, which was the first month of escrow Ripple only used around 100 million and it had to return 900 million back into escrow system.
Where can I spend Ripple’s XRP?
Ripple was never intended to be a currency or a payment method. There is, however, a few merchants who accept payment in XRP tokens online. For instance, you can purchase hot sauces, honey, and jewelry. You can find some lists of vendors that are probably willing to accept Ripple’s XRP, but things are always changing and some of the vendors listed there do not or no longer allow it.
The primary use case for XRP is meant to be for transfer of other currencies or commodities like gold or oil over the Ripple network. Each time an asset or money transferring institution such as a bank uses the network to make a transfer and settlement, the cost is deducted in a small amount of XRP. This is what gives XRP themselves their value – in some ways they can be referred to as “fuel” for the devices which handle these transfers.
How can I invest in Ripple? And should I?
Ripple has unquestionably amassed a lot of momentum, and the number of organizations which are using it shows that the XPR tokens themselves will become valued assets in their own right.
In fact, last year, the increase in the value of one XRP token exceeded Bitcoin or any other digital currency. Early in 2017, one XRP was estimated to worth $0.006. They towered, at the start of 2018, at £3.87, before soon crashing down to their current value of about $1 per XRP.
XRP is traded on cryptocurrency exchange platforms like Binance and Poloniex. Usually, it isn’t possible to purchase XPR with existing fiat (government-issued) currencies. First, you have to buy Bitcoin or Ethereum, then transfer them to a cryptocurrency exchange to trade them for XRP.
As to the question of “should you?” It is fair to say that the acceptance of Ripple by top-tier financial institutions is generally seen as a reliable indicator of XRP’s future value.
However, before investing in any form of digital assets you should thoroughly research it first, and make up your mind about whether or not it is likely to be a valuable asset in the future. As we have seen, the value of all cryptocurrencies is extremely volatile and can go down as quickly as it goes up. A solid piece of advice is never to invest more than you can conveniently afford to lose.