You might be wondering why all cryptocurrencies are compared with Bitcoin?
Within 10 years of its successful launch, Bitcoin has become the benchmark for all other cryptocurrencies. Cryptocurrencies that came after bitcoin used the same framework in their formation.
Ripple is 3 years younger than Bitcoin, as Bitcoin was launched in 2009 and Ripple came in the market in 2012. Ripple is considered at 3rd Rank after Ethereum on 2nd and Bitcoin on 1st.
For comparing Bitcoin with Ripple, one should know what is Ripple.
Ripple- An Intermediary along with Crypto
1. People tend to confuse between Ripple and XRP. Ripple is actually a network, whereas XRP is a native coin.
2. The Ripple network or RippleNet is an open-source protocol developed and published in 2012 by Chris Larsen and Jeb McCaleb.
3. Ripple acts as both a digital payment network and cryptocurrency. It allows for fast and cheap transactions.
4. It relies on a common shared ledger, which is a distributed database storing information about all Ripple accounts.
5. It acts as a network that allows sending money globally within a few seconds. It is designed to make funds transfer less expensive and more efficient all over the world. Most of the customers that use Ripple are corporate institutions and not average consumers.
Understanding the Ripple
1. Ripple is an intermediary between the transactions that are needed to be performed at a global level that involves a change of currency.
2. It allows for a seamless transfer of money in any form, whether USD, Yen, l litecoin or bitcoin.
3. It works like SWIFT-a service for international money and security transfers that are used by a network of banks and financial intermediaries, but Ripple is much faster than this. It also charges a minimal fee of $0.004
4. Where banks take 3-4 working days for processing the transaction, Ripple takes only seconds and just charge 0.00001 XRP.
5. The only reason it’s not free is to prevent DDoS attacks.
Various programs by Ripple
- xRapid, a program that allows financial institutions to minimize liquidity cost if they use XRP as a bridge from one fiat currency to another.
- xCurrent which is a payment processing system for banks.
- xVia which allows businesses to send payments through RippleNet.
All three solutions are crucial in enhancing the Ripple’s value.
XRP is a token used for representing the transfer of value across the Ripple Network. The main purpose of XRP is to be a mediator for both cryptocurrencies and fiat exchanges.
The direct conversion of many currencies is not possible. Therefore, banks need to use the US dollar as a mediator. There is a double commission: converting currency A to USD and USD to currency B that results in high fees.
Ripple is a mediator and has the ability to be exchanged to any currency or valuable (like gold) but is much cheaper than USD.
If you want to exchange dollars to rupees, it can be dollar with dollars and rupees with rupees to minimize the commission. As mentioned above, the transaction cost on Ripple is $0.00001.
If banks join one of Ripple’s platforms to process transactions, they are going to be a lot more efficient.
Banking platforms like Santander, Axis Bank, Yes Bank, Westpac, Union Credit, NBAD, and UBS have already accepted Ripple.
Highlighting the procedure followed by XRP while transferring money:
- You send an international payment.
- Your bank buys XRP.
- Your bank sends the XRP to the receiving bank.
- The receiving bank sells the XRP.
- The proceeds are then deposited on the recipient’s account.
XRP is not mined, thus they are limited!!
Initially, 100 billion XRP tokens are pre-mined, and just 38 billion are available in the market, the rest are in Ripple labs and can release according to the will of developers.
No mining at all in Ripple because Ripple does not use a proof-of-work algorithm for consensus like Bitcoin.
Cryptocurrency without Blockchain- Unimaginable!!
Ripple has replaced blockchain with its own-patented technology: the Ripple Protocol consensus algorithm (RSPCA).
As more coins can be released by Ripple Lab, so at this point ripple, can be considered as “highly centralized” but the whole idea of cryptocurrency is to avoid centralized control.
However, it uses a unique distributed consensus mechanism through a network of servers to validate transactions, which enables almost instant confirmations without any central authority, which keeps Ripple as “decentralized crypto”.
Key differences between Bitcoin and Ripple
|Basis of Distinction||Bitcoin||Ripple|
|1. Ownership||Bitcoin is completely decentralized and is not known by any single organisation, instead participation is available to all.||Ripple is owned by the company “Ripple” as its control is centralized hence, members are selectively elected.But it operates on an open source peer-to-peer platform that is decentralized and works on consensus that no party can control. The network can function autonomously. Thus, providing the features of both centralized and decentralize.|
|2. Purpose||Bitcoin came in the market with the idea of eliminating the intermediaries and becoming an alternative to fiat. Its purpose was to provide the medium of exchange without the regulation of any authority like banks etc.||Ripple purpose is entirely different from bitcoin, as it focuses on transferring money/funds across the globe within fraction of seconds and with minimal cost. Thus providing a payment mediator method for both crypt currency and fiat, wherever is a token used for representing the transfer of value.|
|3. Mining||Bitcoin uses Block chain based on POW (Proof-Of-Work) the mining will be continue until total supply reach to 21 million coins. For mining the coins it requires to solve complex algorithms, which require high power thus increase the cost of transaction. Thus, it may sometimes cause inflation.||Ripple use consensus ledger based on FBA (Federated Byzantine Agreement). The coins are premised. There are 100 billion XRP and no additional mining will occur in the future.62% of coins are hold by Ripple Labs, they will release them according to the demand. Only 38 billion are available in the market.This will result in control supply hence will maintain the equilibrium.|
|4. Transaction Cost||Bitcoin charges $40 per transaction.||Ripple charges $0.004 per transaction.|
|5. Speed of Transaction||Depending upon the transaction, it takes 10 minutes to one day for processing the transactions.||3-5 seconds required by Ripple for completing the transaction.|
|6. Information Tracking||Bitcoins are spread across the globe, network only tracks the movement of Bitcoins.||Ripple is able to track information of any kind, such as account balance the movement of coins can be checked on Ripple charts.|
|7. Buy/Sell||Bitcoins can be bought and sold on any crypt exchange.||Ripple can be bought and sold on its own secure network.|
Bitcoin and Ripple are like the first and last pages of the same book. Just like these pages belong to the same book, in the same way, Bitcoin and Ripple are similar only because they use cryptography.
Their objective is totally different from each other, Bitcoin focuses to serve as an alternative of fiat whereas Ripple’s main focus is to be used by banks. So it is not a subject of multiple regulation checks as many other cryptocurrencies.
Though, it has its own crypto XRP but still has not gained the fame like Bitcoin.
There are only 21 million Bitcoins that can ever be mined, 17 million are already mined and prevailing in the crypto market, whereas a 55 billion XRP tokens are kept in an escrow account, and each month a maximum of 1 billion tokens are set to be released as governed by an in-built smart contract by Ripple Labs. Any unused portion of the XRP in a particular month will be shifted back to the escrow account. This mechanism ensures that there will be no possibility of misuse due to an oversupply of XRP crypto coins, and it will take many years before all the crypto coins will be available.
Bitcoins follow a complex procedure of mining so it requires high power; in contrast, XRP is not mined so is much faster and cheaper than Bitcoin.
Bitcoins are decentralized- none is there to control them, while Ripple is both centralized and decentralized, thus can be more trustworthy.
Bitcoin is still the king of the market and in the near future, its position might be on risk, because of emerging of new and advanced cryptocurrencies.
For new cryptos beating Bitcoin has always been a challenge!!
It quite difficult to choose the best crypto among them, as Bitcoin and Ripple are like the two faces of the coin; both are perfect on their side.