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The well-known Bitcoin whitepaper, published in 2008 by Satoshi Nakamoto, was the basis for the creation of a peer-to-peer electronic cash that began to upset financial markets. Bitcoin (BTC), launched in 2009, became the first cryptocurrency based on a network protected by peer-to-peer encryption. And it exists without a central authority that provides oversight and governance.
Anyone who owns Bitcoin can make transactions directly with anyone else and all transactions made with Bitcoin are recorded indelibly in a public ledger. That public ledger is known as blockchain and once a transaction is added to the blockchain its details can not be altered or deleted in any way.
Bitcoin uses a process called mining to verify transactions as valid and to protect the network. Mining is done by users who add the computing power of their computers to the network to solve increasingly complex cryptographic problems.
Then we have Ripple, which is a more recent arrival in the cryptocurrency scene. It was imagined in 2012 when the fintech company Ripple (XRP) was started in San Francisco. Ripple was created as a means for faster, cheaper and more reliable bank-to-bank payments and international transfers.
The Ripple network realizes this using its native token – XRP.
The XRP is the source of liquidity for banks and payment providers that send cross-border payments. It connects between various legal currencies and allows payments that settle in as little as four seconds and have a minimum transaction cost of 0.00001 XRP. Compare it with the SWIFT system that takes three days to resolve a cross-border transfer, with charges that can exceed $ 45.
How Bitcoin (BTC) works: Bitcoin is a decentralized peer-to-peer digital currency that can be used by individuals and entities to transfer value to one another, with all transactions recorded on a public ledger. It was created as a transactional currency to replace the legal currencies issued by the government.
How XRP (XRP) works: The XRP is used by payment service providers, banks and companies to make international transfers of cheaper, faster and more reliable value. It acts as a bridge between various legal currencies to send funds through the Ripple network.
Key similarities: XRP versus Bitcoin
While both are considered cryptocurrencies and Bitcoin and XRP look similar on the surface, when you dig deeper you will find that they are not really similar at all. As I said, they are both cryptocurrencies. And they both have a limit higher than the number of coins that will ever be created. And they are both the main actors in the cryptocurrency ecosystem.
That's where the similarities end, as these two cryptocurrencies were created for very different purposes.
Bitcoin was created as a transactional currency to replace legal currencies, and is meant to be used to pay for goods and services and to transfer value from one user to another. In contrast, XRP was created for banks, companies and other institutions to transfer money internationally.
And this leads us to a much more fleshy subject; the differences between Ripple and Bitcoin.
Key differences: XRP versus Bitcoin
While the similarities between Bitcoin and Ripple are few and far between, the differences are more numerous and go much deeper. Following are six major differences in Ripple versus Bitcoin.
- Philosophy and Purpose
The vision Satoshi Nakamoto had when he created Bitcoin was for a peer-to-peer currency that did not depend on third parties. He was trying to remove banks, financial institutions and any other company from the transaction cycle, allowing users to simply send money directly to each other. This makes Bitcoin an anti-bank like Ripple is pro-bank. Instead of removing banks from the payment cycle, XRP works with banks to ensure better transactions and global transfers. That's why some have called XRP "The bankers' currency". - Development
Bitcoin is completely decentralized and is not governed by any company, government or central organization. Instead it is run by a group of enthusiastic developers and any changes are made only by the consent of the entire Bitcoin community. Rallent is owned and developed by a registered company, which has investment and profit objectives. The Ripple company was founded in 2012 and controls all aspects of the Ripple ecosystem. Ripple has offices in San Francisco, New York, London, Sydney, India, Singapore and Luxembourg and over 100 customers worldwide. - Decentralization
Decentralization is the lack of control by any entity and is one of the key principles behind everything for Bitcoin, and many other cryptocurrencies for that matter. Bitcoin was created to be as decentralized as possible, and the larger the community and the use, the more secure and stable the Bitcoin network becomes. In contrast, Ripple is a private company that offers its services to banks and other paid companies. Its goal is to create profits and is highly centralized. He was often criticized for this centralization, in particular for the 60 billion XRP that the Ripple company holds as collateral. - Supply of coins
Bitcoin has a limit of 21 million coins and there will never be more than one created. Currently around 17.37 million coins are circulated or about 83% of the total offer. The remaining coins will be put into circulation by mining, with the last BTC that should be mined in 2140. XRP has a much larger supply of 100 billion tokens, and since they were pre-mined, they were all already created. Approximately 60% of the total is held in guarantee by the Ripple company and releases the coins as necessary. The supply of XRP will decrease slowly over time, as a small amount of XRP is destroyed with each transaction. - Reserve coins
Both Bitcoin and Ripple have coins in reserve from their creators. The founder of Bitcoin, Satoshi Nakamoto, holds about 980,000 BTC, although this can not be demonstrated because nobody knows who Nakamoto is. But it has been hypothesized that the account that holds the 980,000 BTC is almost certainly that of Nakamoto as the founder would have easier access to that number of coins, and will have complete confidence in its creation. Resizing is actually quite similar as they also hold a large amount of XRP. In fact, they contain about 60 billion XRP, or 60% of the total supply. Some critics have stated that this is excessive, but the company regularly releases part of this offer, which differs from the Bitcoin reserve that has not seen any issued currency. - Commissions and transaction times
Also the functionality in Bitcoin and Ripple differs. Transactions with Bitcoin take approximately 10 minutes to confirm and processing times have increased to over 24 hours in periods of extreme network congestion. Average transaction costs in the last 12 months have been around $ 0.50, but this is somewhat distorted by the peak of over $ 50 per transaction hit in December 2017. The reduction in expenses is much cheaper and much faster . A Ripple transaction takes only 4 seconds to settle and costs less than $ 0.01. Ripple can also handle up to 1,500 transactions per second, while Bitcoin is limited to 7 transactions per second.
Pros and cons of Bitcoin and XRP
Bitcoin (BTC)
Pros: Bitcoin is the largest and well-known cryptocurrency by far, having gained almost mainstream recognition in its 10 years of life. Set the bar for the entire cryptocurrency ecosystem and perhaps have the largest and most passionate community of any cryptocurrency.
Cons: Bitcoin is held back by slow and expensive transactions that limit its usefulness as a transactional currency. In terms of transactional payment there are a number of cryptocurrencies that work better than Bitcoin, some of which have been designed specifically for this purpose.
XRP (XRP)
Pros: Ripple is hitting banks internally and breaking the international payment industry as efficiently as possible. Ripple also boasts strong financial support and a growing list of partnerships with leading global financial institutions. This should help Ripple continue to grow and increase its influence.
Cons: Ripple will struggle to increase adoption by the financial community as it faces increasing competition from SWIFT, Visa and the banks themselves. Banks have huge infrastructure developed over decades to rely on existing payment and transfer systems and making sure they can change will be a difficult obstacle. It remains to be seen whether the major global banks will adopt Ripple technology.
Spending BTC and XRP
Bitcoin has been designed as a peer-to-peer digital currency and spending options continue to rise, although they remain rather limited due to slow transaction times and high Bitcoin transaction fees. Increasingly it is used for large payments, such as those involving properties, cars and luxury goods. Its use as a transactional currency will probably remain limited as long as commissions remain high.
Ripple was not designed as a transactional currency, but there is a small number of online merchants who accept Ripple. It's a shame because with its fast transactions and small expenses it's actually a better choice for a transactional currency. But Ripple has been designed as a means of making international money transfers (or even transfers of assets such as gold and oil), and this remains its main use case. Indeed, many cryptocurrency enthusiasts are reluctant to use Ripple because of its centralization and ties to traditional banks.
Invest in BTC and XRP
Investing in Bitcoin is simple because you can buy it from so many exchanges of cryptocurrencies or even from individuals. And you can use almost any payment method, from cash to credit cards to online payment portfolios.
If you want or do not want to buy and invest in Bitcoin is another question. Yes, it remains the largest and oldest cryptocurrency, but in 2018 it lost over 60% of its value, and remained around the $ 6,500 level for a few months. There are still questions about when and if it will increase again, or if it will drop to its lowest lows.
Ripple has seen incredible growth in the last part of 2017 and has maintained its value quite well in 2018, despite the large bearish cryptocurrency market. In fact, starting from November 2018, it will appear that it will challenge Ethereum for the position of second cryptocurrency by market capitalization.
Ripple continues to add new customers and the growing use of XRP tokens should help drive its price up over time.
XRP may not be as easy to buy as BTC, but it is not difficult since most of the cryptocurrency trade brings XRP as one of their offers. The difficulty is that in general it is not possible to buy XRP with fiat currencies. Instead you must first buy Ethereum or Bitcoin and then exchange those for XRP.
Regarding the opportunity or not to invest in Ripple, all I can say is do your research. Get a better understanding of technology and use case and make your decision about the potential for growth of the Ripple network and the XRP token.
Bitcoin vs. Ripple: Conclusion
The issue of Ripple vs. Bitcoin may not be completely valid because it is based on different principles and philosophies and was created with different objectives in mind. You will not be able to find Ripple used in the same way as Bitcoin, but that does not mean it's not worth considering it as a crypt.
Ripple has some advantages, such as strong financial support and a large number of partnerships. He set a good foundation in his attempt to become a cornerstone of the global payment industry. And if it grows as big as the Ripple company hopes, XRP owners could reap great benefits.
And as for Bitcoin, it does not seem to lose its grip as the biggest and most famous cryptocurrency at any time. While it is struggling with scalability issues and transaction costs, developments are in the pipeline to solve these problems. And it's a good value reserve right now, with growing adoption from the global financial sector.
