For several years, people have put their hope in cryptocurrencies as a way to protect their capital from devaluation and earn some extra profit through trading and mining. Currently, Bitcoin is the king of the hill, being the first and most popular cryptocurrency in the world.
However, the sudden rise and fall in its value has caused many people to start looking for other less volatile alternatives. Taking advantage of some weaknesses in the Bitcoin structure, a company known as Ripple Labs developed its own cryptocurrency, the XRP, to compete against Bitcoin.
Since its launch, the price of XRP has suddenly multiplied, attracting the attention of many investors in the world. Currently, the XRP is the third cryptocurrency with the highest market capital, after Bitcoin and Ethereum.
Many think that in a very short time, the XRP can become the new king of cryptocurrencies. But is this really possible? Is Ripple the next Bitcoin? In this article you’ll learn everything you need to know about Ripple and its evolution in the market over the years.
By knowing the difference between Ripple and Bitcoin, you can make your own decision and decide if it’s really worth starting to buy XRP and wait for the best to happen.
Ripple vs. Bitcoin: Is Ripple the next Big Thing?
Before analyzing in detail why many finance experts trust that Ripple will smash Bitcoin, it’s necessary to first know what Ripple is and what Bitcoin is. Below you’ll find some useful explanations that will help you to get the point.
Bitcoin was the first cryptocurrency in the world. It was created in 2009, by an unknown programmer. To hide his identity, he used the pseudonym of Satoshi Nakamoto.
Bitcoin allows you to perform decentralized monetary transactions. This means that no bank, government or private institution can audit the transactions.
In this case, the transactions are confirmed by Miners within a blockchain. Anyone with a server or computer can become a Miner. Each Miner receives a reward in Bitcoin after verifying a transaction.
In total, Bitcoin’s maximum supply is 21 million BTC. However, only 17.1 million are currently circulating in the market.
Ripple was created in 2012 by Ripple Labs, a startup company located in the United States. Actually, Ripple is the blockchain and XRP is the cryptocurrency of this system. This same confusion occurs between Ethereum (the blockchain) and Ether (the crypto).
As it happens with Bitcoin, Ripple allows decentralized transactions and doesn’t require third-party confirmation. There are currently 60 billion XRP circulating in the market. However, 100 billion XRP is the maximum supply.
Types of Transactions
Most of major banks in the world use SWIFT technology to perform transactions worldwide. Basically, the information of each transaction is verified first by a private company located in Switzerland. The process of verification, conversion and release of funds could take up to 3 days.
This can be really frustrating, especially if you want to receive your money fast. However, this doesn’t happen with Bitcoin and Ripple.
For example, a transaction with Bitcoin may take up to 10 minutes. Bitcoin uses a consensus mechanism known as Proof-of-Work to confirm each transaction. In simple words, Bitcoin’s network generates such a complex algorithm that it takes a computer up to 10 minutes to solve it.
Several computers or servers (also known as nodes) within the same blockchain compete to solve the algorithm. The first node that solves the algorithm receives the reward. Then the transaction is confirmed and each node in the blockchain keeps a record of that transaction.
This reward system has become unfair, since large mining farms have acquired powerful servers that can solve algorithms in no time. This leaves the rest of users with inferior devices unable to receive high profit from mining.
Bitcoin mining generates very high consumption of electrical energy, which is a big con in countries where electric energy costs are too high. According to a study, electrical energy consumption associated with mining exceeds that of 159 countries together.
Also, Bitcoin charges between $0.5-$3.0 for each transaction. However, in 2017, when Bitcoin reached its highest price according to Coinbase, fees raised up to $40. This fact made virtually impossible to transfer small amounts.
But maybe, Bitcoin’s biggest weakness is its inability to generate more than 7 transactions per second. For example, Visa can process about 50 thousand transactions per second. So, there are still many years left until Bitcoin finally manages to outperform the major electronic payment platforms.
On the other hand, Ripple uses a consensus mechanism known as the Federate Byzantine Agreement (FBA). This system uses servers (also known as nodes) located in major banks, known as Transaction Verificators.
Each node is interconnected with each other, forming circles. Also, each circle is interconnected with another circle. The system doesn’t generate too complex algorithms, making transactions take only seconds to be confirmed. This also reduces the high consumption of electrical energy, in contrast to Bitcoin.
Transaction Verificators make the existence of Miners unnecessary. So, you can’t get extra profit from mining XRP. Also, you don’t need to turn to third parties to change Bitcoin to Ripple or vice versa. All exchange operations are done through Ripple’s website.
Although the company or banks have no control over the transactions, they can control the supply of XRP that circulates in the market. So, in certain way, they can manipulate the price of cryptocurrency at convenience. Therefore, the system isn’t completely decentralized.
Ripple’s transaction fees are less than $0.01. So, you can make hundreds of transactions without losing your first dollar. In addition, Ripple can perform more than 1500 transactions per second, far exceeding the capacity of Bitcoin.
At the end of 2017, Bitcoin reached its highest value of 20 thousand dollars per BTC. This represented an increase of 2000%. However, shortly after its value suddenly dropped to less than half.
On the other hand, Ripple valuation registered a much larger growth in the same year. At the beginning of 2017, its price was 0.0065 dollars per XRP. At the end of the year, it raised to 2.4 dollars per XRP. That’s why many banks and investors believe that Ripple may be the next Bitcoin.
Currently, more than 100 banks around the world are using Ripple to make their international transactions. Among these banks are BOFA, Santander and UBS.
Here are the actual prices of BTC and XRP by the moment when this article was written:
Ripple vs. Bitcoin: Final Considerations
If things turn out well and each price prediction becomes a reality, it’s possible that Ripple will suddenly multiply its market capital in the coming years, beating Bitcoin, Litecoin and others. But, nothing is certain in the volatile world of cryptos, so anything can happen. Below, you’ll find the key takeaways from this article, so you can make your own decision.
The Key Takeaways
- Totally decentralized
- Transactions may take up to 10 minutes to be confirmed
- Allows earning extra income through mining
- Mining can generate excessive consumption of electric power
- Up to 7 transactions per second
- Fees can exceed $40
- Partially decentralized
- Transactions take seconds to be confirmed
- It doesn’t allow mining
- It doesn’t require excessive electrical consumption
- Up to 1500 transactions per second
- Less than $0.01 fee per transaction
The Final Verdict
Certainly, Ripple offers many advantages compared to Bitcoin. It has the backing of several international banks, which guarantees greater price stability in contrast to Bitcoin. In addition, the technological platform that supports this system is much more advanced, allowing a greater number of transactions in less time.
So, is Ripple the next Bitcoin? Nobody knows. But, it’s possible that it will replace the SWIFT system in the coming years. So, this is the best time to start buying XRP, while its value per unit is still low. Perhaps, a small investment today will become a huge fortune in the future.