Bitcoin and Ripple are the number one and number three cryptocurrencies on the market today in terms of market capitalization (Bitcoin with $153bn and Ripple with $12.1bn). They have both gathered tremendous momentum over the past year or so. Both of these digital currencies are aiming to disrupt the way payments are currently made throughout the world and they have already gained a lot of traction. Some analysts even say that Ripple is ultimately the best cryptocurrency so far, as it is now used by major banks and financial institutions. Ripple was even rumored to be the official cryptocurrency during the 2020 Olympic games.
This article will look at the “Bitcoin vs Ripple” argument to see what areas each of these cryptocurrencies thrive and where they struggle, seeing which one might come out on top.
Bitcoin is the very first cryptocurrency to be created, having first come to light in 2009 after being created by an anonymous person/group using the moniker Satoshi Nakamoto. The main goal of Bitcoin is to disrupt the way money is currently transferred across the globe. The Bitcoin community has promised ultra-low transaction fees, as well as much faster processing times than are seen with traditional online payment services. Bitcoin also operates on a decentralised basis, which means that no authority can decide what is to be done with the network and control the supply of the currency compared to centralised governments which control fiat currencies. The primary goal of Bitcoin? To disrupt how financial markets work and the role of the common person in the entire “game”.
All Bitcoin tokens are digital and the balances are stored on a public ledger, in addition to all Bitcoin transactions. Bitcoins are not backed by any asset or commodity. The Bitcoin network operates efficiently due to the miners who verify the transactions on the network. This verification process involves solving complicated equations to ensure that these transactions are legitimate. Every time a miner successfully solves this block equation, they will receive a reward for doing so in the form of Bitcoin, in addition to transaction fees. The total supply of Bitcoin is fixed at 21 million tokens. The price of Bitcoin had fluctuated widely since it was first created in 2009, with it reaching nearly $20,000 in December. Since then, the price has decreased significantly and one Bitcoin now trades for around $8,500.
Ripple is both a digital payment network specializing in financial transactions and a cryptocurrency. It was first released back in 2012. The cryptocurrency of Ripple is named XRP. Ripple is mostly known for its digital payment system. It caters for smooth transfers of money no matter if it is cryptocurrency or fiat currency throughout the world. Ripple has a medium which called the Gateway and it acts as the key link in a chain of trust for two parties involved in a transaction. The Gateway receives and will send the given currency using public addresses through their Ripple network. Anyone can become a member of the network and have their own gateway opened. XRP is utilised to bridge different types of currency together, no matter if it is crypto or fiat. This means the system of transferring one currency to another is seamless.
There is no proof of work or proof of stake system in place with the Ripple network. A consensus protocol is used to validate the balances of accounts, as well as verifying the transactions that are made. Ripple already has a relationship with over 100 banks and financial institutions globally, including giants such as Standard Chartered Bank and BBVA. There are many improvements to traditional payment systems, as transactions can be processed in seconds and it can handle millions of transactions without any issues. Fees are ultra-low, especially when compared to the significant fees banks charge when payments are made across borders.
Bitcoin and Ripple clearly are very different to one another. Bitcoin is completely decentralised and focusing on being a medium of exchange for the everyday consumer, whereas Ripple is a lot more centralised and focuses on catering for large groups such as governments and financial institutions. Bitcoin has experienced issues with transaction fees and speeds in recent times, an area in which Ripple completely dominates with their ultra-low metrics in this area. Bitcoin has a mining system in place called proof of work, whereas Ripple instead uses a consensus protocol in order to verify transactions, eliminating the need for any miners. Bitcoin is not owned by any entity and is fully decentralised whereas about 70% of Ripple tokens are owned by the company Ripple Labs.
This means that Ripple can make changes as they see fit, whereas with Bitcoin the community as a whole needs to make these decisions. The Bitcoin network has a lot of issues with scalability and can only handle about 10 transactions per second, compared to the 1,500 transactions per second that the Ripple network can handle. During 2017, the average cost per transaction with Bitcoin was around the $35 mark, with the same metric being only $0.004 for Ripple. There is no need for miners, the Ripple network requires little to no energy consumption per transaction, compared to the on average 250kWh needed for each Bitcoin transaction, which leads to serious energy demands.
It is very hard trying to decide if Ripple is better than Bitcoin or vice versa as they are a lot different in their structure and their aims. Bitcoin is focused on being a medium of exchange for the average person, while Ripple focusing more on financial institutions and large organizations. It is certainly a fascinating process comparing these two giants of the crypto world, both of which have come so far in the past twelve months or so.
They both clearly have their pros and cons, but overall they are both solid digital currencies which may suit your specific needs depending on your situation. If you are looking to use either of these cryptocurrencies or make an investment, make sure that you are using the best crypto brokers and crypto trading strategies as outlined in the crypto broker comparison guide. Therefore, you are giving yourself the best chance as possible to benefit from your investment.