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Bitcoin vs Ripple

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 vs Ripple – essence, advantages
  • Bitcoin vs Ripple – disadvantages
  • Future outlook & Comparison

mariela naydenova

pro MEMBER SINCE 2018

Mariela is a former investment banking analyst and has been a cryptocurrency writer with LeapRate and Asktraders for the past two years

10 min read 15th of Oct, 2019
0 0

Bitcoin – Essence and Mechanics

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”.

Bitcoin vs Ripple

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.

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Advantages of Bitcoin

  • Bitcoin provides a medium of exchange in a peer-to-peer way that allows people to send and receive funds across the world for minimal cost in a quick way as opposed to traditional bank payments and transfers.
  • While the Bitcoin network is transparent in the way that anyone can see what transactions are being made between wallets, it also allows for a privacy component.
  • It is very hard to know who is involved in these transactions as all of the information provided is simply how much the transaction was worth and what the two parties involved wallet addresses were. This is why a lot of governments have been concerned about cryptocurrencies being used by criminals for money laundering and engaging in other criminal activity, because these payments and link are hard to track. There are also anti-fraud measures implemented as part of the network as payments are irreversible. There is no way for someone to chargeback or cancel payments that they have made. Another advantage is that you can send funds across borders and not have to worry about currency exchange risk. This saves you money in the long term and you aren’t restricted by having to send payments on working days. You can send or receive Bitcoin at any time of the week, no matter what time or day it may be.

Disadvantages of Bitcoin

  • Scalability – Due to the block size being limited to 1MB, there is a lot of network congestion which has led to transactions taking a lot longer to process and as a result the fees have also increased. This of course goes against the principles laid out in Satoshi’s whitepaper of having a medium of exchange that was faster and cheaper than traditional payments services. This is why Bitcoin Cash emerged after a hard fork in the Bitcoin network during August 2017. There are ongoing solutions being proposed in order to try and resolve this scalability issue.
  • Barrier to entry – A lot of merchants still don’t accept Bitcoin as a form of payment and it also is a lot easier when making everyday purchases to use cash or card, rather than sending Bitcoin. There are a number of products however on the market now which are effectively debit cards for Bitcoin, so they can be used the same way as normal debit cards.
  • Price volatility – Merchants and vendors often don’t want to deal with not knowing what direction Bitcoin will go as they cannot accurately forecast their financials for the year due to this fluctuating price. This phenomenon is actually very common to all cryptocurrencies.

Bitcoin or Ripple which is better

Ripple – Essence and Mechanics

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.

Advantages of Ripple

  • Ripple is in the unique position that it bridges the gap between the traditional financial payments system used by the likes of banks and financial institutions with the world of cryptocurrency and blockchain. There is a huge market for Ripple to get involved with, having already got partnerships in place with more than 100 banks and other financial institutions.
  • The Ripple network is adequately anonymous and secure that it offers a lot more security than the traditional banking payments systems. There are also a lot less costs associated with using this network. Processing times are much faster too and it can easily deal with cross border and cross currency payments.
  • Ripple can deal with high volumes of transfers without any slowdown or other issues cropping up. It is mainly focused on companies and institutions rather than the everyday consumer. Ripple is unique when compared to most cryptocurrency and blockchain projects in the sense that it has been making a profit for more than a year to date. This is shown by the major partnerships they have attracted to date, with further notable partnerships coming in the future too.

Disadvantages of Ripple

  • Not suitable for everyday use. Ripple is mostly preferred by those dealing with more significant sums in these transfers, such as business institutions and governments.
  • Heavy centralization. Apart from being centralized, Ripple is also private as the Ripple Labs team owns about 70% of the token. This means that decision can be made to change the network and manipulate the cryptocurrency to aid in their own goals, rather than being decentralized and not able to be controlled in this manner such as with Bitcoin.
  • There is a massive amount of tokens currently in existence, as many as 100 billion tokens. About 38 billion of these tokens are currently in circulation in an investment sense. There are fears in some circles that the Ripple team who own about 70% of the coins will try to cash out on their position at certain times, which will flood out the market for XRP. This would lead to short term levels of oversupply that are massive. This means that normal investors holding these tokens could be burnt in a significant way.
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Bitcoin vs. Ripple

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.

Conclusion

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.