When comparing Bitcoin to Ripple, you’ll find they both have established use cases, make use of decentralization, and are associated with hugely popular cryptocurrencies. Find out all about how both of them work in this article discussing Bitcoin vs Ripple.
It is indisputable that Bitcoin is the leading cryptocurrency in the world today. It promises transaction fees that are substantially lower than traditional online payment mechanisms. Moreover, its operation is in the hands of a decentralized authority, unlike government-issued fiat currencies. Its impact on the digital currency industry is almost indescribable and one cannot deny the innovations it brought with it.
As is the case with most creations, its reputation as being top tier may not last forever. Indeed, it is the go-to example people refer to when talking about cryptocurrency. But this could prove to be temporary. Since its inception, other digital currencies have begun to appear and are garnering attention and acclaim of their own. With this comes the threat of a potential dethroning of Bitcoin.
Let’s face it, the crypto marketplace is becoming quite populous. There is a wide range of digital coins and tokens that are battling for their time in the spotlight.
As a case in point, look no further than the Ripple project and it’s corresponding cryptocurrency, XRP.
This cryptocurrency is one of the leading Bitcoin competitors and is continuing to surge ahead with growing adaptability. At the time of this writing, XRP ranks third on CoinMarketCap, only falling behind Bitcoin and Ethereum.
So, how is it that XRP has the potential of surpassing Bitcoin? Or at the very least, why is it plausible that it could reach Bitcoin’s level of success? This article will take a closer look at what sets these two cryptocurrencies apart.
The oldest and largest crypto
Bitcoin is electronic cash that functions on a peer-to-peer system. Its original design was to provide users with a feasible alternative to fiat currency.
Bitcoin operates on a public blockchain ledger that reinforces a digital currency primarily for the payment of goods and services. The predominant draw to Bitcoin is its cryptocurrency, which shares the same name of ‘bitcoin’. When its price is paired with other currencies on exchanges, it’s referred to as BTC.
Bitcoin’s foundation is a blockchain, which is a public distributed ledger of verifiable transactions and record-keeping. Miners validate the transactions before adding them to the Bitcoin blockchain. For their work, miners receive newly minted bitcoins.
Balances consisting of Bitcoin are kept with the use of public and private ‘keys’. These are not keys in the traditional sense. They are instead long strings of numbers and letters that link together through the mathematical encryption algorithm. This algorithm is the same one that was used to create them in the first place.
The public key (which is akin to a bank account number) functions as the address that the world sees. This address is where other people may send bitcoins to. The private key (which is similar to an ATM PIN) is an important component that needs to remain a secret. It is strictly for the purpose of authorizing Bitcoin transmissions.
Bitcoin’s general price is actually dependent on the size of its mining network. Basically, the larger the network is, the more difficult and costly it becomes to produce new bitcoins. It is because of this that the price of bitcoin needs to increase as its cost of production also rises.
A prominent competitor
The overall design of Ripple is to offer its users with fast, inexpensive, and secure cross-border payments. This is done by way of RippleNet, which is a network consisting of banks and payment providers worldwide.
Ripple is more recognizable for its digital payment protocol than its cryptocurrency, XRP. Ripple operates on an open-source and peer-to-peer decentralized platform. One that effectively allows for a smooth transfer of money in any form. This means that it does not matter whether it is USD, Yen, Bitcoin, or Litecoin.
At its core, it’s a payment settlement, asset exchange, and remittance system that works more like SWIFT. This is a service for international money and security transfers. Those who frequently use it come from a network of banks and financial intermediaries.
XRP functions largely as a bridge currency to other currencies. Its fundamental design does not discriminate between one fiat/cryptocurrency and another. Therefore, it makes it incredibly easy for one to exchange any type of currency for another. Each currency on the ecosystem possesses its own gateway. Suppose Person A wants bitcoins as payment for the services that go to Person B. It is not exactly mandatory for Person B to have any bitcoins. They are able to send the payment to their gateway in Canadian dollars (CAD). As a result, Person A can receive bitcoins from their own gateway.
Rather than use blockchain mining, Ripple uses a unique distributed consensus mechanism. It does so by way of a network of servers for transaction validation. With a poll, the servers/nodes on the network determine – by consensus – the transaction’s validity and authenticity. This enables close to instantaneous confirmations without any central authority. This helps maintain Ripple’s decentralized system and keeps it fast and reliable.
We now have a clear picture of the differences that arise when studying the Ripple vs Bitcoin subject. From here, we can dig a little deeper into their differences by way of closely comparing and contrasting them. We will start with their development and who their developers are.
Bitcoin’s initial development was primarily as a digital currency. As you may recall, their main intent was to function as am open, public, peer to peer, payment for services and goods.
In turn, the initial intent for Ripple was for banks and payment networks as a way to settle payments. Not only that, but it also functions as a money transfer system and a currency exchange.
The core idea of Ripple was to create a system of direct asset transfers in real-time. This would essentially be a lot cheaper, more transparent, and more secure than the existing payment methods, such as SWIFT.
The continuous maintenance of Bitcoin is by a group of developers who are passionate about their craft. It is a decentralized system that is not under the control of any bank, government, or third party. The person responsible for its creation is a mysterious entity. They are a person or a group of people that go by the name of Satoshi Nakamoto.
The development of Ripple, on the other hand, is by an official company with set goals. Moreover, there is an array of investors known as the Ripple company. The founding of this company in 2012 was thanks to Chris Larsen and Jed McCaleb. From 2015 to 2016, the Ripple company would have offices in Australia, Luxembourg, and the UK.
Technology and mining
Initial development and the creators behind the cryptocurrencies are one thing. You can’t expect two cryptocurrencies to have the exact same history of development and inception, after all. From here, we get into the more technical side of these digital currencies.
A key thing to understand about Bitcoin is that it is a currency that runs on blockchain technology. Moreover, it employs the use of mining; in other words, ‘proof-of-work’. Conversely, Ripple utilizes an iterative consensus ledger and validating servers network. It uses this along with XRP cryptocurrency tokens. The management of the Ripple network is in the hands of a range of independent servers. These servers compare their transaction records on the regular. Every second, there is a new ledger of XRP that comes into fruition.
The overall design of XRP does not allow for any type of mining. This, above all else, is the main reason as to why these two currencies are vastly different from each other.
Those who mine for Bitcoin will usually receive a reward in the form of new bitcoins. XRP tokens at the amount of 100 billion have gone through pre-mining. Moreover, there are only 38 billion that are available in the market. The rest are in Ripple labs and there will be a periodic release to the public. In contrast to this, there is no pre-mining for bitcoin in any way. On top of that, the maximum supply is only about 21 million.
Currency distribution – Ripple vs Bitcoin
Mining – or lack thereof in regards to XRP – is the primary difference between these cryptocurrencies. However, as is the case when you compare other digital currencies with each other, the distribution rate is also a key difference. The same can be said for their transactions. Some produce more than others in a specific time frame.
Another notable distinction when it comes to Bitcoin is how they spread their cryptocurrency out worldwide. Ripple owns up to 60% of XRP tokens, and its price is incredibly small. This is especially noticeable when you compare it to the price of Bitcoin.
Additionally, there will only ever be 21 million Bitcoins. On the other hand, there are 55 billion XRP tokens in an escrow account, with up to a billion of them released via smart contract each month. Since it is owned and run by a private, centralized company, the rules regarding token distribution could potentially change, whereas Bitcoin’s distribution rules are hard coded into the blockchain.
It’s possible to track both the movement and distribution of XRP tokens as well as that of Bitcoin. For the former, one can easily do this by way of the Ripple Charts website. For Bitcoin, the a Blockchain Explorer makes all that information available.
The amount of time it takes to confirm a Bitcoin transaction is an average of 10 minutes. Confirming XRP transactions, on the other hand, takes only about 5 seconds.
The final difference that we will go over regarding the Ripple vs Bitcoin discussion, is how these cryptocurrencies are used. Bitcoin is a currency that is used in the same vein as money. To put simply, it is suitable for purchasing goods and services and many users HODL their Bitcoin as a store of value or trade it on cryptocurrency exchanges. Ripple’s goal, however, is to be applicable for the transfer of other currencies or commodities over the network. These include such things as oil or gold.
The Ripple network is a currency exchange that is completely decentralized. This exchange is possible within the Ripple network and as a bonus, it is without any intermediaries or third parties. If someone wishes to sell their XRP for USD, they are able to do so within the network without third party involvement.
Likewise with Bitcoin, it is a decentralized, peer to peer network that requires no 3rd parties when transacting Bitcoin wallet to wallet.
After going over some of the nuances of the Ripple vs Bitcoin debate, it’s clear to see that their respective intents are quite different. Bitcoin remains the quintessential cryptocurrency, though the Ripple project’s continuous growth shows signs that change may be on the way.