The cryptocurrency empire is being ruled by the long-time king Bitcoin. However, there are several strong pretenders that might overthrow Bitcoin in the future. One of the most powerful is Ripple that stands out with its quite different approach.
What is Ripple?
Ripple is the name of a cryptocurrency platform that facilitates the trade of its token XRP. It is a real-time gross settlement system, currency exchange and remittance network. Ripple was built on the principle of a distributed ledger network that is managed by various validating independent servers, rather than a single centralized authority. The network works on a public database using a consensus process between validating servers thus, ensuring integrity. Those validating servers can belong to banks, firms or even individuals.
Ripple’s token XRP enables fast and cheaper transactions between two parties. It is meant to transfer significant amounts of money effectively, without the need for confirmation time.
Are Ripple and Bitcoin fundamentally similar?
No, Ripple and Bitcoin are not similar at all and both the cryptocurrencies work on different principles. Although Ripple’s consensus patterns and validating servers make the network look like a blockchain-based technology, it is not a blockchain. Whereas Bitcoin is completely based on the blockchain, in fact, the first blockchain was created for Bitcoin. Instead of a blockchain, Ripple uses a HashTree to wrap up all the data into a single value that is then compared to all of the validating servers, in order to generate consensus.
Ripple was founded in 2012 by a single company ‘Ripple Labs’ that backs it till now, unlike Bitcoin, whose development is managed by a large network of developers. Ripple does not even have a fluctuating amount of existing cryptocurrency like Bitcoin. Ripple was built with all of its 100 billion XRP tokens out for trading and the number is still maintained with Ripple’s ‘no mining’ rule. Almost 60 billion of all the XRP tokens are held by Ripple Labs itself. On the other hand, Bitcoin’s currency pool is eventually growing, thanks to Bitcoin miners who have mined out about 80% of all the Bitcoin there ever will be.
Ripple is widely adopted by banks and financial firms, which use its currency for immediate money transfers. The platform can move heaps of money from one country to another just within seconds. It can efficiently handle 15,000 transactions per second as compared to Bitcoin that handles only 3-5 transactions per second. Bitcoin settles a transaction in 60 minutes while XRP takes just 3.5 seconds.
Backed by Banks
Due to Ripple’s ability to quickly move assets around the world, the platform is backed by a number of global financial institutions.
Ripple’s software is used by banks to shift money from one country to another. Currently, banks use SWIFT for the purpose. SWIFT is a system that powers cross-border payments, relying on banks that have separate accounts in different countries for this purpose. Ripple claims to have partnered with more than 100 banks including the American Express, Santander, UBS, Westpac, RBC and more.
You would definitely be aware of the speculation surrounding the regulation of cryptocurrencies. A lot of banks and governments are planning to crack down on cryptocurrencies. However, the only cryptocurrency that is on the safer side is Ripple. Due to the services it provides and the fact that it is backed by some of the major financial firms, Ripple is the least likely to witness a crackdown or even a ban.
Cryptocurrency hype and its effects on Ripple
The end of 2017 saw a major cryptocurrency boom, with investors rushing to invest their money and cryptocurrency prices inclining higher and higher. Bitcoin prices surged dramatically in 2017 and reached almost $20,000 in December. With Bitcoin’s upward flight, we saw a lot of other altcoins soaring and swelling too. As Bitcoin went out of reach, investors rushed towards low priced coins in hopes of getting a similar profit like Bitcoin investors.
XRP, along with other altcoins also saw major gains in its value. Additionally, the rumor that ‘Coinbase was soon launching Ripple on its platform’ fueled up Ripple’s upward journey. The rumors got stronger and stronger to the point where Coinbase announced that it wasn’t planning to add any digital asset to its platform.
“As of the date of this statement, we have made no decision to add additional assets to either GDAX or Coinbase. Any statement to the contrary is untrue and not authorized by the company.”
Water was thrown on the fire. Following the announcement, Ripple saw a big drop in value and got back to the same point where it was before the rumors began. Although Coinbase did not support Ripple, the cryptocurrency has a bright future with its long list of applications.
Notes of Caution
Ripple has been repeatedly criticized by Blockchain enthusiast especially for its centralized control that offers operations that greatly differ from the ones offered by decentralized blockchains like Bitcoin.
Financial Times reported that the 18 banks and financial firms that are publicly linked to Ripple say that they “had not yet gone beyond testing” and the ones which had started putting the technology into official work, used it for “moving real money”. None of the banks had used the XRP token yet.
New York Times reporter Nathaniel Popper wrote on Twitter that he has yet to find a bank that actually plans to use XRP for a meaningful purpose. Popper’s claim was denied by Ripple’s CEO, Brad Garlinghouse who stated, “Over the last few months I’ve spoken with ACTUAL banks and payment providers. They are indeed planning to use xRapid (our XRP liquidity product) in a serious way.” Popper contacted the banks that Ripple suggested, but none of them was committal in their plans.