What’s The Difference Between The Crypto Bitcoin and Ripple?
Cryptocurrencies started when blockchain technology and Bitcoin were created. After the creation of Bitcoin, several cryptocurrencies such as Ether (ETH), Ripple (XRP), and Cardano (ADA) came on the market. Ripple and ETH were created and launched a few years after the introduction of Bitcoin. This article will explain who developed Bitcoin, who owns XRP, and why Ripple (XRP) is better than Bitcoin.
Understanding Bitcoin
As mentioned, Bitcoin, launched in 2009, was the first established cryptocurrency that many people have adopted. In fact, a person under the pseudonym Satoshi Nakamoto invented Bitcoin in 2008 and launched it in 2009. Nakamoto aimed to make Bitcoin a peer-to-peer payment system. He/she/them also believed that Bitcoin would hedge against inflation.
Primarily, Bitcoin (BTC) is a decentralized currency, meaning that no government or central authority controls it. Rather, its global user base manages it through thousands of nodes that verify transactions through the mining process. As such, all transactions dealing with BTC are recorded on a public ledger where no one can alter or modify them. Technically, BTC is transferable, divisible, and scarce.
Ripple
In reality, Ripple is the name of the company that developed and launched a cryptocurrency called XRP. However, in most circles, people call XRP Ripple, which is not correct. In the end, many people use XRP and Ripple interchangeably, something accepted in the crypto sector. Some people call it Ripple cryptocurrency or Ripple crypto.
David Schwartz, Jed McCaleb, and Arthur Britto developed XRP in 2011 and launched it in 2012. Later on, Chris Larsen joined the development team. Their major aim was to improve the features and functionalities of Bitcoin. For example, XRP is more energy efficient, with faster transactions and cheaper gas fees than BTC. That is why most people consider XRP better than Bitcoin.
When Ripple introduced XRP, its aim was to make it a means of cross-border financial transactions, working with the legacy banking system. It facilitates payment settlements among individuals and institutions around the globe. However, it is not a medium of exchange for daily transactions such as buying and selling goods and services.
Similarities between Bitcoin and Ripple (XRP)
Bitcoin and XRP have similarities and differences that investors and crypto users should comprehend.
It is easy to use XRP and BTC
Any person who has the know-how to use cryptocurrencies can use both BTC and XRP. One can send it to someone, store it, receive it, or hold it in his/her digital wallet. People can use both cryptocurrencies as stores of wealth, mediums of exchange, or for speculative purposes. In addition, the users do not need to have bank accounts to use these cryptocurrencies.
Both can facilitate borderless transactions
People can use BTC and XRP wherever they are since they are cross-border means of payment. As well, people do not need permission from anyone to carry out transactions using these cryptocurrencies. However, they should comply with regulations relating to crypto activities in their jurisdictions.
XRP and Bitcoin are popular cryptocurrencies
Since both XRP and Bitcoin are within the top ten ranked cryptocurrencies, they are equally popular. Bitcoin is the number one ranked cryptocurrency based on market capitalization while XRP is ranked sixth. It is essential to note that crypto users can purchase Bitcoin and XRP at crypto exchanges such as Gate.io.
Both Bitcoin and XRP are used for speculative purposes
Similar to other cryptocurrencies, people can speculate on the crypto prices of BTC and XRP since they are traded on public exchanges such as Gate.io. In effect, traders can buy BTC and XRP at low prices and sell them when their values have increased. It is vital to understand that both XRP and BTC have high liquidity which makes them suitable investment assets.
Storage and transactions
People can manage both XRP and BTC using digital wallets such as MetaMask. Likewise, they can also use wallets that exist on crypto exchanges such as Gate.io. The trading process is similar as traders can use leverage for both cryptocurrencies. Furthermore, the traders can also use similar trading strategies when trading XRP and BTC.
Main differences between Bitcoin and XRP
Although these two cryptocurrencies have similarities they have striking differences.
Supply of the coins
We already know that both Bitcoin and XRP are layer-1 coins but their supply mechanisms are not the same. The current circulating supply of Bitcoin is slightly above 19 million. In addition, the supply of Bitcoin increases constantly as a result of mining.
On the other hand, people do not mine XRP because it was premised, meaning that the public ledger produced its maximum supply of 100 billion coins when it was launched.
However, the other amount is not within circulation as it is in an escrow account, where Ripple releases them periodically. At present, XRP has a current circulating supply of over 50.7 billion, with Ripple holding more than 50% of that amount.
Bitcoin and XRP do not have the same throughput
The transaction on the Bitcoin network are slower than that on XRP. Specifically, Bitcoin only handles between 3 and 5 transactions per second whereas XRP processes about 1,500 transactions per second.
As you may anticipate, the transaction cost for BTC is far higher than that of XRP because BTC experiences congestion since the network is slow. However, XRP may rarely experience congestion as the transaction speed is very high.
Bitcoin and XRP have different use cases
The main function of XRP is to support a global financial transfer, a payment settlement system, and currency exchange. As such, it enables people to transfer or send their funds and cryptocurrencies locally and internationally at a low cost.
Ripple seeks to overcome the costly and cumbersome way of sending money using the traditional financial system that involves banks and other intermediaries.
As such, it uses XRP as a bridging currency, meaning that individuals and institutions do not need to convert one fiat currency to another when they send funds as they do with the traditional financial system. However, with Ripple, the users can convert their remittance into XRP which they can send at a very low cost.
When using banks or SWIFT, it may take up to 4 days for the money to reach the intended destination. However, when using XRP the funds are received within less than 1 minute.
Bitcoin works differently from XRP since it is a peer-to-peer digital currency. In fact, Satoshi designed it to be an alternative to the fiat currency which people can use to buy and sell goods and services, the way they use cash, on a daily basis.
The consensus mechanisms
XRP and Bitcoin use different consensus mechanisms. Bitcoin uses the proof of work consensus mechanism where the validators use computational power to solve some complex mathematical problems. A validator who adds a block to the blockchain gets a reward worth 6.25 BTC.
This process of solving the cryptographic equation also called crypto mining, consumes much energy. Nevertheless, the Ripple network, which is not a blockchain, uses a distributed ledger called The XRP Ledger to validate transactions using a poll system. At least 80% of the validators should agree in order to approve a transaction. This is one reason Ripple is better than Bitcoin.
Involvement of banks
According to Satoshi Nakamoto, BTC is fully decentralized, implying that it does not use banks and other financial institutions as intermediaries. Conversely, Ripple works closely with financial institutions, especially banks, to facilitate the transfer of funds. It aims to compete with some global financial transfer systems such as SWIFT and PayPal.
XRP vs BTC: Which is better to invest in?
Many investors would like a clear answer on which coin to invest in, BTC or XRP. Nevertheless, it is counterintuitive to say with certainty that one should invest in BTC or XRP. This is because the two coins offer different investment opportunities.
For example, Bitcoin is a better investment asset than XRP in a short period such as one year. This is so because an investor is likely to get a better return with BTC than with XRP in 2023, considering the lawsuit SEC has against XRP. However, it is likely that the price of BTC may rise significantly in 2023.
On the contrary, XRP seems a better investment asset than BTC in the long run if Ripple wins the case against SEC. The reason is that there is a greater potential for the long-term growth of XRP than BTC.
Currently, XRP is less adopted than BTC. Therefore, when many people start using XRP its price is likely to rise. The current price of XRP is $0.39 as of 20 January 2023.
As you note, there is potential for the price of XRP to increase. If someone invests in it at such an undervalued price, the gains will be high if the value increases, for instance, to $30 within the next two years. Therefore, the XRP price today is a good entry point for investors with a long-term investment mentality.
Having said this, it is important to note that the best position for any investor is to diversify his/her portfolio by investing in both BTC and XRP.
Conclusion
Many people have a tendency of comparing Bitcoin with other cryptocurrencies. We found how Ripple is different from BTC as well as how they are similar. For example, just like Bitcoin, XRP is decentralized and it is a good investment asset for the long run. On the contrary, investing in BTC in the short term may bring better returns than trading XRP.
Photo by Dmitry Demidko on Unsplash
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