Although Ripple has some characteristics similar to Bitcoin, this is a completely different project. It uses cryptography to protect transactions, it does not have a public blockchain.
Instead, a network of nodes is used that verify transactions, but not necessarily anonymous P2Ps, many of which are owned by banks and financial institutions.
Unlike Bitcoin, which exists thanks to the distributed network, Ripple is not only the name of the coin, but also the name of the company that developed the protocol. Unlike Bitcoin founder Satoshi Nakamoto, the developers of Ripple created the currency openly.
In this article we will compare these two different currencies and explain their technology, unique features and price behavior.
What is Ripple?
Ripple is considered a bit weird relative to other cryptocurrencies, because it does not have a public blockchain. The XRP Ledger network runs on an integrated blockchain, it does not use proof of work, and its mechanics are almost unknown.
Ripple was developed as a system for transferring assets with the goal of making instant and secure transactions between network members. The idea was that you can transfer any digital values, including fiat currencies, cryptocurrencies, goods, even loyalty points and mobile loans. At a late stage of development, a proprietary token was added, which can be used for any transactions on the network.
Ripple, of course, does not share the original values of Bitcoin and other cryptocurrencies, but thanks to this, it has become attractive to banks, financial intermediaries and state investors looking for solutions for digital payments. Ripple received huge funding to develop its protocol. Among the early investors are such giants of the financial industry as Andreessen Horowitz, Pantera Capital, Google Ventures, IDG Capital Partners and Santander InnoVentures.
What is Bitcoin?
While Ripple is centralized, Bitcoin has a decentralized blockchain. Bitcoin does not have a common server and is stored in the computers of millions of people around the world. Each member of the Network has a copy of the blockchain with a history of all transactions (mining operations, purchase, sale and transfer of virtual coins). Each user has access to the database and the specified information.
When a new block is created, information is synchronized, and copies on the computers of participants are updated. Thanks to this decentralization, it is impossible to replace data and deceive the network. Each Bitcoin block contains data about itself, as well as about the previous node, which confirms the integrity and validity of the chain. To make changes to the blockchain, you will have to adjust the entire blockchain, which is stored on millions of PCs worldwide.
Bitcoin and XRP features comparison
- Bitcoin is focused on operations between private person.
- Bitcoin supply is limited to 21 million coins. Having a limit protects the Bitcoin network from inflationary processes and the risk of depreciation.
- One block is formed in 10 minutes, and the reward is 12.5 coins.
- The mining difficulty is constantly changing - every 2016 node (every 14 days).
- The system is completely decentralized and does not obey anyone. This means that the rate is regulated only by market factors – changes in supply and demand, as well as increasing or decreasing interest in virtual coins.
- During the transaction, a third party (financial institution or intermediary) does not participate in the transaction.
- It is not possible to cancel a transaction that has already been completed. For example, if the recipient’s address is entered incorrectly, the money cannot be returned by the system.
- All operations are anonymous. Speaking more precisely, information about the volume of the transaction and the address is open, but by the recipient of the cryptocurrency is not. If you know the addresses you will not be able to determine the parties to the transaction.
Features of Ripple:
- XRP is designed to facilitate transactions between banks and financial entities.
- All tokens have already been issued during the creation of cryptocurrency in the amount of about 100 billion coins. At the same time, some of them are “frozen”, are at the disposal of the company and are gradually being added to the supply.
- The virtual coin is built on open source code, which can be changed if desired.
- The commission for the operation is 0.00001 XRP. Its purpose is protection against spammer attacks. Sending a large number of micro transactions will lead to significant costs for the attacker, which minimizes the risk of such a problem. In addition, the commission is not charged to enrich the developers, but to ensure the stability of the system.
- Transactions in the network are reversible, money can be returned. This feature distinguishes Ripple from other virtual coins, including Bitcoin.
- The history of all transactions is stored on users' wallets and is available at any time.
- There is no pure blockchain in Ripple. Information is accumulated in the form of a registry, which is located on the network servers. Recent transactions are synchronized from time to time to verify the accuracy of the information.
- This principle has much in common with Bitcoin, but still is not a blockchain.
- Registers are updated every few seconds. Operations take place instantly, so there is no need to expect the creation of several new blocks.
- There is no 51% risk of attack due to the lack of mining.
Bitcoin vs XRP mining
Comparing Ripple and Bitcoin, special attention should be paid to mining. Bitcoin has such an opportunity. The extraction process is the execution of calculations - the selection of numerical values to search for the desired hash. Bitcoin mining is carried out using farms on the ASIC miners, which are increasingly being used due to the increased complexity of cryptocurrency mining. Regardless of the number of miners, it takes 10 minutes to mine the block, and the reward is 12.5 BTC.
Unlike Bitcoin, Ripple tokens have already been issued in the amount of about 100 billion coins and there is no need for production. You can get XRP in several ways - by exchanging or buying on the exchange.
Bitcoin and XRP price comparison
XRP price analysis
XRP started at $0.0058 and the rate was almost the same for several years. In March-April 2017 the coin pumped for the first time and grew to $0.03. The next month Ripple crypto managed to achieve $0.2 in May, because the news that the third largest bank in the world Bank of Tokyo-Mitsubishi joined Ripple’s network.
For several months the exchange rate was fluctuating between $0.18 and $0.3 with some pumps here and there. Another XRP bull run started with the growth of Bitcoin in the end of 2017. During that period Ripple’s crypto reached $3 per coin in January and then dropped to $1. For one month the currency managed to stay one the same price position and started falling. Like many other coins on the market, XRP follows the price movement of Bitcoin too.
In September, Ripple announced the launch of xRapid – a platform for payment providers and financial institutions. It led to XRP price growth and at some point the coin managed to move Ethereum from the second place on CMC. From two months the coin was traded between $0.5 and $0.39 and then fell to $0.28 in December 2018. For almost half a year the rate of XRP was around $0.3. In April 2019 the market started restoring and the coin jumped to 0.4-0.45 in May. However, it was followed by correction and today XRP is traded for around $0.3.
Bitcoin price analysis
Bitcoin has a long history and experienced 4 cycles during which the price rose to the new highs and fell again. Each next cycle the starting price of BTC was higher than it was before.
The first cycle (autumn 2010 – summer 2011) Bitcoin started at $0.06 and then grew to $36. When it dropped to $2 per coin people started calling it a bubble and a Ponzi Scheme. But as you can see the rate in the end of the period is much higher than the price in the beginning.
The same price movements repeated three times more and the last one happened in 2015-2017. That time the coin managed to jump to $20000 before dropping to $5000 for over a year.
The community is expecting that Bitcoin halving in 2020 will lead to another significant price growth. Why do they think so? Because each time a BTC halving event has occurred, the price of BTC went higher.