The crypto investment universe seems to be restricted to Bitcoin from the outside. As the most well-known cryptocurrency, Bitcoin takes the lead in market capitalisation and traction with investors.
However, those interested in diversifying their investment portfolios and experimenting with cryptocurrencies can have other options. XRP from Ripple is one among them. The cryptocurrency ranked sixth in total market value in May 2022. Let’s examine the Bitcoin vs. Ripple differences that all investors need to know.
What Is Bitcoin (BTC)?
In 2009, a person or group using the alias Satoshi Nakamoto invented Bitcoin. Bitcoin is the first successful decentralised cryptocurrency of its age and the first to employ a distributed ledger-based blockchain technology.
New transaction records are added in blocks of information chained together in a blockchain. Each new block includes encrypted information about the previous blocks. If a person wants to modify one block, they must also modify the other block before it.
The Bitcoin blockchain ledger depends on several participants with access to the same information, which helps to preserve its security and decentralisation. For legitimacy, it is not controlled and manipulated by any authority, such as the government.
As a return for donating computational power to the job of validating transactions, bitcoins are generated via a process called “mining.” Once a sequence of transactions has been validated, they are added to the blockchain permanently as a block. The miners who validate the transactions get bitcoins as incentives.
Bitcoin Whitepaper. Source: bitcoin.org
What Is Ripple (XRP)?
XRP is a currency that Ripple primarily uses to settle payments in various government-issued currencies between banks worldwide. In 2011, three engineers, David Schwartz, Jed McCaleb, and Arthur Britto, endeavoured to develop a Bitcoin alternative. They hoped it would require less energy (in the form of computing power) to manufacture and be simpler to use as payment.
The programmers created a distributed ledger called the “XRP Ledger,” a database shared by many individuals in different locations. This distributed ledger features an open-source code used to generate ripples, subsequently renamed XRP digital assets. XRP is pre-mined and has a less sophisticated mining mechanism than Bitcoin.
Together with Chris Larsen, the engineers went on to form the Ripple firm. It received 80% of the 100 billion XRP created by the ledger. Ripple utilises the XRP Ledger and XRP for payment settlement, asset exchange, and remittance systems that operate more like SWIFT, a service used by a network of banks and financial intermediaries for international money and security transfers.
Ripple promotes itself as a worldwide payments network, and its clients include major banks and financial institutions. XRP is used in its products to facilitate the rapid conversion between different currencies.
Ripple vs SWIFT. Source: securities.io
Ripple vs Bitcoin: Similarities
Both Bitcoin and Ripple are independent cryptocurrencies that anybody may use for cross-border payments or speculation. In addition, the two have several similarities.
Popular Cryptocurrencies
As two of the most popular cryptocurrencies, Bitcoin and Ripple, can be purchased on many cryptocurrency exchanges, such as Binance and CoinSpot. Users need to open an account on an exchange to purchase Ripple (XRP), which is similar to buying bitcoin. However, it’s worth noting that XRP has been delisted from a few exchanges due to an ongoing lawsuit with the Securities and Exchange Commission (SEC).
Used Independently
Almost everyone can use and trade BTC and XRP, with a few exceptions. Whether someone wants to speculate on the values of cryptocurrencies, utilise them as a store of wealth, or pay someone else with these crypto coins, it is simpler than with traditional financial methods. Even without a bank account, it is feasible to use cryptocurrencies such as XRP or BTC. In this way, there is no difference between XRP and Bitcoin.
Cross-Border Transactions
Both BTC and XRP can be used as a means of payment between persons residing in various countries since they operate independently of national governments. When converting to their local fiat currency, users may have to deal with taxes, banking restrictions, and capital limits, whereas crypto transactions can be conducted without third-party interference.
Speculative Assets
All cryptocurrencies traded on public cryptocurrency exchanges can be used for speculation. As with most investment strategies, investors attempt to purchase cryptocurrency at a low price in the hopes of selling it for a profit when its value has increased. While Bitcoin wins the liquidity battle between Ripple and Bitcoin, both have more liquidity than many other cryptocurrencies. This makes them suitable for arbitrage and trading opportunities.
Ripple vs Bitcoin: Differences
Perhaps the most significant distinction between Bitcoin and Ripple is the structure of their respective networks. Ripple employs a distributed ledger owned by the company, while Bitcoin uses a decentralised blockchain owned by nobody. But the distinctions don’t end there.
Validation Mechanisms
The Bitcoin community relies heavily on a network of miners to maintain the ecosystem. Bitcoin has a proof-of-work (PoW) technique to deal with double-spending, which otherwise would enable users to trick the system into spending the same amount of Bitcoin over many transactions. In other words, a transaction on the BTC network requires the affirmative intent of at least 51% of miners to be legitimate.
Instead of employing the blockchain mining idea to authenticate transactions, the Ripple network uses a distributed consensus process in which participating nodes perform a poll to verify a transaction’s legitimacy. This allows for very instantaneous confirmations without a central authority. Thus, XRP is decentralised, speedier, and more dependable than many competitors. In addition, the XRP consensus mechanism uses insignificant amounts of energy compared to Bitcoin, which is regarded as an energy hog.
Circulation Mechanisms
Bitcoins are mined and added to the network after bitcoin miners have solved complicated mathematical puzzles to acquire new coins. They are not subject to a release timetable, and their supply is mostly determined by network performance and the complexity of the algorithm used to mine coins. Bitcoin has a maximum supply of 21 million, with around 18.74 million in circulation as of mid-2020.
Unlike Bitcoin, XRP has a maximum quantity of 100 billion tokens, with more than 45 billion in circulation. A smart contract governs the distribution of XRP, and the XRP cryptocurrency is not mined. The total supply of Ripple already exists, and Ripple holds around 55% of the tokens. Any unused XRP at the end of a given month will be returned to an escrow account. This process assures that there will be no abuse of XRP.
Transaction Times & Fees
Overall, XRP is superior to bitcoin in faster transaction speeds and lower transaction fees. Specifically, due to the complexity and labour-intensive nature of Bitcoin mining, Bitcoin transactions are noticeably slower and perhaps more expensive. The Bitcoin network can only handle an average of seven transactions per second. It takes 9.2 minutes for Bitcoin transactions to be ultimately settled. Depending on network congestion, fees can vary from a few cents to several dollars or more when you execute transactions.
Ripple requires a minimum transaction fee to prevent network congestion. This is 0.00001 XRP or a fraction of a penny. The network destroys XRP instead of sending it to a specific recipient to charge the fee, thereby increasing the value of the remaining XRP. As a result of “off-ledger” transactions, Ripple transactions can settle in as little as four seconds. Essentially, a provider performs many transactions in bulk before adding them to the blockchain, ensuring security yet eliminating the need to log each transaction.
Use Cases
Bitcoin continues to gain popularity, as seen by a spike in its adoption worldwide. Numerous companies accept bitcoin as payment for their products and services. Bitcoin has shown its viability as a high-return investment, a hedge against inflation due to its limited supply and a portfolio diversifier. Nevertheless, cryptocurrencies are very volatile, and there is no assurance that Bitcoin will continue to outperform conventional assets.
Ripple is primarily concerned with international payments, remittances, and currency exchange. Ripple enables faster and cheaper cross-border money transfers and currency exchanges. More than 300 financial institutions, including American Express and Santander, currently utilise the RippleNet network. Due to its cheap transaction costs and rapid remittance times, XRP may be a better option than Bitcoin for someone who has to pay $10 to someone in another nation daily or weekly.
Ripple (XRP) and Bitcoin (BTC) Differences
|
|
Bitcoin (BTC) |
Ripple (XRP) |
|
Ownership |
Public (No ownership) |
Private |
|
Algorithm |
Proof-of-work |
Consensus |
|
Block size |
1 megabyte |
N/A |
|
Transactions per second |
~ 10 |
1,500 |
|
Transaction cost |
$0.5/tx |
$0.0002/tx |
|
Transaction speed |
600 seconds |
3-5 seconds |
|
Maximum supply |
21 million |
100 billion |
|
Mining capability |
Yes |
No |
|
Smallest unit |
Satoshi |
Drop |
|
Energy consumption |
57.09 billion kWh |
474,000 kWh |
Bitcoin vs. Ripple Practical Examples
To understand more about Bitcoin vs. Ripple differences, let’s look at some practical examples below.
Bitcoin (BTC)
Andrea, living in America, visits Walmart to purchase a yoga mat that costs US$50. Rather than paying $50 from her bank account using a debit/credit card, she can transfer about 0.0026 BTC (equivalent to $50) from her wallet to the vendor’s wallet. In this case, Bitcoin is an equivalent digital currency—an alternative to real-world U.S. dollars.
Ripple (XRP)
Assume that Paul wishes to transfer $2,000 to Sophia in Argentina. Without Ripple, Paul would have to submit a transfer via his bank, which would take between one and two days. The transaction would include converting U.S. dollars for Argentine pesos at a higher rate than the market rate and transaction fees. With Ripple, however, Paul could convert the $2,000 into XRP tokens and transfer them to Sophia in a couple of seconds at a reasonable cost.
Should I Purchase Ripple or Bitcoin?
Before investing in Ripple or Bitcoin, you should be prudent to examine some factors below.
First, bitcoin’s maximum supply is limited to 21 million, and the crypto must be mined, which is a complex process. Bitcoin is the biggest cryptocurrency in market capitalisation, liquidity, hash rate, and track record.
The maximum supply of XRP is 80 billion. It is pre-mined, meaning that Ripple generated them all at once. If Ripple follows its pledge to keep a portion of the XRP supply locked away, the tokens should maintain their worth.
XRP is a more centralised currency than others since it was pre-mined by a single company and that corporation currently controls a significant portion of the supply. On another note, it’s worth considering that the SEC is suing Ripple for failing to register XRP as a security.
Where to Buy Bitcoin (BTC) and Ripple (XRP)?
As said before, Bitcoin (BTC) and Ripple (XRP) are two of the world’s most popular cryptocurrencies. Therefore, you have many choices in buying these digital assets.
- CoinSpot
- Binance
- Huobi Global
- Swiftx
- Bithumb
- Bitstamp
- FTX
- Kraken
- Bitfinex
- Poloniex
- eToro
- Liquid
- Gate.io
- WazirX
- Phemex
Among these exchanges, CoinSpot is our best-rated platform for both novice and experienced to trade Bitcoin, Ripple and many other tokens. Since 2013, CoinSpot has been Australia’s leading cryptocurrency exchange, earning the confidence of over two million Australians. The platform makes buying and selling any cryptocurrency simple for both novice and experienced traders. It offers competitor trading fees, multilayer security and 24/7 support, providing everything you need to purchase, sell, and manage your digital assets. You can read our detailed review of CoinSpot to know more about its pros and cons and how to create an account on this platform.
The Bottom Line
Bitcoin and Ripple’s XRP are both tradable cryptocurrencies similar to government-issued currencies. Both may also be used to purchase products and services.
The overwhelming bulk of XRP is held by the startup Ripple, which uses it to enable transactions between banks using multiple currencies. The Ripple system outperforms the Bitcoin network because of its faster transaction speeds and lower fees.
On the other hand, BTC is more prevalent and well-known than XRP. Bitcoin continues to be a genuinely public system that is not controlled by any person, organisation, or government. By contrast, the Ripple network is owned and administered by a private firm with the same name.
