Ripple: a worthy contender for Bitcoin?

by | January 11, 2018 11:54 am



Ripple, or XRP, for many cryptocurrency enthusiasts, is the new-kid-on-the-block with a mission to take the lunch out of the hands of the popular bitcoin. The latter’s case, it must be said, has not be helped by a bearish start in 2018. Bitcoin plunged close to 40 percent back in the middle of December, 2017, and began the first week of the year 2018 by shedding 7.6 percent.

 

Ripple on the other hand, has had the best run of its life in the past few months. As price of bitcoin dropped in December, Ripple took off, quadrupling in value in a matter of days to take second position among cryptocurrencies in terms of market capitalisation. That surge meant that for all of 2017, Ripple grew 35,000 percent compared to bitcoin’s 1,500 percent growth.

 

That has gotten the commentators on the side of Ripple. Most of the predictions ever since have seen bitcoin losing its pride position on the market caps list to Ripple. On Monday, 8 January an analyst with CNBC predicted that XRP would only need to get to $6.57 for its market capitalisation to be bigger than bitcoin’s.

 

The price of XRP is currently at $2.32, representing a drop of 2 percent in the past one week. The cryptocurrency is also back to third position, behind Ethereum, on the Coinmarketcap.com.

 

What is Ripple?

Ripple refers to a transaction network and crytocurrency token, XRP, that was launched in 2012. Its foundation are actually older than bitcoin (2009), haven been conceived in 2004 by Ryan Fugger. It was created as the go-to cryptocurrency for banks and global money transfers. The founders describe it as the “fastest and most scalable digital asset” for real-time payments anywhere in the world.

 

The sponsors believe that Ripple’s selling point is its liquidity, speed and low transaction fees.

 

“The liquidity needs of banks today is managed with literally ten trillion of float that sits in these nostro and vostro accounts,” said Brad Garlinghouse, CEO of Ripple. “We believe very strong this is an inefficient model. You can use digital assets to fund liquidity and Ripple is uniquely positioned to capitalise on that. Bitcoin takes four hours to settle a transaction. XRP takes 3.6 seconds.”

 

So there it is the famous comparison of bitcoin and Ripple. At most, Ripple can be seen as a partial competition for bitcoin. While there are other similarities the two cryptocurrencies shares, there are however marked differences.

 

First, Ripple was never conceived to become a method of payment for online purchases but for money transfers. In that regard, its likely competitors are services like SWIFT. In fact there are talks that Ripple will soon take over from SWIFT.

 

“I did tinker with the Ripple system in the early days and I thought it was a very interesting technology but shortly after that, there was a change in management and the strategy of the company – that it was no longer to be used by anyone who wanted to use the system, but banks, as a low cost system to route payments,” Tim Akinbo, co-founder of tanjalo.com. “Ripple and bitcoin are not in competition. Ripple is an attempt to replace the SWIFT messaging system.”

 

Ripple is not mined or created by its userbase like bitcoin. The token’s creators have full control over the entire 100 billion Ripples available, given it a centralised worldview. The creators release a few – about 1 billion XRP, into the market every month to avoid flooding. Transactions need to be validated by the company or by designated validators.

 

Nevertheless, Ripple has the advantage of being accepted by as many as 100 global banks unlike bitcoin. XRP’s emergence follows a pattern in technology innovation whereby the ‘fast-follow’ technology that pivots on the original design goes on to win mainstream adoption over the true innovator.

 

Some analysts see it as the most likely cryptocurrency to be adopted formally by networks such as VISA and Mastercard as well as central banks.

 

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