Both Ripple (XRP) and Bitcoin (BTC) are among the top cryptocurrencies when it comes to their market caps, with Bitcoin being the largest one. However, while these two coins are so close to one another on the list of largest cryptocurrencies — they are quite different when it comes to their design, purpose, goals, and methods of achieving them.
In this Ripple vs Bitcoin article learn more about the main differences among these top digital currencies.
Ripple vs Bitcoin: what is the difference between them?
Before we start, let’s make sure that we are all on the same page. If you are not familiar with what exactly cryptocurrencies are, catch up on our article about them here. If you are interested in learning more about Bitcoin before comparing it to XRP, read our Bitcoin article. Meanwhile, those who wish to learn more about XRP can do so by reading our Ripple article.
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With that out of the way, what makes these two projects so different from one another? Well, the first major difference is the way they work.
As you may know, Bitcoin works by utilizing blockchain technology, which you can learn more about right here. XRP, on the other hand, does not. It might sound strange to learn that a cryptocurrency doesn’t need a blockchain to operate, but there are several cases where projects have developed an alternative approach to launching their coin.
Instead of using a blockchain, XRP has Ripple protocol consensus algorithm, which was developed by its parent company — “Ripple Labs”. As such, it does not require miners, and there is no mining process. Transactions are secured and verified by participants of the network who use this mechanism.
This also means that there is no mining of XRP tokens, since all of them already exist. The circulating supply moves throughout the Ripple community, while the rest of the coins remain locked, and are released by the company. This is also what makes XRP highly centralized. On the other hand, Bitcoin uses Proof of Work algorithm, and it has miners who are rewarded with new BTC coins for verifying transactions and building up Bitcoin’s blockchain.
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This is far from being the only difference, however, and the way that each of the coins was meant to be used is also quite different.
Ripple vs Bitcoin: their purpose
As many already know, Bitcoin was launched back in 2009, after a few years of the financial crisis has struck the world. These issues were caused by the banks that misused their level of control over the money in order to attract new clients and earn even more for themselves.
The plan backfired, and one entity, known as Satoshi Nakamoto, came up with the concept of Bitcoin. Back then, Bitcoin was imagined as digital money which would be decentralized and used in everyday payments. However, as decentralized digital currency, it would not be controlled by the banks. All necessary processes would be done by the community through the use of blockchain technology.
However, over the years, Bitcoin’s price kept growing. On the other hand, its blockchain speed and block sizes did not grow so much, which made Bitcoin very expensive and very slow. As such, it is not particularly practical when it comes to making payments. However, it could still be used as a store of value, and many expect that someday it might replace gold.
Ripple, on the other hand, was created by a centralized company — called Ripple Labs — whose goal is to work with the banks. Over the years, Ripple (the company) has been working on developing payment solutions, such as xCurrent and xRapid. It aims to partner up with the banks around the world, and have them use these payment solutions, which need XRP in order to work.
In other words, Ripple is providing the banks with the opportunity to join the crypto sector and remain relevant, but still not go full crypto. They would be using a payment solution, made by a centralized firm. Their clients would still be able to come to the bank, pay fiat money to the bank, and have it send it to another location almost instantly. However, the money would travel from one place to another in the form of XRP cryptocurrency, which gives it a valuable use case.
These payments would be instant, and significantly cheaper, as there would be no need for two banks to process the transactions or to trust one another — Ripple would do it for them, as a third party trusted by all the banks.
The technology that the banks are using for making international transactions is heavily outdated these days. It is slow, and it often requires days for the transactions to be settled. Not to mention that there are some hefty fees involved. The entire system is old and slow, whereas Ripple’s solutions are modern, lightning-fast, and very cheap to use.
Ripple vs Bitcoin: The investor’s perspective
As we have seen, the two coins are after a relatively similar goal — both wish to be used by as many people as possible, and ensure fast transactions, cheaper and more efficient than the ones that the traditional banks can offer with their outdated technology. Of course, they also have a completely different way of achieving this.
This often has investors confused when it comes to which coin is better to invest in. Of course, that decision falls upon each individual investor, as they need to be the ones who make it. However, before they can do that, they should have all the facts at their disposal.
When it comes to Ripple, the company and its project want to cooperate with as many banks around the world as possible, potentially all of them. In that regard, the XRP price depends on how many banks around the world are willing to use Ripple’s payment systems and coin.
Bitcoin’s price, on the other hand, reflects the community’s interest in BTC. It is decentralized, with no company to control it, manage it, or give it reputation, or any guarantee of value. It also has no real-world asset that would secure its price.
In other words, Bitcoin is only as valuable as the community thinks. So far, that has worked quite well, as BTC managed to hit $20,000 in 2017. Of course, this was also followed by a major price drop after the coin was oversold by those wishing to cash out and become rich.
Bitcoin also has the biggest market cap, which is typically a bit over half of the total crypto market cap. This might be something that would gain more attention from institutional investors, which, in turn, means that the coin is more likely to get greater cash flow.
It is also important to keep in mind that the banks are the ones controlling the financial world right now, and that they will do everything in their power to remain relevant. It is unlikely that Bitcoin will ever exterminate them completely. Instead, the banks will find a way to adapt and join the crypto space, although likely only to a certain extent. In that regard, XRP would serve them quite well.
There is no way to determine which of these two coins, or rather — these two approaches to solving the financial difficulties — will win. This is why any decision falls upon each individual investor. Both of them have their pros and cons, and both are worthy of being a part of the investment portfolio, in their own way.
As we have seen, the two coins are after a relatively similar goal — both wish to be used by as many people as possible, and ensure fast transactions, cheaper and more efficient than the ones that the traditional banks can offer with their outdated technology. Of course, they also have a completely different way of achieving this.
This often has investors confused when it comes to which coin is better to invest in. Of course, that decision falls upon each individual investor, as they need to be the ones who make it. However, before they can do that, they should have all the facts at their disposal.
When it comes to Ripple, the company and its project want to cooperate with as many banks around the world as possible, potentially all of them. In that regard, the XRP price depends on how many banks around the world are willing to use Ripple’s payment systems and coin.
Bitcoin’s price, on the other hand, reflects the community’s interest in BTC. It is decentralized, with no company to control it, manage it, or give it reputation, or any guarantee of value. It also has no real-world asset that would secure its price.
In other words, Bitcoin is only as valuable as the community thinks. So far, that has worked quite well, as BTC managed to hit $20,000 in 2017. Of course, this was also followed by a major price drop after the coin was oversold by those wishing to cash out and become rich.
Bitcoin also has the biggest market cap, which is typically a bit over half of the total crypto market cap. This might be something that would gain more attention from institutional investors, which, in turn, means that the coin is more likely to get greater cash flow.
It is also important to keep in mind that the banks are the ones controlling the financial world right now, and that they will do everything in their power to remain relevant. It is unlikely that Bitcoin will ever exterminate them completely. Instead, the banks will find a way to adapt and join the crypto space, although likely only to a certain extent. In that regard, XRP would serve them quite well.
There is no way to determine which of these two coins, or rather — these two approaches to solving the financial difficulties — will win. This is why any decision falls upon each individual investor. Both of them have their pros and cons, and both are worthy of being a part of the investment portfolio, in their own way.
Ripple vs Bitcoin: Pros and Cons
Bitcoin Pros
- It is highly valuable
- Decentralized that means no one can control it
- Accepted on pretty much all exchanges
- Has the most use cases
- Accepted by a rising number of merchants around the world
- The best-known name in the crypto industry
- It can be exchanged for any altcoin
- Has an extremely high security
- Confirmed not to be a security (financial instrument)
- Protection from payment fraud
- Allows you to make pseudonymous payments (only exchanges know your identity, but the receiver of the coins does not).
- A great solution for unbanked and underbanked people
Bitcoin Cons
- Slow blockchain
- Small block size
- Highly volatile
- High risk of investment loss
- The mining process is expensive and highly competitive
- High transaction fees
- Non-reversible transactions
- Lacks regulations
XRP Pros
- Has a well-structured infrastructure
- Created and supported by a well-known company
- Its price is more stable than Bitcoin’s
- High-ranking coin
- Has advanced technology
- Capable of making near-instant transactions
- It can connect all the banks into a single network
XRP Cons
- No real-world use cases outside of its payment systems
- Numerous controversies and lawsuits in the past
- Has elements of centralization
- Not accepted by all exchanges
- Cannot be exchanged for most altcoins
- The SEC did not confirm that it is not a security
- Low price
- Works with the banks, which goes against the point of being a cryptocurrency
In the end, Ripple (XRP) and Bitcoin (BTC) do have a few similarities, but a lot more differences; especially when it comes to their missions, technology, price, and more. Answering the question of Ripple vs Bitcoin or which one is better is not easy, since both coins are still evolving, together with the rest of the crypto market. You might say that Bitcoin is better for individual investors, while Ripple will most likely become a go-to solution for banks, considering that its value comes from making international transactions faster and cheaper for the bank’s clients.
