It is widely believed that cryptocurrency investment is only restricted to bitcoin. There is no doubt that bitcoin is the king in market capitalization.
However, the market is filled with various other options for people interested in diversifying their portfolios by exploring digital coins that provide a distinct knowledge about digital currencies. Ripple’s XRP happens to be one such coin. In July 2021, cryptocurrency got the sixth rank in terms of market capitalization. Let’s find the difference between XRP, Bitcoin, and other digital tokens.
Bitcoin functions on a public blockchain ledger that supports digital currency to manage payments for goods and services. The bitcoin network is built upon the blockchain concept, a public ledger of authenticated transactions and data recording.
Miners authenticate transactions continuously and add them to the Bitcoin blockchain. Minors get rewarded with BTC on successful transaction authentications as they invest the time and computing power required to authenticate the ledgers.
XRP is the native cryptocurrency for the products developed by Ripple Labs. These products are used for payment management, asset exchange and remittance systems that perform like SWIFT, an international payment service and security transfers used by a network of banks and financial intermediaries. As compared to Bitcoin, XRP is pre-mined which simplifies the mining procedure.
The company was recognized as a peer-to-peer trust network that authorized social media. Within a network, users could bypass banks, advance loans and unlock credit lines with everybody. However, the network failed to take off.
In 2012, three years after the launch of Bitcoin, Ripple transformed itself and became OpenCoin– a network for transaction settlements where big businesses and financial firms proceeded as counterparties to transactions.
XRP cryptocurrency was introduced with 80 billion tokens headed to the company and 20 billion to its co-founders. The agenda was to provide an intermediate technique of exchange between two currencies or networks. In September 2013, OpenCoin converted into Ripple Labs.
Ripple represents itself as a worldwide payments network, and counts major banks and financial services in its client list. XRP is implied in its products to support faster currency conversions.
What Is The Difference Between Bitcoin And Ripple?
Both Have Different Methods To Validate Transactions
Rather than opting blockchain mining mechanism, Ripple network operates on a special distributed consensus method to authenticate transactions, where participating nodes verify the authenticity of transactions y conducting polls. This leads to immediate confirmations without a central authority.
XRP continues to be a decentralized, speedy and much more reliable option than its competitors. Also, XRP consensus system is energy efficient as compared to Bitcoin.
XRP Is Cheaper And Faster Than Bitcoin
Bitcoin transaction confirmations may consume more minutes and impose high transaction costs due to the complex and rigorous attributes of mining used in cryptocurrency. But XRP transactions take seconds to get confirmed at a very little cost.
Both Bitcoin and XRP transactions are charged with processing fees. Whenever a transaction is executed on the Ripple network, a small XRP amount is applicable for the users.
XRP Has More Coins In The Market
At the launch, around 1 billion XRP were pre-mined and gradually released in the market by the major investors. On the other hand, the Bitcoin supply limit is 21 million, which indicates that only 21 million Bitcoin will exist eternally. Lack of BTC has served its investors in generating interest as a store of value.
XRP and Bitcoin Have Different Circulation Mechanisms
Bitcoins release and network addition aspects depend on the miners findings. They do not maintain release schedules and their supply relies mainly on network speed and algorithm complexities for coin mining.
XRP release is controlled by a smart contract. Ripple decided to announce a maximum of 1 billion XRP tokens every month as regulated by an incorporated smart contract; the latest flow is around 50 billion.
Any unused part of the XRP in a specific month will be moved back to an escrow account. This procedure guarantees absolute usage without any misuse because of over supply of XRP crypto coins, and it will take years for all the cryptocoins to be available.
Bitcoin vs. Ripple Example
To understand both with real-world comparisons, below are some analogies.
Bitcoin is an equivalent digital currency—an alternative to real-world US dollars. For example. Smith can make a purchase and pay for it in bitcoins, or he can purchase bitcoins for trading and investments and sell them off at a later date for profit or loss, just like trading any other fiat currency like the GBP or JPY.
Suppose there is a guy named Smith visits Walmart and makes payment in US dollars. He can also purchase other currencies with his dollars for trading and investment, Ex- GBP or JPY and trade them off later for profit or loss.
Bitcoin is a similar digit currency-a substitute to real US dollars. Smith can make a purchase in exchange of bitcoin or he can trade his bitcoin for trading and investment later for profit or loss.
If Smith in America wishes to transfer $100 to Johnson in Italy, he can do this by directing his American bank to execute the transaction. After taking applied charges, Smith’s American bank will provide instructions via the present-day SWIFT system which will credit Johnson’s account in Italy with the same amount in euros. This procedure includes high charges on both parties and takes some days for processing them.
Ripple’s payment system contains XRP tokens for the asset transfers on the Ripple network. Smith can convert his $100 instantly to equally valued XRP tokens that can be transferred immediately to Johnson’s account on the Ripple network.
Once necessary transaction authentication is executed by a decentralized Ripple network, Johnson will get the XRP tokens. He gets the option to convert it back in US dollars or any other currency or he can keep it as XRP tokens. This authentication procedure is much faster compared to bitcoin and other money transfer systems.
The Bottom Line
Above mentioned example describes Ripple’s complex procedures with its basic functionalities. Ripple scores better compared to the bitcoin network for its quick processing and reduced transaction charges.
BTC, on the other hand, is globalized and more popular than XRP that gives it added benefits in different ways.
Bitcoin exists as an open public system that is not owned by any individual or government. However, Ripple’s decentralized network is owned and managed by a private company with the same name. Both digital systems have their individual cryptocurrency tokens and serve different uses.