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Not only is bitcoin (BTC) the oldest and most widely recognised cryptocurrency in the world, it’s also the largest.
But the crypto marketplace is becoming increasingly crowded, with a diverse range of digital coins and tokens battling for their piece of the pie. XRP (XRP) is one of the leading competitors. Having become closely associated with San Francisco tech company Ripple, XRP is an independent asset designed to allow for faster and cheaper international payments.
XRP is sometimes referred to as “the next Bitcoin”, but is that really the case? To find out, let’s take a closer look at the similarities and all-important differences between bitcoin and XRP.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
The world's oldest, largest and most recognized cryptocurrency, bitcoin is peer-to-peer electronic cash that was originally designed to provide a viable alternative to fiat currency.
XRP is designed to offer fast, cheap and secure cross-border payments through RippleNet, a network of banks and payment providers all around the world.
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Is it called XRP or Ripple?
Before going any further, let’s clear up any confusion you may have about the differences between Ripple and XRP. Though Ripple is often used to refer to the XRP cryptocurrency, such usage is incorrect.
Ripple is the name of a US tech company focused on cross-border payment solutions.
XRP is an independent digital asset native to the open-source XRP Ledger. It is used to facilitate transactions on the Ripple network.
Satoshi Nakamoto’s 2008 paper outlined a vision for a form of peer-to-peer electronic cash known as bitcoin. Launched in 2009, the world’s first digital currency is based on a peer-to-peer network secured by cryptography, and there’s no central authority that governs bitcoin.
Bitcoin holders can transact directly with one another, with all transactions recorded in a public ledger known as the blockchain. Once a transaction has been added to the blockchain, its details can’t be removed or altered in any way. These transactions are verified and the network secured by volunteers known as miners, who use their computing power to solve complicated mathematical problems.
Meanwhile, XRP is a more recent arrival on the cryptocurrency scene. Its history dates back to the start of 2012 and the founding of the San Francisco fintech company now known as Ripple. Ripple’s aim is to provide faster, cheaper and more reliable international payments between banks than the infrastructure currently in place.
This is where the XRP cryptocurrency comes in. The native digital asset of the XRP Ledger, a decentralised ledger powered by a peer-to-peer server network, XRP acts as a liquidity source for banks and payment providers sending cross-border payments. Using Ripple’s network, and with XRP acting as the link between different fiat currencies, Ripple allows users to send payments that settle in four seconds, and the minimum transaction cost or a standard transaction is 0.00001 XRP.
How bitcoin (BTC) works
Bitcoin is electronic cash that users can transfer to one another through a peer-to-peer network, with all transactions recorded on a public ledger. Its original purpose was as an alternative to fiat currency.
How XRP (XRP) works
Banks and major corporations use XRP to send faster and cheaper international money transfers. XRP acts as a bridge between different fiat currencies, allowing funds to be sent via the Ripple network.
Key similarities between bitcoin and XRP
While bitcoin and XRP may seem quite similar at face value, there aren’t all that many similarities when you dig down a little deeper. Both are cryptocurrencies, both have an upper limit on the total number of coins to ever be created, and both are major players in the world of crypto.
However, these two currencies were designed with different purposes in mind. Bitcoin was developed as an alternative to fiat currency, designed to be used to pay for goods and services and for people to send payments directly to one another. Meanwhile, XRP serves as a pool of liquidity for banks, corporations and anyone else who wants to send an international money transfer.
Key differences between bitcoin and XRP
1. Purpose and philosophy
Satoshi Nakamoto’s vision for bitcoin focused on enabling peer-to-peer transactions that don’t require users to go through a third party. The aim was to cut out banks and other financial institutions – rather than sending funds via their bank, BTC holders can send transfers directly to one another.
But if bitcoin is anti-bank, Ripple is very much pro-bank. Rather than taking control away from the world’s financial institutions, Ripple’s focus is on working with the banks to enable them to send more efficient global transfers.
Decentralisation, or a lack of control by any one person or authority, is one of the key underlying principles of bitcoin and many other cryptocurrencies. Bitcoin is an open-source currency backed by a passionate community of developers, and while many argue that the increasing difficulty of mining means that it’s not as decentralised as it should be, it’s based on a very different philosophy to Ripple.
Ripple is a privately-owned company that offers its products and services to banks and other companies. Ripple has copped heavy criticism for its level of centralisation, in part due to the much-publicised 2015 incident when the funds of recently departed Ripple founder Jed McCaleb were frozen, and also due to the fact that Ripple has locked up 55 billion XRP in escrow.
Bitcoin’s total supply is capped at 21 million coins, and approximately 17.2 million BTC (or approximately 82% of the total supply) circulating at time of writing (August 2018). The remaining coin supply is expected to be mined by 2140.
XRP has a maximum supply of 100 billion tokens, all of which have already been created. The XRP supply will decrease in future, as a small amount of XRP is destroyed as part of each transaction.
4. Transaction times and fees
There are also a few key differences between bitcoin and XRP from a functionality standpoint. Bitcoin transaction confirmations take around 10 minutes, while processing times bloat even further during periods of intense network congestion. Average transaction fees in the 12 months to July 2018 ranged anywhere from US$0.50 to a brief peak of more than US$50.
Contrast those figures with Ripple and XRP, where the transaction cost is less than US$0.01 and payments are settled in 4 seconds. And while XRP is capable of handling 1,500 transactions per second, bitcoin maxes out at around 7 transactions per second.
Bitcoin vs XRP: Current prices
Wallets for bitcoin and wallets for XRP
If you’re thinking of buying either bitcoin or XRP, you’ll first need to set up a wallet where you can store your crypto coins. There are myriad bitcoin wallets available, ranging from secure hardware wallets to desktop, mobile, web and even paper wallets.
XRP holders aren’t quite as spoiled for choice, but there are still multiple options to choose from. Take a look at our crypto wallets guide for tips on how to choose the right wallet, or check out our separate guides on the best wallets for bitcoin and XRP.
The biggest and best known of all digital currencies, bitcoin has achieved a level of mainstream recognition that most other cryptos can only dream about. Its performance has a significant impact on the prices of all other cryptocurrencies, and it’s backed by a passionate community.
Slow transaction times, high fees and limited transaction throughput all hamper bitcoin’s usefulness as a payment currency. There are several other currencies that perform better than bitcoin in pure payment terms.
The cross-border payments sector is greatly in need of disruption, and Ripple’s plan to transform slow and outdated international transfer methods could be the answer. Ripple also boasts a strong financial position and a sizable list of partnerships with major financial institutions around the world – all of which is good for XRP.
Widespread adoption is the biggest challenge facing Ripple in the months and years ahead, with competition expected to come from SWIFT, Visa, Stellar and even the banks themselves. Whether the world’s largest banks, financial institutions and corporations will come to Ripple’s party remains to be seen.
The bottom line
Bitcoin and XRP are based on different philosophies and developed with different end goals in mind. XRP isn’t “the next bitcoin”, but that doesn’t mean it isn’t worth considering for crypto buyers.
With strong financial backing and more partnerships than just about any other digital currency project out there, Ripple has laid a solid foundation for its assault on the global payments industry. And if the US fintech company can achieve the widespread adoption it’s hoping for, it could spell good news for XRP holders.
As for bitcoin, its position as the world’s largest and best-known cryptocurrency doesn’t look like being challenged any time soon. While issues with scalability limit its potential for day-to-day transactions, and therefore present a barrier to wider use, it’s perhaps better suited as a store of value than a payment currency.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
Disclosure: At time of writing the author holds ADA, ICX, IOTA and XLM.
Andrew Munro is the cryptocurrency editor at Finder. He was initially writing about insurance, when he accidentally fell in love with digital currency and distributed ledger technology (aka “the blockchain”). Andrew has a Bachelor of Arts from the University of New South Wales, and has written guides about everything from industrial pigments to cosmetic surgery.
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