Ripple vs Bitcoin: Could Ripple be the Next Bitcoin? (2024)

So,you’ve heard about twoof the mostpopular cryptocurrencies,Bitcoin and Ripple, butyou'renot sure what the difference between Ripple vs Bitcoin is? Or maybe you know what they do, butyou're notsure how the technologyof these two cryptocurrenciescompares? Either way, hold on tight, as I'm about to teach you everything you need to know!

InthisRipple vs Bitcoin guide, I am first going to start with the basics.I am going to talk about thingstheirpurpose,their transactionspeedsand thetotalcoinsupply of both projects.

After that, I am then going to talk aboutthedecentralization of each project,along with the scalability of each blockchain.Finally,I’mthengoing to discuss how each project has performed so far.

By the end of readingthisguide, you will have all the information youneedto decide which cryptocurrency is better.

So,what are you waiting for? The first part ofthisBitcoin vs Ripple guide is going to start byintroducing both of theseblockchains!

Bottom Line of Ripple and Bitcoin

In their simplest form, both Bitcoin and Ripple are cryptocurrencies that are supported by blockchain technology,whichallowspeople from all over the world touse these blockchains tosendandreceive funds. Both projects have their native coin, which can be purchased online at athird-partyexchange.

Although atfirst,these cryptocurrenciesmight sound very similar, there are some clear differenceswhich I will cover now.

Bitcoin Explained

Created in 2009, Bitcoinwasthe first and original cryptocurrency. It was built by an anonymous developer called Satoshi Nakamoto, who wanted to create a new global payment system that would allow people to send and receivedigital moneyon a peer-to-peer basis.

Peer-to-peer is similar to “Person-to-Person”, meaning that no third party or intermediary is required to process and verify transactions. As a result, the Bitcoin system is “Decentralized”,because it is not controlled by any single person or authority, nor is it controlled by any central bank, government or nation-state.

Instead, transactions are confirmed bythecontributingBitcoin community,called“Miners”.Anyone in the world can become a miner by hooking a deviceupto their computer. In return for their time and electricity costs, those who are successful arerewardedwith extra Bitcoin.

If you're a little confused, don’t worry, I’ll talk about thisprocessin more detailin the nextsection!

Bitcoin(BTC)also has amaximum supply of 21 millioncoins. The current circulating supply is17.1 million, with the number increasing each day. However, there will never be any more than 21 million Bitcoins mined,and that figure expects to be hit in 2140.

Now that’sBitcoin explained, the next part of my Ripple vs Bitcoin guide is going to find out about Ripple.

RippleExplained

Ripple was first launched in2012,threeyears after Bitcoin. It was built by a company called Ripple Labs who are based in the United States. The purpose of Ripple was to create a paymentsystem that could be used by banks to transfer funds both domestically and internationally.

Although they are targeting the financial services industry, anyone can buyand sell the currency of Ripple - the XRP coin.

People often get confused about the difference between Ripple and XRP, so I’ll quickly clear things up.Rippleis the name of the blockchain technology that allows people to send and receive funds (these funds can translate into most currencies out there). On the other hand,XRPis the name of the cryptocurrency, much in the same way that Ether is the cryptocurrency and Ethereum is the blockchain.

Just like Bitcoin, the Ripple blockchain does notrequirethird partiesto confirm and verify transactions, allowing people to send and receive funds on a peer-to-peer basis. In total,there will be a maximum supply of 100 billion XRP coins, with a currentcirculatingsupply of about60 billion.

So,now that you know the absolute basics of Ripple XRP, the next part of my Ripple vs Bitcoin guide is going to look at how each blockchain performs!

Technical Performance

Bitcoin

When sending funds to another person, the Bitcoin blockchain takes approximately 10 minutes for the transaction to be confirmed. Thisremainsthe same no matter where the sender and receiverarelocated.

Whether you are sending funds to somebody in the same city as you or someone on theother side of the world, it will always take about 10 minutes! When comparing this to the time it takes to send money overseas with a bank, it is muchquicker to useBitcoin,asbanks can takeupto three days to process the transfer.

When Bitcoin was first released, transaction feeswerevery low. It would cost just a fraction of a cent to get the transaction processed. This made Bitcoin idealas aglobal payment system.

However, as the system hasbecomemore and more popular, the amount that users have to pay has increased quite substantially.During its busiest period in late 2017, transaction fees were costing as much as $40, whichisn't sustainable for micropayments to say the least.

Fun Fact:High Bitcoin fees were the main reason that Bitcoin Cash was created!

Every system in the world can only handle a certain amount of transactions before it becomes overloaded.For example, although in 2016 Visa only processan average of 1,667 transactions per second, it can process over 50,000 per secondif it needsto, butcannot exceed much further than that.

On the other hand, you have Bitcoin.Eventhough Bitcoin is the most popular cryptocurrency in theworld, it is only able to process a maximum of 7 transactions per second.This is ahugescalabilityproblemthat Bitcoin must resolveif it wants to achievethedream of becoming a global payment system.

So,now that you knowabout the performance ofBitcoinexplained, the next part of my Bitcoin vs Ripple guide is going to see how Rippleperforms...

Ripple

As youwill soon find out, the Ripple blockchain performs much better than Bitcoin's. Here’s why...

Firstly, when sending XRP from one wallet to another, it only takes a few seconds for the transaction to be confirmed.This makes Ripple a much better alternative to Bitcoinwhen it comes to the speed of transactions.

When it comes to transaction fees, Ripple is practically free because the standardcostto make a transfer is just0.00001 XRP. To put this into real-world numbers, even when XRP reached its all-time high in Januaryat$3.29, this would have amounted to a transaction fee of just $0.0000329.This means that you could send over 30,000 transactions before you paid$1 in transaction fees!

So,what about scalability? Well,once again,theRipplecoinperformssignificantly better than Bitcoin. Remember how I mentioned earlier that Bitcoin can only handle 7 transactions per second? Well,Ripple can process more than 1,500 per second!

All of the above statistics make Ripple ideal for the multi-trillion-dollarinter-bank industry. This is where banks send money tootherbankslocated inother countries. At the moment, banks need to use athird-partyorganization located in Belgium called SWIFT. As a result, transactions are expensive and can take around 3 days before they are settled.

Moreover, when banks are located in developing nations and have to trade in a currency that isn’t popular, they often have to perform multiple exchanges as there is not enough liquidity in the market. By using Ripple, banks can use XRP as a bridge of liquidity, saving institutions lots of time and money.

So,now that you know how the two blockchain projects perform, the next part of my Ripple vs Bitcoin guide is going to discusswhich blockchain is more decentralized.

Ripple vs Bitcoin:Decentralization?

Decentralization meanstonotbecontrolled by any single person or authority. However, there are ongoing arguments in the cryptocurrency communityregarding the fact thatboth projects aren’tas decentralizedas theyshouldbe.

Bitcoin

When it comes to Bitcoin, although it is certainly true that nosingle entitycontrols the network, things have changed since its early days. When Bitcoin was first launched, anybody could become a minerusing aGPU or CPU, whicharecheap to buy.

However, it is now possible tousea piece ofexpensive hardware calledanASIC. ASIC's aremuch more powerful thanGPU’s and CPU’s, meaning that they will always have more chance of winning the mining reward. As a result, those who can’t afford to buy ASICs don’t have a fair chance of contributing to the system.

This isn’t the only issue.

There are now somepowerful organizations that manage'Mining Pools',in which different Bitcoin minersjointheir resourcestogether to ensure that they have the best chance of winning the Bitcoin mining reward. They build Bitcoin mining farmsconsisting ofthousands of ASIC devices. The idea is simple – the more ASIC devices you have, the more chance you have of winning the reward.

Most of these mining pools are located in China, where electricity costsarecheap. When I last checked the statistics (which you can see below), justfourmining pools control more than 50% of the total Bitcoin hashing power.

This puts a lot of power into the handsof a very small amount of people, which goes against the decentralizedideologyof Bitcoin.

Ripple XRP

There are also concerns from cryptocurrency fans that Ripple XRPisnot as decentralization asitshould be. Firstly, unlike Bitcoin,theRipplecoinis controlled by a company called Ripple Labs. It is important to remember that although they do not have the power to amend transactions or control people’s funds, they do control the supply of XRP.

At the time of writing,June 2018, there are approximately 60 billion coins in circulation, of a total supply of 100 billion. The big problem is that the remaining 40 billion (40%) is controlled by the foundersof Ripple– Ripple Labs.

They have the power to do what they want with the coins, meaning they technically can manipulate its price. If Ripple Labs decided to issue a large amount of the coins they control, it could negatively affect the price.

The other concernIfound when researching thisRipple vs Bitcoin guide,is thatsome peopledon’t like the factthat the blockchain isn’t maintained by the XRP community. In the case of Bitcoin, although the system has become dominated by large mining pools, anyone can attempt to contribute to the network by purchasing the required hardware.

This isn’t the case with Ripple asit isn’t possible to mine XRP. Instead, the network uses something called “Transaction Validators”.The only people that can become a transaction validatorarethe banks that install the technology.

Technically speaking, it is still decentralized because no single validator can take control of the network, nor can they amend or manipulate a transaction. However, some people think that everyone should have a chance to contribute to the network, not just financial institutions.

So,now that you know some of the concerns that people have regarding the decentralization of both projects, the next part ofthisRipple vs Bitcoinguideis going to discuss how transactions reach consensus.

Bitcoin vs Ripple: How doTheyReachConsensus?

Neitherof theseprotocolsrequiresa third partyto confirm, verifyandaudit transactions. So,how do they do it?

Firstly, let me quickly explain what a consensus mechanism is.Everyblockchain uses a cryptographic algorithm to confirm that a transaction is valid without going through an intermediary. This ensures that the person sending the money actually has the funds,and it also makes sure that the funds are not spent twice (double-spending).

Every device that is connected to the Bitcoin or Ripple network is called a node,and for a transaction to be confirmed, a percentage of nodes must “Reach Consensus”—which means they agree thatthe transaction is valid.

Bitcoin and Ripple each use a different consensusmechanism, which I will discuss below.

Consensus Mechanism

Bitcoin: Proof-of-Work

The first-ever blockchain consensus mechanism was created by the developerof Bitcoin,and it is called Proof-of-Work. The best way to understand Proof-of-Work is to think about a really difficult calculation.

The Bitcoin networkgeneratesa random calculation that is so difficult that no human could solve it. Instead, it requires a large amount of computational powerto solve.Thecalculation takes 10 minutes to solve.Once it issolved, the Bitcoin transaction is confirmed as valid.

Every single node that is connected to the network competes with each other to become the first device to solve the calculation. Whoever getstherefirst, wins the Bitcoin mining reward. The main problem with the Proof-of-Work model is that it requires really large amounts of electricity. For example,arecent studyrevealed that Bitcoin mining consumes more electricity than 159 individual nations!

The second issue with Proof-of-Work (as I discussed earlier) is that it allows people to use really expensive hardware, meaning that thosewho can invest moremoneyhave a much higher chance of winning the Bitcoin reward.

Thirdly, and possiblymost importantly, the Proof-of-Work model has contributed to the issues of high fees, slow transactions and the inability to scale.

So,now that you know what consensus mechanism Bitcoin uses, the next part of my Ripple vs Bitcoin guide is going to look at what Ripple uses!

Ripple:Federated Byzantine Agreement

The Ripple blockchain uses a consensus mechanism calledFederated Byzantine Agreement(FBA).Just likeBitcoin and its Proof-of-Work model, FBA seeks to reach consensus among different nodes.

In FBA, each node will trust a limitednumberof other nodes, which is known as a "Circle". The Ripple network has lots of different circles, which each overlap each other so that essentiallyevery node is in some way connected.

Transaction Validatorsthat are used to verify transactions (banks that use the technology), theyare individually selected and accredited before them having the ability to engage in transaction verification.

This means that in reality, none of the banks that use the technology are going to want to manipulate consensus, as they are using it to support their transactions. Even if they did, it wouldbeclear for all other Transaction Validators to see, who would simply reject the transaction.

Unlike Bitcoin,Ripple and its FBA consensus mechanismarenot required to solve complex calculations, meaning that it uses far less electricity than Bitcoin. This makes it a more efficient system and ensures that transaction fees are kept low.

Ultimately, in the few seconds that the system needs to confirm a movement of funds, at least 80% of the Transaction Validators must reach a consensustomarkthe transactionas valid.

So,now that you know about the two consensus mechanisms that are used, the final part of myRipple vs Bitcoin guide is going to look athow theprojects have performed so far!

First though, here is a comparison table so you can recap on some of the main differences between these two projects!

Comparison of Table

Ripple vs Bitcoin: The Story So Far

When people have the Ripple vs Bitcoin argument, one thing thateveryone canagreewithis that both blockchain projects have performedoutstandingly.However, beingthe original cryptocurrency, Bitcoin has always been the number one coin in terms of value, market capitalization, adoption, and real-world usage.

The year 2017 was its most successfulyearto date, whereby BTC increased its value by more than 2,000%. By the end of the year, Bitcoin reached its all-time high of $20,000, with a total market capitalization of just over $320 billion. To put this into perspective,this amounted to a higher market capitalization of bothGoldman Sachs and Morgan Stanley!

In terms of real-world usage, more and more vendors are beginning to accept Bitcoin as a payment method. This is especially true in Japan, where it is now possible to spend Bitcoin in over 200,000 different stores! Other well-known organizations that acceptBitcoin include,Microsoft, Expedia, PayPal,Overstock and even Virgin Galactic.

However, it will take a very long time before Bitcoin is used as a main-stream global payment system. The main reason for this is that the developers need to fixtheirperformance issues. Transaction times of 10 minutes, high fees and scaling levels of just 7 transactions per second are a million miles from asustainable globalpayment system.

The good news is that the team is working onthe second layer of payment technology on top of Bitcoin called “Lighting Network”, whichwill hopefullytake Bitcoin to the next level with fast, cheap and highly scalable transactions!

So,what aboutRipple XRP?Ripple is now the third strongest cryptocurrency in terms of market capitalization. Just like Bitcoin,the Ripple coinhad an amazing year in 2017. At the start of the year it was worth just$0.0065,however by the end of it this rose to a massive$2.40.

When it comes to the actual objective of the parent company,Ripple Labs, they are making some really good partnerships with some of the largest banks in the world. More than 100 different financial institutions are now testing out the Ripple protocol,including Santander, Bank of America and Credit Agricole!

In the future,it is hoped that the financial industry will use XRP to settle their inter-bank payments. The entire industry is worth trillions of dollars each year, so if everything goes to plan, the value of XRP could soon see new all-time highs.

This is not investment advice though.

Ripple vs Bitcoin: The Conclusion

And that’s the end ofthisRipple vs Bitcoin guide!Before youopened this article,you were unsure of the main differences between the two. However, if you have readthisguide from start to finish, you should now have a really good idea of what sets these two crypto-powerhouses apart.

As you now probably know, the Ripple blockchain performs much better than Bitcoin. It performs faster transactions, cheaper transactions, and more scalable transactions. Not only this, but the Ripple consensus mechanism is much better for the environment— itdoes not waste largeamounts of energy.Ripple's goals are different from Bitcoin's though, so don't think of Ripple as becoming "the next Bitcoin".

Bitcoin is still (as it always has been) the number one cryptocurrency. I believe that Bitcoin is more suited as a store of valuerather than a payment system though, in a similar way to Gold or Silver. However, the most important thing is that the next Bitcoin upgrade, the Lighting Network, is successful. This will make Bitcoin more usable as a payment system.

So,which cryptocurrency do you preferafter reading thisRipple vs Bitcoinguide? Have you decided to choose one over the other,or are you like me andwould prefer to have investments in both?Pleaselet me know your thoughts in the comments section below!