So, What is Ripple? Ripple has been hailed as the cryptocurrency that will give the likes of Swift, Moneygram and Western Union a run for their money. While Ripple is designed to allow for speedier, more hassle-free, and anonymous remittance of money, it actually flouts many preset rules of cryptocurrency. Some pundits even claim that Ripple is not a ‘real’ cryptocurrency.
In this quick guide, we shall walk you through all the nuggets you need to know to get started in the world of Ripple. If you are looking to invest in a cryptocurrency that will change the way we remit money across the globe, you need to wrap your head around Ripple. Read on.
Getting to Know Ripple
What’s ripple? Created in 2012, Ripple is a digital platform that looks to offer a bridge between fiat currencies. It comprises two parts: RippleNet, a money transfer platform and XRP, the world’s fifth largest cryptocurrency by market cap. As you might have already inferred, RippleNet is a seamless payment network that connects banks, money transfer institutions, and other stakeholders, allowing them to transfer assets and money through the platform. The unifying factor is that all these transactions are recorded on a blockchain, a decentralized XRP ledger
The primary aim of Ripple is to reduce the cost and time associated with cross-border payments and money transfers. True to that, transactions processed through Ripple network takes about 4 seconds. In comparison, payments on Ethereum and Bitcoin networks take about 2 minutes and 1 hour respectively, while conventional transfers last between 3 and 5 business days.
Since XRP ICO (Initial Coin Offering), approximately 100 billion XRP coins have been created, 60 percent of which are still held by the parent company. Perhaps of more interest to crypto enthusiasts is that whenever a transaction is conducted over Ripple Network, a few XRPs are reduced/destroyed. Much to the grin of this group, XRP cannot be mined, too, making cryptocurrency exchanges the only places to garner them.
Why Does Ripple Matter?
At the beginning of Bitcoin craze, ripple gained a reputation for being the most sought-after altcoin. With value per coin at sub $1 and XRP supply at 100 billion, it’s not hard to see why it has become a darling for those looking to invest in the post-Bitcoin era. Of course, you can expect snappier transactions on ripple network than Bitcoin network. In fact, it’s speed that has attracted banks to Ripple, albeit on the low.
How does Ripple Work? Let’s take an example of two business people who want to conduct a cross-border payment, Jane (the sender) based in Japan and Joe (the recipient) based in Jamaica. In the traditional money transfer, this will involve converting JPX to a common currency such as USD, then transfering the money between Jane’s bank and Joe’s. Eventually, the USD in Joe’s bank is converted back to JMD. The trouble is that JPX>USD> JMD conversion takes lots of time and attracts a slew of fees.
That’s where the Ripple Network comes in handy; it proposes the use of XRP as the go-between currency. Oftentimes that means transactions can take around 4 seconds to be executed and confirmed — and the transaction fees associated with converting local currencies to XRP are much reduced.
Ripple vs Bitcoin: What’s the Difference?
There’s a reasoning Ripple has gained an increasing following from both consumers and banking institutions. Considering that RippleNet and XRP were designed with a different goal in mind, they offer several different benefits over Bitcoin.
Transactions conducted on ripple network, as mentioned above, take less 4 seconds, which makes it significantly much faster than Bitcoin, and incomparable to traditional systems.
Lower Transaction Fees
The transactability and speed aren’t the only bonuses associated with Ripple. While the cost of transacting Bitcoins has been on the upward trend in the past few months, the price for Ripple transactions has been quite favorable.
The defining feature of Bitcoin is that users can solve mathematical problems in order to be rewarded with coins. With Ripple, however, all the 100 billion XRP possible to use on the network has already been created. That means XRPs cannot be mined — in fact, about 60% of the coins are in the possession of the company. Whether this is a good or bad thing, the mining-free property of Ripple certainly makes for a huge difference.