The development of Ripple has been a process that dates back to before Bitcoin existed. Designed to revolutionize the world of cross-currency and cross-border payments. Ripple is a very different animal to Bitcoin, Ethereum and other cryptocurrencies.
The History of Ripple
Ripple’s creation dates back to 2004. Development went on and 8 years later a global version emerged. This time, it was a refined version of Bitcoin’s protocol. Relying, like the new version of Ethereum, on network consensus rather than mining.
In 2013, the Ripple company – then called Opencoin, started working on the Ripple Protocol (RTXP). Supported by funding from the likes of Andreessen Horowitz. It was here that Ripple’s focus changed. Financial institutions started adopting the network as a way to make transactions almost instantaneous and a great deal cheaper for clients.
Fast forward to 2018, and the native currency of Ripple, XRP, can handle 1,500 transactions per second. It can scale to match Visa, but at a much lower cost and a much quicker settling period. Seconds rather than days. XRP usage has grown, and Ripple now occupies third place in the crypto rankings by market capitalization, behind Bitcoin and Ethereum.
What Is the Difference Between Ripple, Ethereum and Bitcoin?
All three of these make you think of cryptocurrencies, but the reality is that they are very different. Bitcoin is a store of value with a limited supply, like gold. People use it for transactions, payments, and investment. Ethereum is a network designed for developers wanting to build decentralized applications and create smart contracts for many different settings – not just financially motivated.
Ripple, meanwhile, is specifically designed to make cross-border and cross-currency payments cheaper and easier worldwide. Both for crypto and fiat transactions. It relies on network consensus rather than mining. So the energy demands are infinitely lower than Bitcoin. Its algorithm automatically searches for the cheapest way to get from one currency to another. Sometimes, this means one exchange from the original to the target currency. While other times, several exchanges in between can save the sender money. Either way, Ripple’s network will figure it out and execute it automatically.
How Can I Buy Ripple?
As with other cryptocurrencies, if you want to buy XRP, you need to get a wallet first. You can download a software wallet or a mobile application, or you can buy a hard drive or USB – known as a hardware wallet. A wallet stores your public and private keys. Think of your public key as your bank account and your private key as the special code you need to authorize a transaction. Everything else lives on the distributed ledger – the blockchain.
Once you have your wallet ready, head over to one of the many exchanges that offer XRP purchases and buy it with your debit or credit card, before transferring it to your wallet.
What Can I Use Ripple For?
If you have XRP, the chances are that you’re either an investor or crypto trader. Or maybe, you are looking to facilitate a transaction between different currencies. At the moment, this is something that is more a concern of major enterprises such as banks, than members of the general public. However, Ripple intends to step sufficiently into the mainstream that you or I could easily use it as a means to send money to each other, without the need for advanced technical knowledge.
As an XRP token is a tool, it isn’t used to buy things. Instead, it facilitates transactions, and your transaction fees are deducted from your supply of XRP.
What Are the Advantages and Disadvantages of Ripple?
Ripple is unbelievable cheap to use. As it is automatic and searches for the best possible way to get from one currency to another. It does not have any restrictions on borders. Also, it is extremely cheap to use as a tool for transactions. It is seen as being a threat to traditional entities like Visa and SWIFT because of this.
Ripple also uses network consensus, rather than proof of work or proof of stake. This makes it more efficient regarding speed and monitoring. But it is also far more energy-efficient than currencies like Bitcoin. As a tokenized system, individual XRP is very cheap too. This gives Ripple a degree of protection against the massive fluctuations in value that can occur with more valuable cryptocurrencies. Although regarding percentages, the currency has still seen 10-15% swings in the past.
There are drawbacks to the system though, although these are mostly down to perception. As Ripple has targeted the banking sector. Many champions of blockchain and decentralization have been turned off the platform. Similarly, as it is a pre-mined currency, there is no significant incentive for regular people to act as nodes. What this ultimately means is that many validator nodes are large businesses. Therefore, this doesn’t feel as distributed or decentralized as Bitcoin or Ethereum – although these currencies have their issues too.
The other disadvantage is that Ripple itself owns the majority of the XRP tokens in circulation. This effectively means that they have control over the Ripple blockchain. While this is again a matter of perception rather than the realistic possibility of anything happening. Decentralization purists feel that are elements of XRP that aren’t inf act decentralized. This can go some way towards explaining why so many financial institutions are working with Ripple though, despite being more cautious about other cryptocurrencies.