Bitcoin is inarguably the largest cryptocurrency in the world today by market cap. You most probably have heard of it. You hardly can turn on the TV as of late without someone bringing it up. However, there are a bunch of contenders to its throne and some of them are rather different. One of the most intriguing ones in its deviation from the numerous crypto-norms is Ripple – a much more centralized cryptocurrency that’s in an incredibly decentralized space.
Technically speaking, Ripple is not a cryptocurrency that is similar to the mold of Bitcoin. That’s why if you are looking to make an investment in Ripple, you might want to do your research first – and what better place to make that stride than right here!
Ripple in a Nutshell
Ripple is a San-Francisco-based FinTech company founded back in 2012 as an ensuing iteration of Ripplepay. This real-time gross settlement system (RTGS), currency exchange and remittance network is built atop the idea of a common ledger network of independent validating servers who participate in the comparison of transaction records.
Unlike Bitcoin, Ripple doesn’t rely on energy and computing-intensive proof-of-work. Instead, it encompasses a distributed public database that involves a consensus process among the validating servers to uphold the integrity of transactions. These validating servers can belong to anyone; be it individuals or even banks.
Ripple is actually the catchall name for the cryptocurrency platform and its transaction protocol is XRP, just as Ethereum refers to the platform that facilitates dealings in Ether. XRP direct money transfers between two parties are nearly instant; require no conventional confirmation time and the XRP token allows for the exchange of any type of currency.
Ripple aims to better the financial transactions between banks to make them faster, more reliable, and cheaper. As a result, the company has already managed to lure huge financial institutions to the Ripple network, including BBVA, Santander, and RBC.
Recently, Ripple just took another huge stride in its expansion efforts in Asia. They announced official plans to set up a new office in Singapore – considered as today’s Asian hub for innovations in the FinTech industry. With the company’s seasoned leadership team and their ever-growing Ripple network, Ripple’s projections look promising.
The Opportunity in Hand
When you think about it, the current state of our global banking system is rather frustrating when we make international financial transactions. We, the bank’s clients, have to wait 3 to 5 processing days and incur hefty fees when we transfer funds to parties in different countries. It actually is faster to take a plane with a bag of money than most of these international transactions.
So, if the technology for easier and more reliable global payments already exists, why should the international payments industry lag so far behind?
Well, it isn’t too far-fetched to assume that these financial institutions are collectively making trillions of dollars in transaction fees and are in no haste to make adjustments to better the traditional system that puts money in their pockets.
The financial industry also tends to keep pertinent information veiled in complex financial jargon that is surely meant to trip up any average person. Financial terminologies such as “quantitative easing” and “collateralized debt obligations” play part to establish the financial realm in an abstruse curtain.
However, we are only partially affected by issues with these financial transactions; the financial institutions are the ones that experience a major fraction of these problems. Why is this? Because financial transactions have to go through multiple middlemen; results in a high failure rate, a costly and slow process with no logical global structure for these transactions.
Instead of taking the ‘burn it to the ground’ tactic that most cryptocurrency ideologists adopt, Ripple aspires to make this process exceptionally efficient through their own cryptocurrency token (XRP).
Every year, an equivalent of about 155 trillion dollars moves across the borders. For example, let’s make the assumption that everyone makes use of PayPal which charges a fee of 2.9% for each financial transaction. Granted, this would be way hefty for payment fees; about 4.495 trillion dollars of these global payments would go to PayPal. Moreover, these payments would most likely take a couple of days to process.
XRP’s Value Propositions
Aside from Ripple’s vast increase in transaction speed, these transactions have extraordinarily low costs and are paid in XRP. Ripple does this through the destruction of a very minute percentage of the XRP coins sent and received.
The XRP coin is subject to deflation because there are lesser total coins in circulation with every transaction conducted. As a result, there will be a price increase with every transaction though it will be hardly noticeable in the short run. However, you might want to take this into account if your plans are long-term.
There is a major problem with the number of XRP coins in circulation, as well as its price; the amount of coins currently in circulation is only at 38% of the total XRP coins created. At the moment, the main concern of individual investors is that Ripple still owns 62% of the total XRP coins created.
Financial institutions need a stable price for them to appropriately conduct financial transactions. It’s opinionated that this is the reason why Ripple is holding back most of the XRP coins. However, Ripple has not issued an official statement on the real reason yet.
How does Ripple (XRP) differ from Bitcoin?
Multiple validating servers
A vast majority of people assume that Ripple is a blockchain-based technology because of its validation servers and consensus mechanism. Even though Ripple is consensus-oriented, it is not a blockchain. It makes use of a HashTree to condense the data into a single value which in turn is contrasted across the validating servers to offer consensus.
Backed by Financial Institutions
The idea of regulation is a common discussion point among the cryptocurrency investors, as well as the financial commentators. Even though this may not be of any meaningful concern, most worry that banks will crack down on Bitcoin and other blockchain cryptocurrencies. This is even less likely to happen with Ripple.
It is backed by a notable number of the world’s major financial institutions such as American Express, Santader, RBC, UBS, and more. These financial institutions all play part in its operation and proliferation – they all can charge their specified transaction fees. This control is the major differentiating aspect for Ripple.
In most ways, this isn’t surprising because blockchain technology holds a multitude of benefits for corporations that effectively employ it. Nonetheless, backing Ripple is most certainly an outlier and it’s a move that every potential buyer and seller has to understand. Why? This gives the financial institutions a greater control level over Ripple as compared to other cryptocurrencies.
When you take this into account with the fact that there’s no creation of new XRP, and that there’s strict control of those in circulation, many tend to be concerned about Ripple’s future.
Nearly Instant Transactions
Ever since its release, Ripple has been stable with over 35 million transactions processed without any arising issues. Thus far, Ripple is able to oversee 1500 transactions per second. In comparison to Bitcoin which can handle 3 to 6 transactions per second (tps) and Ethereum 15 tps, recent Ripple updates enable it to scale to Visa levels of about 50,000 tps.
The XRP coin isn’t mined like Bitcoin, Litecoin, Ethereum, and a good number of other cryptocurrencies. Instead, Ripple issued the coins at its inception, just as a company issues stock once it incorporates; they simply settled for a number (100 billion) and went ahead to issue that many XRP coins.
Currently, Ripple’s blockchain is one of the fastest in the crypto sphere with a transaction speed of about 4 seconds. To demonstrate just how fast this is, transactions on the Bitcoin blockchain take over an hour to send around.
Adding the fact that Bitcoin is facing scalability issues, Ripple is definitely the more efficient transactional cryptocurrency of the two. Moreover, Ripple is scalable in case the number of transactions increase rapidly.
How to Buy and Store Ripple in 3 Simple Steps
Step One: Get a Ripple (XRP) Wallet
The most important thing to note down when you use a wallet to hold your XRP is the secret key. Make a point to store it in a secure location. Better yet, write down the secure key a couple of times and store it in a number of different secure locations. Keep in mind that the secure key gives users access to their wallet. Generally, the XRP wallets operate the same way that Bitcoin wallets do.
For maximum security, it is recommended that you hold your XRP on a hardware wallet. You might want to know that you initially have to fund your Ripple wallet with 20 XRP in order to protect it against low-level spam attacks.
Currently, the only reliable hardware wallet for storing XRP, as well as a good number of other cryptocurrencies, is Ledger Nano S. Also, Toast Wallet is yet another easy to use self-hosted wallet that can hold Ripple; it is available for desktop (Mac, PC, Linux) and mobile (Android, iOS).
Step Two: Find a Ripple (XRP) Exchange Platform
There are plenty of options for buying Ripple today. You either buy Ripple with fiat currency (EUR, USD, etc.) or you can use specific exchanges to trade Bitcoins for Ripple.
Invest in Ripple via a Trading Fund
There are platforms like eToro that don’t give you actual access to your coins; you can’t send coins in your eToro account to other individuals. The only possible thing you can do with the platform is to either buy or sell Ripple for fiat currency; which means that the platform is only good for price speculation.
Use Fiat Currency to Buy Ripple
The best way to purchase Ripple (XRP) for those who don’t already own Bitcoin is to make a direct purchase using a credit card or a wire transfer.
Bitstamp makes it possible for you to buy XRP through a wire transfer. After you sign up and follow their Know Your Customer (KYC) procedure, it is pretty easy for you to send EUR via a SEPA transfer, or even USD via a bank transfer. Once the transfer clears, you can directly trade fiat currency for XRP on their exchange.
Also, Bitstamp makes it possible for you to use your credit card to move funds to the platform, as well as directly trade BTC for XRP. Find out more on how to purchase XRP on Bitstamp.
Another exchange that supports XRP is GateHub. You first have to sign up to GateHub and go through their KYC procedure. The exchange accepts bank transfers and SEPA transfers – though there’s a $15 fee for the bank transfers. Once the trading platform receives EUR or USD, you can trade the fiat currency for XRP.
Trade BTC for XRP
All through the Ripple community, the consensus is that the most inexpensive way to buy XRP is to first purchase Bitcoin from Coinbase or any other provider. Then, you can send Bitcoin to any number of exchanges and trade for XRP.
Potential Japanese customers can make use of Bitbank or Coincheck to buy XRP.
For those individuals located in Mexico, you can use Bitso to purchase XRP.
Step Three: Withdraw Your XRP to the Wallet
It is not recommended that you leave your XRP on the exchange you purchased them from. Why? Because you actually don’t have the sole control to the private key for your coins – they are not actually yours.
It doesn’t matter where you bought your coins. Always make a point to remember to withdraw them to your Ripple wallet which you possess the private keys to. Once your transaction is confirmed, you have successfully seen through the process of purchasing Ripple.
Conclusion – Is Ripple (XRP) a Good Investment?
Well, to be true – that’s entirely on you.
Ripple’s success at the end of the day is linked to the number of partners on the Ripple network (which has embraced a steady growth over the past year), the effectiveness of the XRP coin, and the number of people who use Ripple’s products. Ripple is seemingly doing well on these fronts.
However, it might be important for you to keep in mind the sheer supply of the XRP coins in the market (about 100 billion coins). As if this isn’t a hard pill for any potential investor, you also have to keep in mind that Ripple holds about 62 billion XRP coins (about 62% of the total coins created). Technically, they can bring in massive amounts of their XRP coins into the market in an attempt to control the price; to generally keep it low.
Nonetheless, aside from the investment metrics, it is vital for you to have an ample understanding of the position that Ripple is currently in. Do you realize the opportunity at hand for Ripple? Do you think that Ripple’s team can actually pull this off? What strategies is Ripple’s team effecting to realize their goals?
You might want to find more insight from Ripple’s Founder and CEO, Brad Garlinghouse. He points out whether you should invest in Ripple and exactly how Ripple (XRP) plans to revolutionize the finance industry.