Ripple vs Bitcoin: Which one’s better?
Here, we look at Ripple vs Bitcoin – and explore where XRP has the upper hand over the world’s biggest cryptocurrency
What’s the difference between Ripple and Bitcoin? Well, in cryptocurrency terms these two digital assets are like night and day. Each has vastly different use cases and tokenomics, with XRP delivering rather tepid returns in recent years. Here, we’re going to compare Ripple and Bitcoin, and see what their future prospects are looking like.
The infographic above really paints the stark difference between Ripple and Bitcoin. Even though Ripple’s XRP is the third-largest cryptocurrency in the world, its market cap is barely 4.4%of Bitcoin’s size.
One area where XRP definitely has the upper hand in the battle of Ripple vs Bitcoin is the total supply of coins that can ever exist. Bitcoin has a hard cap of 21 million, approximately 89% of which are already in circulation. By contrast, Ripple can have an astounding maximum supply of 100 billion tokens – and close to half of them are already in the market.
As you’d imagine, this means there’s little contest in XRP vs BTC when it comes to price. Bitcoin has managed to achieve a decent amount of scarcity because of its relatively low number of coins. It’s a classic case of supply and demand – BTC has low supply but high demand, meaning that prices can be pushed up substantially.
Just as you’d be willing to pay top dollar for a rare baseball card, or a premium if there was only one bottle of water left in the shop on an extremely hot day, high levels of supply can have a detrimental impact on demand. And this, in a nutshell, is where XRP’s problem lies. Critics argue that Ripple is overly centralised, with the company that created XRP regularly releasing large amounts of this altcoin from escrow accounts. This pushes up the supply even further, and dismayed investors argue that this hampers positive price action.
Ripple or Bitcoin? The use cases
Of course, you may not be interested in the merits of a Ripple vs Bitcoin investment – instead, your priorities may lie in the use cases of these two cryptocurrencies.
When Bitcoin was created all the way back in 2009, its goal was simple: to offer a digital currency that would allow people to pay for goods and services. BTC has long aimed to deliver an alternative to centralised institutions. Indeed, it was built in anger following one of the worst financial crashes seen in decades.
Putting Ripple against Bitcoin, you begin to understand that these are radically different assets with divergent agendas. Ripple, which founded the XRP token, launched in 2012. This company also wanted to address some of the weaknesses in the global financial system. Instead of mounting a direct challenge to banks, it wants to offer a service that helps them to run more efficiently.
Although XRP is also accepted as a payment method by some e-commerce retailers, this altcoin’s main goal is to serve as a ‘bridge’ between different fiat currencies. A consumer changing their dollars to rupees, or pounds to euros, can often face rather punishing and even extortionate fees ,especially when it comes to the remittances market. Through XRP, these conversions can become a lot less expensive.
Ripple vs Bitcoin: Which one’s better?
Just because you can buy one XRP for a little more than$1.10 doesn’t necessarily mean that the cryptocurrency itself is less valuable than Bitcoin. There are some areas in the Ripple vs Bitcoin debate where XRP comes out top.
A big difference between Ripple and Bitcoin is the speed with which transactions can be executed. XRP can be sent from one party to another in a matter of seconds, compared with several minutes for BTC. By and large, XRP also commands much lower fees – and during times where demand is high, Bitcoin users may face rather high costs if they want miners to prioritise their transaction and include it in the next block.
And that brings us neatly on to our next topic: mining. New Bitcoin is mined when complex mathematical problems are solved, and all of this ends up using vast amounts of energy. (At present, Bitcoin’s electricity usage is equivalent to the total footprint of Argentina.) Understandably, this has sparked some serious concerns about the impact of cryptocurrencies on the environment. When a single transaction uses as much power as an American household does in 19 days, you know you’ve got a problem.
Ripple manages to sidestep this issue because of how all of these tokens have been pre-mined,and the XRP that isn’t in circulation right now is locked up in a smart contract.
As we alluded to earlier, one of the biggest factors in the Ripple vs Bitcoin debate is how Ripple’s technology is used by more than 200 financial institutions in dozens of countries. There are some seriously big brands included in this list, including American Express and MoneyGram. Hurdles do exist. For example, the Spanish bank Santander, an investor in Ripple, opted not to use XRP in its new international payments network because the company isn’t active in enough markets.
Although there is some institutional interest in Bitcoin, progress has been slow. All of this could be about to change, with firms such as Galaxy Digital Assets and Grayscale Investments encouraging investors to back BTC through high-profile ad campaigns in the Financial Times and on major business news channels.
The bottom line
Ultimately, Bitcoin is a better-known cryptocurrency than Ripple, and it has a much larger market capitalisation. Typically, big rises in the value of XRP normally happen whenever the likes of BTC and ETH – which are both bigger cryptocurrencies by a sizeable margin – embark on a bullish surge.
Trade Bitcoin to US Dollar - BTC/USD chart
Many critics are also concerned about XRP’s independence, and argue that it is unacceptably centralised because of its ties to Ripple. Some of those who have followed the cryptocurrencies space since its infancy in the early 2010s argue that this undermines the whole purpose of digital assets, which is to be decentralised and controlled by no one, meaning that there’s no single point of failure.
It’s going to be interesting to see how Ripple evolves in the coming years. The company’s CEO Brad Garlinghouse said in an interview with the Financial Times that he wants his business to become “the Amazon of payments” – indicating that he wants the platform to diversify and become a much bigger presence in the digital economy. Indeed, Ripple has invested hundreds of millions of dollars in projects that have been aiming to stimulate the use of blockchain. Garlinghouse told the FT:
“Amazon started as a bookseller and just sold books. We happen to have started with payments. Two years from now, you’re going to find that Ripple is to payments as Amazon was to books.”
The question now is whether Ripple will succeed – and whether it can co-exist with Bitcoin.
It depends what you really want. These are radically different assets with divergent agendas. Ripple’s aim is to become a bridge between different fiat currencies, meaning it is more versatile and cost-effective for those in the foreign exchange space.
Not likely in the short term. There’s little contest in XRP vs BTC when it comes to price. Bitcoin has managed to achieve a decent amount of scarcity because of its relatively low number of coins. It’s a classic case of supply and demand – BTC has low supply but high demand, meaning that prices can be pushed up substantially.
Ripple can have an astounding maximum supply of 100 billion tokens – and close to half of them are already in the market. Bitcoin has a hard cap of 21 million.