First things first, let’s start from the beginning.
Ripple was released in 2012 by the Ripple company, then named Opencoin. Unlike other digital currencies, Ripple’s primary purpose is not to be a medium of exchange (such as Bitcoin) or a platform for creating smart contracts (such as Ethereum), although both are possible on its network too.
Instead, the main intention with Ripple is to make transactions between banks more efficient by reducing the time and costs required for a transaction to be settled. That is real-world everyday transactions between fiat currencies like the Euro and USD, not only crypto transactions inside of the Ripple network.
Thus, we can say that Ripple is much more than a cryptocurrency. Ripple is transaction settling system for banks and payment networks, or a more efficient payment protocol compared to the ones currently used by banks.
To maximize the efficiency of its protocol Ripple uses a cryptocurrency to run the verification processes and the whole system. The cryptocurrency is known as XRP.
Another important difference with Bitcoin or other popular cryptocurrencies is the fact that Ripple (or XRP) is a cryptocurrency with decreasing supply, or said another way, a currency with a deflationary tendency. Instead of having a maximum number of XRPs that will be created at some point in the future (such is the case with Bitcoin, Litecoin etc.), Ripple started with the maximum number of XRP coins already released into the system.
The maximum supply of digital coins is set 100 billion XRPs and that number is decreasing at a very slow pace going forward into the future. Instead of creating new XRPs on each verified transaction (such as Bitcoin), the Ripple system destroys a small number of its crypto coins every time a transaction is settled.
Advantages of Ripple
Ripple is open source, but it’s owned and operated by the Ripple company. It doesn’t use mining or the proof of work method to verify transactions. Instead, transactions are verified by a consensus process between members of the network.
Ripple also uses a consensus ledger instead of a blockchain ledger as many other digital currencies. And this is the advantage of Ripple because the consensus process is much faster than mining. As you probably already know, mining takes a lot of time and uses a lot of computer power. With that, it also needs a lot of electricity and creates a lot of heat in the process. So, it’s definitely not the most convenient solution, especially considering that over time, the blockchain technology requires even more and more power to run.
While a Bitcoin transaction may take anywhere from a few minutes (average is 10 min) to a few hours, transactions on the Ripple network are completed within a few seconds. The Ripple payment protocol is already used by several major banks and is gaining popularity in the financial world as a better solution than what is currently used.
Disadvantages of Ripple
However, crypto enthusiasts are not that excited for Ripple. One of the issues or disadvantages that is frequently stated is the fact that about 60% (60 billion) of the XRPs are currently owned by the Ripple company. This is a large portion of the whole supply and many people are turned off by that.
Also, another thing that many crypto enthusiasts don’t like is the fact that Ripple is partnering with banks and works to help them. In contrast, Bitcoin and other cryptocurrencies are designed to completely cut out the banks (middleman) from the system and this is an aspect that attracts many people to invest in cryptos.
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