The birth of cryptocurrency began with Bitcoin and with it blockchain technology. However, following its creation, several alternative decentralized crypto assets were created, some offering faster transactions than Bitcoin, better scalability, or smart contracts, for example.
Some crypto altcoins are also arguably considered centralized, and the argument rages on today not only within the cryptocurrency community itself but with the SEC. This chief regulator has yet to deem XRP, not a security as it has Bitcoin and Ethereum.
But the differences between Ripple vs Bitcoin are vast, not just in value, but how they differ as an investment and trading instrument. This guide takes a deep dive into comparing the cryptocurrencies XRP and BTC and what each has to offer investors and traders alike.
Bitcoin and XRP are both cryptocurrencies that share a few similarities but are considerably unique in many more other ways. Both can be used to store or transfer value from user to user, without the need for a bank.
The similarities about end there, with even their creation and backstory diverging completely. For one, Bitcoin was designed by the pseudonymous Satoshi Nakamoto, that is presumed deceased and had noble reasons for creating cryptocurrency that will be explained under the below concepts section.
Ripple, on the other hand, started as another project altogether, and the XRP protocol is now provided by Ripple, a company by the same name.
Bitcoin was created in 2008 during the Great Recession and peak bank bailouts. A newspaper headline mentioning such a situation is coded right into the “genesis block.” It was designed to be the first peer-to-peer form of digital cash but also feature aspects of a commodity to ensure scarcity and not let it fall into the same sort of situation that fiat currencies are currently becoming exposed to an endlessly inflating supply. Bitcoin enables users to be their own bank, custody their own wealth, all without the need for a third-party.
Ripple, on the other hand, isn’t actually the name of the cryptocurrency; it is the name of the parent company behind the protocol. While Ripple executives claim XRP is decentralized, founders hold a sizable portion of the supply, and the crypto community claims the distribution is too unfair to be considered decentralized. The SEC isn’t yet sure, and there is a grey area surrounding XRP because of the involvement of Ripple, the company.
And while Bitcoin is vehemently opposed to banks, Ripple works with directly banks to get them to implement the XRP protocol and replace cross-border payment solutions like SWIFT wire transfers. Because of how completely different in concept these two assets are, the crypto community is just as divided on if the asset is worthy of investment or not.
Ripple also has a marketing team, for example, while only developers and the community itself supports Bitcoin. Because of this, Ripple is subject to stricter regulation than Bitcoin, which has no intermediary whatsoever.
Bitcoin wasn’t the first attempt at creating a cryptocurrency; however, it was the first successful one. Satoshi Nakamoto solved the elusive “double-spend” issue plaguing previous forms of digital cash that ultimately failed. The proof-of-work system driven by Bitcoin mining contributing hash power to the network to keep it secure, and chugging along was the solution necessary to create the future of finance.
XRP utilizes a consensus ledger and series of network servers to validate transactions. As a result, XRP is significantly faster and more flexible than the Bitcoin blockchain.
Bitcoin blocks are generated roughly every ten minutes, transactions that pay the highest fees or happen to make it to the top of the pool can be processed in this timeframe, but it can take longer from there depending on overall transaction fee costs, how many transactions are currently pending in the meme pool, and more. The number of transactions per block can reach as high as 3,500, so the cryptocurrency currency has a capacity for roughly 3,500 per ten minutes.
XRP, however, is “consistently” capable of 1,500 transactions per second, easily trumping Bitcoin’s slow and clunky blockchain mechanic. Fees are also significantly less on XRP, the XRP blockchain can handle a number of different assets, and more compared to Bitcoin. These are just some of the ways that make Ripple better than Bitcoin.
One of Bitcoin’s most important attributes and what gives it value as a tool for wealth preservation and hedge against inflation is due to its extremely limited, hard-capped supply of just 21 million BTC. Bitcoin also has a deflationary supply mechanism, called the halving, which reduces the supply of BTC that enters the market by half every four years. The most recent halving decreased the block reward miners receive for contributing hash power to the Bitcoin network, from 12.5 BTC to 6.25 BTC.
The stock-to-flow model based on Bitcoin’s supply projects the cryptocurrency to reach prices of $100,000 per BTC and far beyond within the next few years, based on nothing more than a mathematical formula. But Bitcoin’s very code is built using math, and math is what keeps the network going.
Bitcoin’s distribution may even be lower than currently know, despite the transparent number of total coins in circulation and to ever exist. For example, the cryptocurrency’s creator, Satoshi Nakamoto, is said to hold roughly 1 million BTC of the final 21 million BTC supply but is believed to be deceased.
Unless the private keys to that Bitcoin were passed along to next of kin in some way, or Satoshi is still alive, those 1 million BTC are potentially lost forever. In the early days of Bitcoin, the coins were hard to come by and had to be generated through mining. The earliest users ended up with large sums, with many who also lost their private keys over the years. Adding in all the users who have lost small portions either by passing away, forgetting passphrases, or sending assets to the wrong address, the supply could be even less than believed.
XRP, however, the supply is much more visible, especially because Ripple themselves hold a substantial portion of the token’s supply. There’s an XRP supply of 100 billion tokens in total, with 45 billion currently in circulation. The rest is held in an escrow account by Ripple. Founders hold a sizable supply, such as Brad Garlinghouse and Jed McCaleb, who is no longer associated with the project but sells a regular amount of holdings per month, keeping the altcoin’s price lagging behind other tokens.
This unfair distribution is why XRP isn’t a favorite among the cryptocurrency community and why it is argued that the asset is centralized or not. Bitcoin also has a much larger market capitalization despite XRP having a much larger token supply. Bitcoin is currently at a $211 billion market cap, while XRP’s is roughly $11 billion, representing a $200 billion difference due to Bitcoin’s first-move advantage.
The two assets also aim for an entirely different use case, or at least Ripple seeks to use XRP to disrupt a very different market that Bitcoin would be utilized for. Both are primarily used these days as a speculative investment or trading instrument because use cases aren’t there quite yet. Bitcoin is used as a store of wealth and insurance policy against the unknown, and a hedge against inflation.
Because there will only ever be 21 million BTC, yet dollars and other fiat currencies are being printed at a rapid pace, the cryptocurrency is an excellent hedge against inflation. XRP does have this benefit, but that’s not what it is used for.
XRP is a cross-border payment solution that seeks to disrupt SWIFT wire transfers, Western Union, MoneyGram, and more. Ripple is working closely with banks to get them to adopt the XRP protocol, which would benefit XRP holders if the token becomes widely adopted by the likes of JP Morgan, Goldman Sachs, and more.
When it comes to if you should invest in Bitcoin or Ripple, or if you should buy Ripple or Bitcoin for the long term, the key to this decision is in looking at past price chart history and future price forecasts.
Investing in either asset at any point before 2016 would have resulted in a fortune being made. Depending on when someone bought into these assets in 2017 or 2018, they could still be underwater. After the crypto bubble popped, these assets fell to bear market lows but have spent the last three years trying to break out from downtrend resistance. According to technical analysis charts, both cryptocurrencies, depending on how far they go this time around, could make them a once in a lifetime trade at current prices.
For example, when Bitcoin broke out from $1,000 in 2017, the cryptocurrency ballooned to $20,000 in the same year. It started its lifecycle out at nearly worthless, trading at below a penny.
Ripple also started out at a fraction of a penny, and at its all-time high, reached $3.50 per XRP token. This took place after Bitcoin’s, but XRP hasn’t been able to recover anywhere near as well since. After reaching over $3.50, XRP fell to just ten cents per token on Black Thursday. Bitcoin’s bottom was set long before that, at $3,200. Now each crypto token has broken out from downtrend resistance and is targeting much higher prices and potentially a new bull market and incredible returns.
Bitcoin’s supply-based projections and the stock-to-flow model aren’t the only way experts are attempting to predict the future price of Bitcoin. Some of the top minds in finance, such as Tim Draper and Max Keiser, have made Bitcoin price predictions that reach as high as $500,000 per BTC.
If Bitcoin price followed the same exact price trajectory to the next peak from the bottom, the cryptocurrency would reach a price of $325,000 per BTC by the end of 2021 alone.
Ripple price predictions don’t reach anywhere near as high per coin due to the much more extensive distribution, but they could still make for a good investment. XRP is expected to reach as high as $26 per token if similar market cycles are followed as previously.
When it comes to Ripple vs Bitcoin, there are so many apparent differences, as you can now see after reading this guide. Investing in any cryptocurrencies is risky but can also lead to profits that are impossible in other markets. Bitcoin has provided the earliest investors with 1,000,000% ROI, and it is still very early to get into the asset.
XRP is also very new in terms of its place in the financial world and is decades away from becoming what it is setting out to do. This makes XRP an excellent investment also, yet a risky one. If it fails to disrupt the current banking and cross-border payment mainstays, it could fall into obscurity, and prices could fall into oblivion.
Bitcoin could also go to zero, but because of its distribution, decentralization, and opposition to banks, it very well could have long-term value even if it doesn’t fully take off. But its potential, if it does, is far more powerful than even XRP’s. Bitcoin could completely replace all fiat currency and become the next global reserve currency unseating the dollar’s hundred years of dominance.
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