By Yashika Lohia and Achal Arora
Ripple is a digital payment system with a cryptocurrency by the same name. Ripple is represented in the form of XRP units. Like Bitcoin, Ripple’s XRP unit is based on mathematical formulae and has a limited number of units that can ultimately be created. Both forms of currency can be transferred from account to account (peer-to-peer or P2P) without the need for any intervening third party. The transactions are cryptographically secured, irreversible, without the involvement of any centralised authority and recorded in the digital public ledger which works on the blockchain technology.
Is Ripple a rival to Bitcoin?
Ripple positions itself as a complement to rather than a competitor to Bitcoin. Ripple is a payment system, international remittance network, and currency exchange system.
The Ripple network—called RippleNet—is designed to allow the seamless transfer of any form of currency; be it Dollars, Euros, Pounds, Yen or Bitcoins. Cross currency transactions can also be made. “Ripple will open up many more gateways for Bitcoin users and easier ways to bridge Bitcoin with the mainstream world of finance,” says Stephen Thomas, a senior developer for the Ripple protocol and a Bitcoin advocate.
Ripple is more refined than Bitcoin with respect to its transaction speed, scalability (transaction per second), the stability of XRP unit prices, security, technological efficiency, low operating and liquidity costs.
How will Ripple benefit Bitcoin users?
A major difference between the two currencies is that in order to buy or sell Bitcoins, the user has to go through the centralised exchange while in the case of Ripple, it can be used on its own secured differences. Additionally, the Ripple information tracking system is more advanced than the Bitcoin network as it traces comprehensive information about the transactions rather than just tracing Bitcoin movement.
Along with giving Bitcoin more ways to connect with those using other forms of currency, Ripple promises expedited transactions and increased stability. As a distributed network, Ripple does not depend on a single company to manage and secure the transaction database. Consequently, there is no waiting on block confirmations, and transaction confirmations can go through the network quickly.
Another advantage of using peer-to-peer is the absence of a “central target or point of failure in the system,” Ripple’s backers note.
How many ripples will there be?
The company plans to ultimately create 100 billion XRP. Half of those are to be released for circulation, while the company plans to retain the other half. Ripple will place 55 billion XRP into a cryptographically secured escrow account by the end of 2017 to ensure certainty of transactions. These will gradually be made available for transactions.
Ripple: Free(ish) or free?
Ripple doesn’t collect transaction fees the way PayPal, banks and credit cards do. However, it does take a small portion of a ripple (equivalent to ~1/1000th of a cent) from each transaction. That amount is destroyed rather than retained. The deduction is meant as to safeguard against the system being swamped by any one individual who might try to put through millions of transactions at once.
Ripple is now the third largest cryptocurrency after Bitcoin and Ethereum, in terms of market capitalisation. Ripple is unique in terms of its payment system and transaction infrastructure, with the added advantage of real time operations and scalability. Ripple distribution is growing at a quick pace but XRP has still not witnessed the rally that Bitcoin and Ethereum have. Ripple certainly has the due potential to become the next Bitcoin and may even surpass the latter in its performance.
Featured Image Source: Visual Hunt