Most people in the crypto community will have come across Ripple and XRP at one stage or another. With a permanent feature in the top 10 cryptocurrencies by market cap it’s no wonder why. However, the cryptocurrency has developed a somewhat contrasting reputation in the industry. While some people are fully behind the coin, others are not as convinced, like many other aspects of the cryptocurrency industry. Here we set out to answer the burning question: is Ripple a good investment?
XRP, Ripple, Ripple Labs
Before we go any further, let’s establish the difference between these three key names. XRP is the cryptocurrency that is native to Ripple. Ripple is the payment system while Ripple Labs is the company that built it. Ripple Labs was founded in 2012 with the intention of bettering banks’ services when it comes to cross border payments. So while Ripple is the open source (semi) decentralized ledger on which the network operates, XRP is the cryptocurrency that facilitates the movement.
Is Ripple A Good Investment?
The maximum supply of XRP to ever exist is 100 billion, of which 45 billion are currently in circulation. This illustrates a deflationary currency with the potential to grow. According to basic economics, the more scarce an asset becomes the more likely the price is to increase. XRP is also currently trading at under $0.50 making it an easy and relatively cheap market entry point. Prices aside, XRP and Ripple are likely going to continue their adoption rates as they provide a viable use case that few other projects are currently trying to tap into.
Ripple is a pioneer in bridging the gap between the traditional financial sector and the blockchain world. The company has partnered with many large financial institutions around the world offering them access to the fast and cheap transaction opportunity that decentralized ledger technology is able to provide.
The Ripple network is capable of conducting over 1,500 transactions per second (TPS) with confirmations taking 3 - 5 seconds, a much higher rate that Bitcoin (3.3 - 7 TPS) and Ethereum (10 - 15 TSP) is able to provide. Not just speed, the network also charges a significantly less amount to transfer one currency to another country than traditional services offer. To illustrate this, Michael Arrington the founder of TechCrunch sent $50 million using XRP, which cost him $0.30 and took “2 seconds”.
Through the use of XRP, Ripple provides banks and financial institutions access to liquidity in order to facilitate international payments in a fraction of the time, at a fraction of the cost. Banks around the world as well as payment services are making use of Ripple, and this is likely to continue growing.
How Does Ripple Differ From Other Cryptocurrencies?
The Ripple network and XRP function in a different manner than the other top 10 cryptocurrencies. We’ll be running through the most significant differences, which contribute to answering the “is Ripple a good investment” question.
Ripple Does Not Utilize Blockchain Technology
Instead of using blockchain technology like most other cryptocurrencies, Ripple uses their own technology to verify transactions called the Ripple protocol consensus algorithm (RPCA). Transactions are still verified through a consensus on the network.
XRP Is Not Mined
The Ripple network does not make use of mining functions for verifying transactions and creating new coins. Instead, all the XRP that is ever to exist (100 billion) was premined in 2013 and stored in escrow, and released by Ripple periodically.
Ripple Is Not So Decentralized
Going against the nature of cryptocurrencies operating without a single entity in charge, Ripple is in fact a more centralized cryptocurrency network. While Bitcoin is operated by nodes around the world, Ripple makes use of “transaction validators” which are banks that have installed, and make use of, the Ripple technology.
While Ripple Labs hold XRP in escrow, the network is still operated by a number of validators that can not and could not control the network should they wish too. This is a grey area in the Ripple debate.
Weighing Up The Pros And The Cons Of Investing In Ripple
While Bitcoin was designed to facilitate peer to peer (read international) payments at a lower cost and faster rate than traditional fiat international payments, Ripple takes this to another level. Their incredibly fast (1,500 TPS) transaction capability and scalability, not to mention the smaller fee structure puts them front and centre of most useful cryptocurrencies for cross border transactions. Combined with the fact that they are offering these services to banks allows for a faster and cheaper service to be accessible to anyone outside of the cryptocurrency and blockchain industries.
The Ripple company is a business that employs over 500 people ranging from developers to marketing teams. The company is believed to have one of the best leadership teams in the tech (not just crypto) scene, so if the company is destined to grow, many believe the cryptocurrency will too.
The cons relate to the centralized nature of the currency and the fact that XRP is not mined, which many feel goes against the core essence of cryptocurrencies as well as the reason why Satoshi Nakamoto created crypto. However, the company has reiterated that the network is not as centralized as people believe, saying that “the XRP Ledger is based on an inherently decentralized, democratic, consensus mechanism — which no one party can control.”
Before investing in any cryptocurrency one should always DYOR (do your own research). While this piece on “is Ripple a good investment'' outlines the benefits and downfalls of the Ripple network, this in no way provides financial or investment advice. However, should you wish to invest in XRP, you can buy as little as $20 through the Oobit platform with simply your credit or debit card, or bank transfer. Oobit also provides a state of the art wallet in which to store your XRP, making the whole process much simpler and easier for any level of trader.