What are the strengths of Ripple (XRP) and what are the advantages of buying Ripple? How to invest in Ripple? And above all, what future for Ripple? Discover our opinion on Ripple (XRP).
Bitcoin is talking about it, the success of the most famous crypto currency has somewhat overshadowed the meteoric rise of other cryptocurrencies. However, we must not forget that there are to date more than 9,000 crypto currencies, some of which have also stood out. This is particularly the case with Ripple (XRP). Café de la Bourse therefore takes a look at this cryptocurrency, which is among the Top 5 most important cryptocurrencies in terms of market capitalization: what is Ripple? What are these similarities and differences with Bitcoin?
WHAT IS RIPPLE USED FOR?
Ripple is a cryptocurrency like Bitcoin or Ether. Its abbreviation is: XRP. This is also a cryptocurrency based on blockchain technology.
The main difference between Bitcoin and Ripple therefore comes not from the technology on which this currency is based but from the protocol of creation of the currency. Indeed, the mining of Bitcoin which corresponds to the way they are produced takes place thanks to an algorithm ensuring that the progress of the stock of bitcoins is slower and slower, by halving the reward every four years. The algorithm was indeed designed so that bitcoin behaves exactly like a scarce commodity, the exploitation of which offers diminishing marginal returns. The algorithm predicts that the volume of bitcoin in circulation will reach precisely 21 million units by 2140. As more bitcoins are put into circulation through the use of the Blockchain.
WHO CREATED THE RIPPLE CRYPTO CURRENCY?
If the creation of Bitcoin is accompanied by a mysterious aura which participates in the story telling of the first of the crypto currencies (we do not know who precisely invented it, only one certainty: it was created by Satoshi Nakamoto, of whom we do not know. if it is a man, a woman or several people), the creators of Ripple are well identified. Ripple was launched by California start-up Ripple Labs in 2012, roughly four years after the launch of Bitcoin. With the success of what is now the 4th largest crypto currency in terms of market capitalization, Ripple co-founder Chris Larsen has become richer than Google co-founders Larry Page and Sergey Brin.
Ripple follows a totally different process of making and distributing tokens. All the tokens were indeed mined at once. Some of these ripples (around 15%) were put on the market, another was kept by their creators (around 20%), the rest were set aside to be injected into the network later (around 65% ).
Of the 100 billion units of XRP issued, only 45 billion are in circulation in 2021.
HOW DOES THE RIPPLE WORK?
As we have seen previously, Ripples are produced, or rather were produced, thanks to Blockchain technology, but the similarity to Bitcoin ends there. Indeed, Ripple and Bitcoin are very different.
The origin of Bitcoin comes from the desire to create a currency that would serve as a means of transfer of value unregulated by a central body. Blockchain, in this situation, was used to ensure the validity and reliability of transactions, with all blockchains being visible to all members of the network.
Ripple itself, whose production has already been made in its entirety (the tokens have all been "pre-mined"), by the same entity (the start-up that created it), testifies to a desire to create a much more centralized cryptocurrency. In 2021, XRP is mostly held by a very small number of players, including the creators of the network. The company owns nearly 54% of the 100 billion XRP coins. The company made a commitment in 2017 to lock in 55 billion XRP, and 1 billion is released each month to ensure supply dilution. To date, the number of XRP blocked by ESCROW stands at 47 billion. Note that Escrow is a system that uses a third party to block coins. Established by the company Ripple, the ESCROW system makes it possible to cryptographically lock several billion XRP until almost 2040. The number of XRP held by Ripple amounts to just over 6 billion, which leaves only 45% of XRP in public circulation.
Ripple departs a bit from the pure Blockchain Bitcoin system and is more akin to a HashTree system. Only a few network players validate transactions (the transfer of XRP tokens is provided by the RippleNet network). The Ripple system is not based on a Blockchain with proof of work or proof of stake, since there is no mining. Validating a transaction requires unanimous validation.
WHAT CAN I BUY WITH RIPPLE?
While many online stores accept payment in Bitcoin which allows the purchase of food such as computer equipment, fashion items and cultural products, Ripple has a much more limited use. It is indeed a compensation currency, the use of which is mainly reserved for member banking establishments. Ripple is intended above all to be a substitute for certain current payment systems such as SWIFT. At the same time, the Ripple is enjoying a growing appeal from retail investors.
BITCOIN VS RIPPLE
Finally, we cannot describe what Ripple is without talking about this peculiarity which contributes to its spectacular success and which considerably distinguishes it from other cryptocurrencies like Bitcoin: Ripple's transfer system works independently of the XRP token. It is therefore much more than a cryptocurrency!
Ripple was indeed created with the idea of using blockchain technology to facilitate interbank payments. The Ripple digital payment protocol is so successful that it even tends to steal the show from the cryptocurrency of the same name. Ripple has even become a serious competitor to the Swift interbank network.
Ripple, more reliable, also allows faster and more economical interbank exchanges. Indeed, cross-border transactions carried out in XRP are almost instantaneous (on average 3.88 seconds at the start of 2021 against several days with other systems) and the commission charged by the company is minimal (much less than the amounts withdrawn by concurrent systems). XRP’s coin offers a settlement time of four seconds, while its competitors Ethereum and Bitcoin have settlement times of two minutes and over an hour, respectively. The system allows you to exchange your own tokens but also to carry out transactions of traditional national fiat currencies such as the Euro or the US Dollars. Unlike most crypto-currencies including Bitcoin, transactions remain validated by a central body and do not depend on ripples.
It is therefore understandable that the Ripple alternative is appealing to several large banking groups and financial institutions such as UBS, UniCredit, Crédit Agricole, Bank of America or HSBC for example, which have adopted this protocol or started test programs and integrated Ripple within the framework of pilot projects. The support of these big international names of course benefits the reputation of the Ripple system in general as well as its cryptocurrency.
WHY INVEST IN RIPPLE?
Buying Ripple Costs Less Than Bitcoin
Ripple is undoubtedly a lot cheaper than Bitcoin.
Indeed, as of April 2021, 1 XRP is trading at around $ 1.6 for over $ 60,000 for 1 BTC. This monumental price difference presents a considerable advantage for Ripple: greater accessibility that could encourage retail investors to invest in this cryptocurrency. It is actually easier to own several hundred Ripples than a single Bitcoin. The fact that XRP approaches a form of parity with traditional currencies thus facilitates its use for payments.
Ripple: an increase of 650% since early 2021
Statistically, Ripple has an average performance lower than Bitcoin or Ethereum, which explains the fact that XRP can gradually lose market share in global cryptocurrencies. Although XRP outperformed sharply in 2017 (price multiplied by 13 between December 2017 and January 2018), XRP engaged for 3 years in a price channel between approximately $ 0.15 and $ 0.5.Moreover, if we consider the XRP / BTC pair, we can indeed observe an overall outperformance of Bitcoin over Ripple over time. Since January 2018, the XRP / BTC pair has effectively declined by over 80%. Nevertheless, Ripple can sometimes benefit from stronger bullish movements than Bitcoin. The new increase at the start of 2021 is a good illustration of this impulsive dynamic.
Ripple's market capitalization, which in April 2021 reached nearly $ 75 billion, allows it to rank in the Top 4 crypto currencies according to coinmarketcap.com, just after Bitcoin which has a market capitalization of $ 1,150 billion, Ethereum with a market cap of $ 280 billion, and Binance Coin with $ 82 billion.
Why The price of Ripple is less volatile than the price of Bitcoin
This apparent “underperformance” of Ripple compared to Bitcoin is, however, a central advantage for Ripple. It should be noted that the Ripple has a major advantage compared to many cryptocurrencies and which is obvious when we observe the evolution of its price: it is relatively stable. It is even a cryptocurrency with one of the lowest volatilities. This situation is mainly due to the fact that the company RIPPLE LABS owns almost half of the Ripples issued. There is therefore less volatility due to the massive purchase of individuals. It should be remembered that Asia is very present on the Ripple market, as it is on the cryptocurrency market in general. Thus, in 2017, 25% of the XRP transaction volume is done in Korea and 10% in Hong Kong.
HOW TO INVEST IN THE RIPPLE?
With the increased development of cryptocurrency platforms in recent years, the democratization of Ripple among individuals and various professionals now makes it quite easy to obtain Ripple. It is for example possible to buy XRP on platforms like Binance, Bitpanda or Coinhouse for example.
Another way to position yourself on Ripple is trading. Use the services of an online broker such as eToro or XTB, for example, which allows you to buy or sell Ripple through a derivative product. But be careful, in this case, you do not own the Ripple since you are buying a derivative product with a cryptocurrency as an underlying.
WHAT FUTURE FOR THE RIPPLE CRYPTOCURRENCY?
All cryptocurrency markets depend on Bitcoin
We can only note a very significant dependence of all crypto-currencies on Bitcoin, a dependence that has been confirmed in recent months. If the main cryptocurrency falls, all other crypto, including Ripple, is dragged in its wake, regardless of the differences between XRP and BTC.
Thus, the sharp rise in recent months is accompanied by a context of hyper-expansion of the cryptocurrency market. The total capitalization of the cryptocurrency market reached nearly $ 2,250 billion in April 2021. Bitcoin represents 53% of this capitalization, a market share that is constantly decreasing. Although the major crypto currencies are losing market share with the spread of cryptocurrencies, Ripple remains an asset that is highly correlated with the overall state of the market.
Ripple on track to retain its place among the leaders
We can nevertheless put this dependence of Ripple on Bitcoin into perspective. As we have seen, the price of XRP is less volatile than that of Bitcoin because it is less subject to speculation.
In addition, more than a cryptocurrency, it is the Blockchain application behind Ripple that is of interest to many players in the bancassurance industry. Although Ripple has some competitors, its efficiency and current market position gives it a central place in the cryptocurrency industry. For example, at the start of 2021, the number of transactions carried out on average each month represents more than 100 billion dollars. Its partnership with solid and influential companies and financial institutions whose positive reputation reflects on the Ripple is an undeniable plus. Be careful, however: the network that banks use does not necessarily need the XRP token to work with traditional currencies.
The resilience of Ripple pinned by the SEC
Thus, despite some scandals, XRP retains its attractiveness. Recall that in December 2020, the SEC accused Ripple of having issued unlicensed securities. Indeed, the SEC criticized Ripple for not registering XRP as a security. This SEC accusation led to a collapse in the price of Ripple, of which individuals were the first victims. In addition, there is still some distrust of Ripple cryptocurrency, mainly due to its high centralization. Ripple has however proven its resilience, as evidenced by the rise in Ripple prices since then, demonstrating Ripple's ability to maintain its position as a first-rate cryptocurrency over time.
We would like to remind our readers that in the case of cryptocurrencies, it is advisable before investing (and possibly speculating on the movements of supply and demand) to fully understand the functioning of the currency on which you wish to position yourself. . You must also understand how the Blockchain works, the technology on which the Ripple is backed like many other cryptocurrencies. Also be sure to find out about the quality of the developers and their funding and take care to follow the news of the cryptocurrency and the events that could influence its price (release of new tokens, possible fork, etc.).
Some questions about Ripple?
What is Ripple?
Ripple is a cryptocurrency based on Blockchain technology, which derives its peculiarity from the fact that all the tokens have already been mined and have been set aside to be injected into the network later. In addition, Ripple is famous for its transfer system, which works independently of the token, and which is very successful.
Should we invest in Ripple?
Ripple is one of the crypto currencies that matter, which has retained its leadership position despite a stock market performance that is often less spectacular than other cryptocurrencies, but also much less volatile than Bitcoin in particular. For these reasons, it can be present in a diversified cryptocurrency portfolio.
How to buy Ripple?
It is possible to buy Ripple directly from crypto exchange platforms like Binance or Bitpanda for example or to invest in Ripple via derivatives offered by stock brokers like eToro or XTB for example.