Over the past few weeks, there has been a fair bit of confusion on cryptocurrencies, digital assets, and tokens. Even though there are distinct similarities between the three, now would be a good time to take a closer look at what Ripple – or XRP – and Bitcoin are trying to achieve. Comparing these two directly is quite interesting, although it is important to remember they are completely different projects in the end.
2. Bitcoin
Most people active in the world of cryptocurrency and digital assets have heard of Bitcoin. It is a peer-to-peer cryptocurrency focusing on decentralization. It is also a payment method for both consumers and merchants alike. Completing smaller payments remains a bit of a challenge, although the Lightning Network may – hopefully – alleviate those concerns some day.
Bitcoin is a cryptocurrency in its truest form, issued on a blockchain through the process we know as “mining.” It has a global reach and continues to make a lot of headway all over the world. It is also a currency without any real governance, even though mining pools are responsible for validating transactions. Some people will argue the mining pools make Bitcoin less decentralized than it should be since a few pools control the majority of the network’s mining power.
Perhaps the biggest drawback to Bitcoin is how it takes 10 minutes – or sometimes, hours and days – to fully settle a transaction. This is mainly due to the current block size limit and all payments occurring on-chain. These technical challenges may some day be resolved, though. Bitcoin is a proper currency for people who want to be free of banks and traditional finance.
1. Ripple
Ever since the Ripple project was launched, a lot of people have been opposing the idea. Then again, Ripple – and its XRP currency – are often wrongfully labeled as a cryptocurrency, since that is not entirely true. Ripple’s XRP token is a digital asset issued on a distributed ledger. It also shares some decentralization traits, although on a much smaller scale compared to Bitcoin.
All XRP transactions pass through nodes and validators, similar to Bitcoin. However, on the Ripple network, those transactions do not rely on the mining protocol. That is not surprising since it is impossible to mine XRP whatsoever. Ripple also has a higher degree of governance, as the Ripple Consensus ledger relies on institutional validators run by global banks and a few other institutions.
One thing Ripple provides the Bitcoin network cannot – in its current form – is a lightning-fast settlement speed. The consensus mechanism used by the Ripple Consensus ledger settles transactions in mere seconds, assuming the transaction took place using the XRP asset. It is evident Ripple can’t be put in the same category as bitcoin, but that doesn’t mean it can’t be successful. It is not a digital asset most diehard cryptocurrency users would like to have in their portfolio, but that is understandable.
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