Robert Steinadler, 6 months ago

What is the difference between Bitcoin and Ripple (XRP)?

Distributed ledger technologies are not all the same and they work in different ways. In fact, most of the technologies that have emerged over the last few years have been developed with the goal in mind to be different from other already existing projects. At the end of the day, if you like to achieve more speed or more security than the DLT solution that is already available, you have to do things differently otherwise you would end up in the same place.

With the hype around Bitcoin, many other DLTs have emerged and this has caused a lot of confusion among many investors and especially beginners. Since Bitcoin was the first cryptocurrency on the market, other cryptos often get compared with Bitcoin. Sometimes this isn’t really helpful because one cannot compare things to each other that are very different at the core of their being.

This is why in this article we are going to explore the difference between Bitcoin and Ripple instead of looking at the very few similarities.

Quick facts about Bitcoin and Ripple (XRP)

Ripple (XRP)

Bitcoin (BTC)

Max supply of 100,000,000,000 XRP

Max supply of 21,000,000 BTC

DLT: XRP ledger

DLT: Bitcoin blockchain

The network is public but under the large influence of Ripple

The network is public and is not controlled by a single entity

Transaction fees: Average of $0,004

Transaction fees: Up to $50 or more depending on demand

TPS: 1.500 transactions

TPS: 10 transactions

Algo: HashTree consensus

Algo: Proof of work SHA256

XRP ledger is open source

Bitcoin is open source

Bitcoin vs. Ripple

Bitcoin is based on a distributed ledger technology that is called a blockchain. And this is where the difference between Bitcoin and Ripple already starts. Not all DLTs are based on the blockchain, but all blockchains are DLTs.

Bitcoin is using proof of work in order to validate transactions and reinsure that the blockchain cannot be manipulated. Ripple on the other hand validates all transactions through a network of over 150 validators. Each validator is a server that is reaching a consensus with the rest of the network using a consensus mechanism called HashTree.

In effect, all servers share a ledger and have to agree if a new entry is valid or not. If a majority of 80 % of the validators agree on the transaction it is written to the ledger.

The difference between the consensus of Bitcoin and that of Ripple lies in speed and security. Ripples ledger is incredibly fast since only a few parties have to agree on the state of the ledger. Bitcoin on the other hand is really slow. Thousands of nodes worldwide have to agree on the next block and miners have to put in the work to make a transaction happen.

Ripple is sacrificing security since only a few servers are responsible for the network and all transactions. Bitcoin on the other hand is sacrificing speed since its security is unmatched but it takes ten minutes on average to create a new block that offers limited space for transactions.

XRP vs. BTC

Ripple and XRP are not the same things. Again, this is a huge difference. Commonly people speak about Ripple if, in fact, they mean the XRP token. Ripple is the company that invented XRP and is still associated with the XRP ledger.

All the financial products developed by the company are based on the XRP ledger and make use of the XRP token. The basic products are:

  • xCurrent: This is a banking software that specializes in remittance payments between banks or other financial institutions. It is based on RippleNet but it is not using the XRP token.
  • xRapid: This is a payment solution that is meant to settle transactions almost instantly on a large scale and internationally. XRP is used as a bridge currency with this product to settle these payments.
  • xVia: This product is basically an API that allows connecting to different payment networks which include but is not limited to xCurrent and xRapid.

All three products are based on the RippleNet which is also part of the XRP ledger and is making use of the advantages of its distributed ledger technology.

Bitcoin on the other hand has no company that started its development. Instead, companies can choose to build solutions on top of Bitcoin’s open-source technology that could in principle offer similar services such as those described above. There is also no difference between Bitcoin and BTC since both refer to the same cryptocurrency. It is noteworthy that some exchanges rather use XBT as a ticker than BTC. Also, sometimes “bitcoin” is used when referring to the cryptocurrency and “Bitcoin” when referring to the network as a whole.

Supply and monetary policy

One of the biggest notable differences between Ripple and Bitcoin is that both have a very different approach to the total supply and the emission of tokens. Bitcoins supply is tied to the process of mining. Miners are rewarded with the transaction fees included in each block and a so-called block reward that is responsible for the emission of freshly minted BTC. The block reward is cut in half every four years on average and approximately in the year 2145, all 21 million Bitcoins will have been brought into existence.

Ripple on the other hand designed XRP with a fixed supply of 100.000.000.000 XRP and 55.000.000.000 XRP was given to the founders and the company at the start of the network. Ever since Ripple as well as the founders have been selling their tokens to the market continuously. Eventually, the company decided that it would create too much pressure on the XRP price and they came up with a plan to build a mechanism that increases sales if necessary and reduces sales if targets are met.

Ripple also used its XRP holdings to forge partnerships and drive adoption by selling or offering XRP to partners as a part of a larger deal. Here are a few examples of banks who partnered with RippleNet:

  • Santander
  • Canadian Imperial Bank of Commerce
  • Kotak Mahindra Bank
  • Itaú Unibanco
  • IndusInd
  • InstaReM
  • BeeTech
  • Zip Remit
  • LianLian
  • RAKBANK
  • IFX
  • TransferGo
  • Currencies Direct
  • Airwallex
  • SEB
  • SBI Remit
  • Siam Commercial Bank
  • Krungsri

What is the value of XRP and Bitcoin?

Bitcoin is considered to be a very scarce digital commodity. Bitcoiners also like to refer to it as the only sound money that currently exists. The fact that it comes at an incredible cost to mint new BTC makes it even more valuable than the strictly limited supply alone. This is why many people refer to it as digital gold.

Ripple on the other hand created XRP with a fixed supply that came immediately into existence and the idea that gives value to XRP is closely connected to the success of the company. Should Ripple succeed and make XRP the standard for remittance or bridging international payments, then the demand would explode and drive the price up.

Of course, both value propositions described are pure speculation. It remains to be seen if Bitcoin is indeed the ultimate store of value. And Ripple’s success is also not imminent at the time of writing.

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