Ripple vs. Bitcoin

Ripple and Bitcoin Are Tough to Compare for Several Reasons

An XRP with bitcoins
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Jordan Mansfield / Contributor / Getty Images

 

Ripple's XRP and Bitcoin are both cryptocurrencies, which are digital alternatives to government-issued currencies. There are some major differences between them.

They differ in their main purposes, how they have been created, and the cost and time needed to make a transaction. Learn more about how Ripple and Bitcoin compare.

Key Takeaways

  • Bitcoin and Ripple's XRP are cryptocurrencies you can trade like government currencies.
  • Both can be used to pay for goods and services.
  • The number of places accepting these currencies is limited.
  • Ripple consumes less energy than Bitcoin as trades occur much more rapidly.

What Is Ripple (XRP)?

XRP is a currency that's now mostly used by Ripple to make payments between banks in different government-issued currencies. In 2011, three engineers named David Schwartz, Jed McCaleb, and Arthur Britto set out to create an alternative to Bitcoin. They wanted it to require less energy (in the form of computing power) to produce. They also wanted it to be easier to use as payment.

The engineers developed a distributed ledger, called the "XRP Ledger," a database shared among many people in different locations. Together, they must develop a consensus on whether a transaction is valid. This distributed ledger has an open-source code used to create digital assets called ripples, later renamed XRP.

Along with Chris Larsen, the engineers went on to form a company that is now called Ripple. It was given 80% of the 100 billion XRP the ledger produced. Ripple uses the XRP Ledger and XRP to make cross-currency payments for financial industry customers that use its RippleNet system.

Note

The company placed 55% of the total possible supply of XRP (55 billion) into a series of escrows in December 2017, and may release as many as 1 billion a month.

What Is Bitcoin (BTC)?

Bitcoin was created in 2009 by a person or group using the pseudonym Satoshi Nakamoto. Bitcoin is the first successful decentralized cryptocurrency of its generation; it's also the first to use a blockchain type of distributed ledger.

In a blockchain, new records of transactions are added in blocks of information that are strung together in a chain. Each new block contains a shorthand code that links it to the previous one. If a person wants to alter one block, they'll also have to alter the one before it. And if they want to alter the following block, they'll have to alter the one they altered previously.

Like the XRP Ledger, Bitcoin's blockchain ledger relies on multiple participants who all have access to the same information, which helps maintain its security and keep it decentralized. It doesn't rely on one authority—like a government—to give it legitimacy.

Bitcoins are created in a process called "mining" as a reward for lending computing power to the task of verifying transactions. Once a series of transactions are verified, they are permanently added as a block in the chain. The miner who created the block is rewarded with 6.25 bitcoins.

How Do Ripple and Bitcoin Compare?

XRP
  • Currency code: XRP

  • Price as of October 25, 2021: $1.10

  • Trading volume on October 25, 2021: 2.6 billion

  • Facilitates payments between banks in different government-backed currencies. May be traded as a speculative investment.

  • The XRP Ledger created 100 billion XRP all at once.

  • An XRP consists of 1 million drops, the only sub-units of the currency.

Bitcoin
  • Currency code: BTC

  • Price as of October 25, 2021: $63,039.83

  • Trading volume on October 25, 2021: $31.1 billion

  • Provides an alternative, decentralized currency for making purchases. May be traded as a speculative investment.

  • Twenty-one million bitcoins will eventually be created by forming new blocks in the blockchain.

  • A bitcoin consists of 1,000 millibitcoins, 1 million microbitcoins, and 100 million satoshis. This is the smallest division of a bitcoin that can be recorded in the blockchain.

Price and volume source: CoinMarketCap

Value of XRP and Bitcoin

As of October 25, 2021, the value of a single bitcoin was much higher than a single XRP: $63,039.83, compared with about $1.10.

The all-time high price of XRP varies, depending on the pricing source. According to various media reports, it was above $3 in early January 2018. CoinMarketCap reports that XRP's highest price was $3.84 on January 4, 2018.

CoinMarketCap also reports that Bitcoin's highest price to date is $66,878.47 set on October 20, 2021.

Cryptocurrency Regulations

The federal government provides little oversight of spot trading, which is real-time trading (as opposed to futures trading) of cryptocurrencies. But state governments and parts of the federal government play roles in regulating virtual currencies. They have the ability to prosecute anyone suspected of fraudulent activity related to virtual currencies.

State bank regulators are tasked with overseeing crypto spot exchanges based on individual states' money transfer laws. The Internal Revenue Service requires virtual currency traders to pay tax on capital gains from buying and selling crypto.

The Treasury Department’s Financial Crimes Enforcement Network monitors trades in virtual currencies for indications of money laundering. The Securities and Exchange Commission (SEC) requires most initial coin offerings—the currency equivalent of initial public offerings of stocks—to be registered; the SEC has prosecuted unregistered issuers of new cryptocurrencies.

The Commodity Futures Trading Commission (CFTC) has prosecuted companies and individuals for misrepresenting the risks of crypto and for manipulating their value.

Warning

The CFTC says that you may have no recourse if someone steals your virtual currency. It warns that crypto-trading platforms may lack safeguards against market manipulation and other means of protecting traders.

Bitcoin and XRP Transaction Information

Payments made using XRP can be completed in three to five seconds; those made using Bitcoin are intended to take an average of around 10 minutes.

The average fee for an XRP transaction on October 25, 2021, was about 1,501 drops. Total fees amounted to 1996.157493 XRP. There were about 1.22 million transactions that day.

Every time an XRP transaction is completed, a small number of XRPs are destroyed. To defend the XRP Ledger from spam or denial-of-service attacks, the transaction cost increases as the load on the ledger increases.

The average fee for a Bitcoin transaction that same day was $3.093; the average total transaction fees were 14.02 BTC. There were 284 million Bitcoin transactions that day.

In addition to the Bitcoins mined by completing a block, the miner receives any fees associated with their verified transactions.

How to Buy Crypto

Both XRP and Bitcoin are traded on cryptocurrency exchanges. You will need to create an account with an exchange. You'll also need to verify your identity.

Important

Some exchanges may not enable you to trade XRP for certain currencies and cryptocurrencies. When you choose an exchange, make sure it offers the precise services you are looking for.

To trade and use XRP, you'll need a wallet; it stores your means of accessing your holdings. The wallet contains a cryptographic key that encrypts and decrypts data. This makes it hard for thieves to steal your money.

Many traders use hardware wallets that they connect to their computers only when needed. Software wallets are less secure because they generally are connected to the internet at all times.

The Bottom Line

Ripple's XRP and Bitcoin are both cryptocurrencies that you can trade like government-issued currencies. You can also use both to buy goods and services. Just keep in mind that the number of places that will accept them for payment is limited.

Ripple, the company that holds the vast majority of XRP, uses it to facilitate transactions between banks using different currencies. XRP is much less likely to be used by consumers than Bitcoin. Bitcoin was created to be an alternative to government-backed currencies.