A huge amount has been said about Bitcoin over the past few months, largely due to the staggering increase in value that the cryptocurrency has experienced. This sudden boom has lead many people to consider learning about cryptocurrencies for the first time, which in turn has lead to an increased focus on the options aside from Bitcoin.
Another cryptocurrency aside has been grabbing a few headlines around this time too, perfectly pitched to draw the eye from the new converts: Ripple. Let’s dive deeper into what Ripple is, what it can offer, and just how far its value may eventually climb.
What is Ripple?
“Ripple” is a catch-all term that is used to describe two connected, but individual, entities. It is a both a cryptocurrency and an open payment network, and is best distinguished as follows:
XRP tokens: The Ripple “currency”, which is offered as tokens. These function in a similar way to Bitcoin, Litecoin, and other similar cryptocurrencies, though there are some differences (more on that to come).
RippleNet: The RippleNet is an open payment network that allows for the quick, efficient transfer of currencies. This includes XRP, but standard currencies, as well as other cryptocurrencies, can also be exchanged on the network.
As a general rule, if you hear someone talking about “Ripple”, they are most likely referring to the currency, XRP.
So… Ripple is just another Bitcoin?
No; Ripple has a number of differences when compared to Bitcoin. Although both Ripple and Bitcoin rely on blockchain technology, their approaches are very different indeed.
The mission statement behind Bitcoin, and other similar cryptocurrencies, is to completely decentralize the movement of money. Money is owned by everyone in the blockchain, rather than held in a central location. This ensures equality among those who own Bitcoin, rather than a central bank that controls the flow of the currency.
Ripple operates differently. First and foremost, Ripple is not decentralized; it is owned by OpenCoin. This, theoretically, means that Ripple XRP tokens could just cease to exist if the company chose to close the network. While this is incredibly unlikely, it does in some ways defy the original aim of cryptocurrencies in general.
Furthermore, XRP tokens can’t be mined like Bitcoin can. There are 100 billion pre-mined XRP tokens available, and there is no option for miners to earn more. Should the owners wish to increase the number of XRP tokens available, they could do, whereas Bitcoin is strictly limited to 21 million available coins (of which over 16 million are currently in circulation).
Furthermore, Ripple uses a novel consensus algorithm to validate online transactions. This requires computers to identify themselves if they wish to join the network. Bitcoin allows any computer to become a miner, without the need for third-party verification.
Finally, XRP tokens do not have an intrinsic value the way that Bitcoin does; you can’t go shopping with XRP tokens, for example. Instead, XRP tokens are a digital substitute for traditional currencies.
What is Ripple’s purpose, if it doesn’t have intrinsic value?
Bitcoin can be used in place of conventional currencies; XRP tokens cannot, so it’s natural to wonder what the cryptocurrency was actually intended for.
The answer can be found in the length of time it takes to transfer funds between countries. Major corporations and banking institutions have long bemoaned the length of time a financial transaction takes across borders, with some international transactions taking up to a week to process. In business, a week is considered far too long– so an alternative was required, and Ripple is the alternative of choice.
XRP tokens have been setup to allow funds to be transferred between countries almost instantaneously; most Ripple transactions process within five seconds. This ability to allow for financial transactions was the primary purpose of XRP tokens, which is why the tokens have no value of their own; they are representatives of conventional currency during the digital transaction.
As you may expect, the speed of transactions has drawn the eye of a number of global corporations. To date, megacorporations such as Bank of America, Santander, Swiss UBS, and American Express have all implemented the use of XRP tokens as part of their business model.
As a result, Ripple and XRP tokens aren’t true competitors to Bitcoin; they compete with other transaction processors that seek to speed up overseas financial transactions. You can even use Bitcoin on RippleNet; the two are similar due to their blockchain and peer-to-peer basis, but share few similarities beyond that.
Why is Ripple suddenly making headlines?
The past few weeks have seen news outlets begin to turn their attention to Ripple and XRP tokens. There are two main reasons this has happened:
Cryptocurrencies are “hot” right now
Thanks to the incredible growth of the value of Bitcoin in recent months, the media is focusing on cryptocurrencies more than they have in the past. There is a thirst for cryptocurrency stories, which has led to journalists investigating other forms of cryptocurrency in an attempt to find the “next big thing”.
Ripple has been experiencing strong growth of its own
Bitcoin may have dominated the headlines over recent months, but in the background, Ripple was quietly undergoing a boom of its own. At the beginning of 2017, a XRP token was worth $0.006– so next to nothing.
A year later, an XRP token was worth $3.35, giving Ripple a total market capitalization of more than $129 billion. Ripple is growing far faster than Bitcoin, too. From December 2017 to January 2019, the growth had increased by over 1,000%.
However, at the time of writing, Ripple has experienced a serious dip in its fortunes. This has been attributed to the press attention surrounding XRP, as well as an imminent trading ban — or at least strong regulative oversight — for cryptocurrencies by South Korea. XRP is currently worth around $1.47– but this market fluctuation is fairly standard for cryptocurrencies. It is also worth noting that $1.47 is still a lot higher than the XRP token value just 12 months ago.
What does 2018 look like for Ripple and XRP tokens?
As the above example has proved, XRP tokens are far from a sure thing– then again, the same is true of many cryptocurrencies. Cryptocurrencies are volatile in nature, which is just something that investors have to be prepared to cope with, learn to ride out the storm, and wait for prices to rise again.
What’s worth remembering is that the storm can be ridden out; when cryptocurrencies crash, they have a tendency to rise again. This is similar to standard currency exchanges. When there are signs of trouble, investors bail out — even if that means accepting a loss on their investment — to prevent further damage. The drops the price, which makes the price attractive to new investors. Slowly but steadily, the price begins to rise again, and the market stabilizes once more.
There is no reason not to believe that XRP tokens will experience the same pattern. They may be struggling today, but in a week’s time, they could be rising high once more. One of the reasons Ripple is a good choice of cryptocurrency is, ironically, a factor that causes many to demonize it: the association with major financial institutions. The institutions that have sought to implement Ripple and XRP tokens will want to see the cryptocurrency do well, so it is more likely to bounce back from any losses thanks to this support.
So while the recent sudden drop may have made you postpone your purchase of XRP tokens, there’s really no cause for immediate concern. In fact, if you buy why while the price is low, you stand to make a profit when it rises once more.
What are the predictions for XRP tokens value in 2018?
As recent events have shown, predicting cryptocurrencies is not dissimilar from attempting to herd cats– theoretically possible, but incredibly difficult in practice.
It seems likely that XRP tokens will increase after this dip, at least back to the levels that were seen only a few weeks ago. This is further bolstered by confidence from Ripple HQ: CEO Brad Garlinghouse recently sent a Tweet that suggested payment providers are “planning to use (XRP) in a serious way”.
If this is correct, and more financial institutions are looking at XRP tokens as a serious method of transferring funds across borders, then the future for Ripple could be very bright indeed. Of course, it is worth noting that all CEOs talk about exciting times ahead for their company — that’s their job — and until Garlinghouse’s prediction becomes reality, XRP token value may continue to struggle with recent changes.
While it’s unlikely that XRP tokens will ever reach the dizzy heights of Bitcoin, there is still plenty of promise and potential in the cryptocurrency. It is not impossible to imagine a future where the current $1.3 price looks incredibly low. While another 1,000% price increase is unlikely in the near future, if Garlinghouse’s claims are proven to be reality, it’s possible that XRP tokens will eventually exceed $8-10 by the end of the year.
Of course, that’s a big if— only time will tell.