Since Bitcoin was released to the market in 2009, it has ushered in a new era for finance. It has inevitably received attention and is currently the most popular crypto token. However, there are many more options for those looking to get into crypto. One such token is Ripple. But in XRP vs Bitcoin, which one is the winner?
What is Bitcoin?
Bitcoin is the oldest crypto token on the market. It popularized the idea of a blockchain and operating on a distributed ledger.
Bitcoin is a token used to facilitate payments and transactions. It operates on a public, decentralised ledger that stores all information about accounts and transactions on the network. Transactions are validated by blockchain users before they can be finalised and added to it.
Users who verify transactions are known as “miners”. To do this, they employ powerful computers that solve cryptographic puzzles. The first to solve this puzzle can add a new block to the blockchain and earn rewards in Bitcoin.
What is XRP Coin?
Ripple Labs launched its crypto token, XRP, in 2012. Unlike other altcoins at the time, XRP was not meant as a competitor to Bitcoin. It was instead created to solve issues with payment systems on a global scale. Today, it is mainly used by banks and financial institutions for payment settlements, cross-border transfers and remittances.
Read more: What Is Ripple
Ripple network considers XRP an alternative to the dated and slow “SWIFT” system used by banks for settlements. While SWIFT can take 1-4 days to confirm a transaction, XRP can bring this down to mere seconds.
Difference Between Bitcoin and XRP
XRP transactions are both cheaper and faster than Bitcoin transactions. Since Bitcoin requires computers to solve complex cryptography problems, it can be time-consuming. On the other hand, XRP transactions take just seconds to process and confirm. Therefore, the Bitcoin blockchain can support fewer users than XRP.
Bitcoin uses the proof of work mechanism. Under this system, powerful computers are used by miners to solve complex mathematical puzzles. The first one to arrive at the solution can add a validated block to the chain. As payment for the energy and time expended, BTC tokens are rewarded to the winner.
XRP instead does not use crypto mining for its consensus. Validation is based on a pre-determined set of “nodes” – or users – voting on each block to be added to the chain. If a majority of the nodes agree that the block is valid, it is finalised.
Proof of work is a highly energy-intensive process. The use of powerful computers also requires a lot of electricity to be expended. Some estimates indicate that Bitcoin mining uses as much power as entire countries.
XRP is much more energy efficient. There is no requirement for complex puzzles as only a select few nodes vote on validation. This does not require a risk-reward mechanism like Bitcoin.
There is a cap on the number of Bitcoins that can exist. The code indicates that no more than 21 million bitcoins can be in circulation in the future. The current circulating number is 19.2 million coins. Each time a new block is mined, 6.25 BTC are released to the validator. This number is controlled by a process called “Bitcoin halving”, which is based on how many coins are yet to be mined.
At launch, Ripple pre-mined 1 billion XRP tokens and released them to its users. The minting of new coins is based on a smart contract, which is capped at a maximum of 1 billion XRP per month. The current supply is almost 100 billion tokens.
Bitcoin Vs XRP: Uses and Examples
Bitcoin, while being the most popular crypto token on the market, is still not as feature-rich as newer cryptos. Therefore, its uses are restricted to simple transactions. These are conducted by individuals who value the convenience and anonymity of crypto.
XRP is instead used by businesses and banks. Since its primary application is the simplification of payment settlement systems, its main users are financial institutions. It is available to the public for use, but most individuals would indirectly benefit from XRP if their bank is partnered with Ripple.
To illustrate this difference, imagine yourself as a user of both crypto tokens. Bitcoin is another form of money. If the business accepts it, you can even go to your local grocery store and pay for goods with Bitcoins.
XRP is a little more specific. If you shift to another country for work and wish to send money back to your family, the system is not simple. You must first go to your bank and instruct them to send it to your family’s bank account. After 1-4 days, this amount will reach your family. This also involves heavy charges.
XRP makes it much simpler. To use this, both you and your family must simply create an XRP-compatible wallet. Creating a wallet is fast and only requires visiting a website and inputting a password. The money is instantly converted into XRP tokens and sent to your family’s wallet address within seconds. There are no delays and no heavy fees to use the system.
Is Bitcoin Decentralised?
Bitcoin is a highly decentralised crypto coin. Its user base is spread all over the world and you can mine it using your laptop or computer. However, this has changed in recent years. As the difficulty of mining has gone up, so has the cost of the hardware required to do it efficiently. Today, you have to spend tens of thousands of dollars on “ASIC” mining hardware to stay competitive in Bitcoin mining.
Read more: Bitcoin Vs Dollar
This increase in cost is considered a sign of centralisation by many users. Individuals are worried that large companies or wealthy individuals will gain control of Bitcoin’s consensus process and monopolise it.
Is XRP Decentralised?
While the technology behind XRP is decentralised, its users are not. Unlike Bitcoin, XRP does not use proof of work. Validation is based on a pre-selected set of nodes voting to reach a consensus.
Read more: XLM Vs XRP
Regular individuals cannot become nodes on the network. This role is reserved for large banks and financial institutions partnered with Ripple to use their service. Therefore, XRP’s network is highly centralised.
In Ripple vs Bitcoin, there is no clear winner. Each has its strengths and weaknesses and it depends on your preference as a user and investor. Bitcoin is popular and highly decentralised but it is also slow and can be costly. On the other hand, XRP is fast and cheap but the network is highly centralised and its development is controlled by a single company. However, both these coins can have a part in your portfolio.
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