The Ripple Effect

I, like probably many others, thought that Ripple was just another crypto currency doing battle for supremacy or survival with the other 2000 other crypto currencies and was ignorant of the differences. Having read a couple of interesting articles recently I decide to understand the difference between Ripple and other currencies such as Bitcoin.

Ripple was released in 2012 by cofounders Chris Larsen and Jed McCaleb and was primarily aimed at improving the efficiency of interbank transaction.  Thus Ripple is better known for its digital payment protocol than its cryptocurrency, XRP.  It is actually a subsequent release of the  earlier Ripplepay and can be described as a real time gross settlement system (RTGS) , currency exchange and remittance network.  Ripple uses an iterative consensus ledger and validating servers network along with XRP cryptocurrency tokens.

Bernard Marr provides a good summary in his recent Fordes article compares Ripple to Bitcoin. In this article . He states “While Bitcoin is a digital currency intended as a means of payment for goods and services, Ripple is a payment settling, currency exchange and remittance system intended for banks and payment networks. The idea is to provide a system for direct transfer of assets (e.g. money, gold, etc.) that settles in almost real-time, and is a cheaper, more transparent and secure alternative to transfer systems used by banks today, such as the SWIFT payment system.

Bitcoin is based on blockchain technology, while Ripple doesn’t use blockchain but uses a distributed consensus ledger using a network of validating servers and crypto tokens called XRP (sometimes referred to as Ripples).”

The Ripple network is managed by a range of independent servers comparing their transaction records constantly. A new ledger of Ripple is created each second. Ripple operates on an open source and peer-to-peer decentralized platformthat allows for a seamless transfer of money in any form(or indeed commodities such as gold or oil) , whether USD, Yen, litecoin, or bitcoin. XRP are traded on cryptocurrency exchanges such as Binance and Poloniex. Usually, it isn’t possible to buy them with existing government-issued (fiat) currencies – you will have to buy Bitcoin or Ethereum first, then transfer them to an exchange to trade them for XRP. By first converting the value of the transfer into XRP, rather than USD, exchange fees are eliminated and processing of payments is reduced to seconds.

A recent article in also compared Ripple  to Bitcoin ( and compared the transactional speeds “Bitcoin transaction confirmations take 10 minutes on average, while XRP transaction confirmations take 5 seconds.” There is also a vast difference in the transactional costs and these were given as BTC : $USD 40,  Ripple: $USD 0.004. The Cointelegraph article provides a table comparing Bitcoin to XRP. Note the transation speed and the energy consumption. The Ripple network is managed by a range of independent servers comparing their transaction records constantly. A new ledger of Ripple is created each second.

Bitcoin vs Ripple

OwnershipPublicityPrivate company
Transaction speedAppr. 1 hour (depending on the fee)3-5 seconds
Transaction cost$40$0.004
Number of transactions/secondAppr .101.500
Energy cost/transactionAppr. 250 kWHMinor
InflationCoin supply raising to 21 mln cap by 2140Almost deflationary (a very small amount of XRP can be destroyed in each transaction)
Coin supply21 mln100 bln

One other major difference is that with Bitcoin new coins are created (there are limits) as rewards for “miners” offering computing power (# hashing) to maintain the blockchain network. Ripple is not designed to be mined at all. That’s why these two currencies are very different from each other. Bitcoin is not pre-mined at all, and the maximum supply is just 21 mln.

Ripple was created with 100 Billion coins at inception and just 38 bln are available in the market, the rest are in Ripple labs and can be periodically released.

An addition feature was added recently whereby, through a smart contract system (escrow) the company releases 1 billion coins of its XRP holding to themselves each month to help fund business operations, incentivize customers, and sell to accredited investors. Any unused tokens will be placed back into escrow.

Like any other cryptocurrency Ripple is not without risk and the fact that it is controlled by a single entity (ie centralised ) is contary to the decentralised philosphy set out by the Satoshi Nakamoto, the creator of Bitcoin. However, some say that Bitcoin is a solution looking for a problem whereas Ripple is a solution created to solve a tractional problem.  Ripple improves on some of the drawbacks attributed to traditional banks. Transactions are settled within seconds on the Ripple network even though the platform handles millions of transactions frequently. 

Bitcoinmagazine’s article on Ripple that

Ripple’s hub-and-spoke design positions XRP in the middle as a tool that is fungible with any currency or digital asset, such as frequent flyer miles.  Therefore, the value of Ripple is the Ripple network itself and its ability to move assets around the world, rather than in the XRP token . Ripple has come into a lot of criticism from Bitcoin and other blockchain enthusiasts in regards toRipple’s centralized control is in direct contrast to the ideals and advantages of decentralized blockchains like Bitcoin. The Bitcoinmagazine’s article pointing out that Ripple also maintains a trusted Unique Node List (UNL) that is meant to protect against potentially malicious or insecure validating servers.

An article in the Investoppedia website (

 Was of the opinion that since Ripple has no no central authority that decides who can set up a node and confirm transactions, the Ripple platform is described as decentralized.

This view is clearly incorrect as it is the UNL that controls the network rules, presenting a conundrum: On the one hand, it protects against problematic validators, but, in theory, a regulating body or government could come in and force a change that isn’t necessarily desirable or is downright invasive. Furthermore, because of a FinCEN violation and fine in 2013, Ripple has updated its policies and will only recognize and recommend gateways that are in compliance with financial regulations.

The current performance figures for Ripple can be found at