Technology

XRP Wild Ride: Can Ripple Beat Bitcoin?

From a market capitalization viewpoint, Ripple is the number two cryptocurrency on the planet. However, it is growing at a pace that has Ripple beating Bitcoin daily. On Dec. 31, Ripple opened at $2.10 and today it’s already over $3.60. That’s almost a 75% jump in just four days. Ripple has been riding a tsunami since late December and has jumped nearly 28% today alone.

Ripple Beat Bitcoin

Will Ripple Beat Bitcoin?

Bitcoin‘s market capitalization right now is just over $252B while Ripple is at about $142B. However, when you compare the two over the last several weeks you can see that Ripple is soaring while Bitcoin is floundering, dipping below $15,000 per coin today. Here’s another way of looking at it.

On Dec. 28, 2017, just seven days ago, the market capitalization of Ripple was just under $54B. That means it’s tripled in a week while Bitcoin has shed some $14B in market cap. It certainly looks like Ripple can beat Bitcoin, and might even do so before the end of January. But how long can Ripple keep up the growth rate, and why is it so popular?

Ripple is Different

Ripple, unlike Bitcoin, doesn’t depend on coins being mined. When it was created in 2012, it was capped at 100B coins. Currently, about 55B of them are in escrow on contracts that state only 1B can be released per month. Any of those coins that are not purchased by the end of the month then go back into escrow. This keeps demand for the coins high, but that’s not what is mainly driving its growth.

What is driving Ripple’s growth is how it was conceived and positioned. It’s not just an untraceable cryptocurrency, it’s a new way for inter-bank payments to be made. It’s already garnering attention around the world via recent partnerships with American Express, Santander Bank (UK), and a Japanese credit card consortium.

Ripple is positioned as a new way to send money between banks and across borders. It’s much faster than the current system, taking a matter of seconds instead of days. It allows for traceable transactions so banks and customers know where the money went and when. This is a completely different mindset than that of Bitcoin which is more about untraceable transactions and decentralization. The current state of Bitcoin is faltering because transaction fees are quite high and transaction times are lengthy. That’s slowly eroding confidence in it while Ripple is maintaining transaction times of 2-4 seconds.

Crypto King Ripple?

Many are wondering, “Will Ripple beat Bitcoin?” It depends on several factors including the Lightning Network for Bitcoin. Fees and sluggish transactions are making Bitcoin unfavorable to some. The Lightning Network is supposed to solve all of that by allowing two users to complete a transaction without having to wait on the entire network to catch up. It starts with a payment channel between two users with Bitcoin put into a multisig address. The two users then determine the amount of Bitcoin each can redeem, sign the transaction and close the channel. The last transaction with both signatures then gets broadcast to the blockchain. The effects of this are very low fees, instant payment and more privacy. With Bitcoin transaction prices in the $30 range, people are starting to look to altcoins for better speed and transaction fee rates.

Enter Ripple where transactions cost a portion of a coin, a very small portion of a coin, 0.00001 XRP, otherwise referred to as 10 drops. However, it’s set to increase over time based on the server load factor and is actually a formula.

Current Transaction Cost in XRP = base_fee_xrp × load_factor

This is to prevent network spamming and attacks. That makes today’s base transaction fee around $0.0000361. Even if the server load were to multiply that by 1000 the rate would still be so low that even Litecoin and Ethereum do not come close to it.

How Can Ripple Beat Bitcoin To Climb Top?

This is basically what everyone is speculating at present. If Ripple continues to make headway into becoming the go-to inter-bank payment system, will the price continue to rise? If so, how high will it go? The breakneck speed with which it has gone up over the last two weeks probably won’t be sustained. Adding $100M to market cap in seven days isn’t something that can continue indefinitely. However, it will probably continue to rise steadily for some time. The wait to see if Ripple beats Bitcoin has begun, and that wait may not be long.

Ripple’s performance, ability to be traced, and centralized nature appeal to many in the financial sector while Bitcoin’s privacy appeals to others. The rapid rise in Ripple’s price may simply be driven by many using its low fees and transaction times for some quick flipping. Then, when the Lightning Network arrives for Bitcoin, perhaps they will move money back into it or into something else entirely. Whether or not Ripple beats Bitcoin in terms of market cap before then is anyone’s guess.