Cryptocurrencies and blockchain technologies have become a part of everyday life. Today, it’s never been easier to buy and sell your cryptocurrencies.
Alongside the well-established Ethereum and Bitcoin is the new arrival on the scene – XRP. But what exactly are the differences between these crypto coins?
WHAT IS XRP?
XRP is both a digital payment processing system and a crypto coin. The cryptocurrency was invented by the American technology company Ripple Labs.
The cryptocurrency was designed to enable banks and payment providers to transfer money across borders in real-time without incurring costs.
WHAT’S THE DIFFERENCE BETWEEN XRP AND BITCOIN?
Ideologically, Bitcoin and XRP are worlds apart. Bitcoin was created to remove the need for centralised financial institutions. XRP allows those financial institutions to operate more efficiently.
One key difference is that whereas Bitcoin is based on a blockchain system, XRP isn’t. Bitcoins are released as a reward when a user encrypts a transaction, a process known as 'mining'. XRP on the other hand, is released periodically by a network of validated servers, so there's no need for mining.
There's a total of 21 million Bitcoin in existence, for XRP the figure is 100 billion.
The cost of transferring Bitcoin and XRP is much lower than with banks or third parties. However, the cost of transferring Bitcoin is more variable depending on how many transfers are happening at any given time.
Although XRP is cheaper to transfer, it still depends on centralised financial institutions – if they crash, so does XRP.
XRP can handle more transactions per second, which means coins can be transferred faster. It takes around an hour to transfer Bitcoin, whereas you can transfer XRP in around 4 seconds. This will prove to be increasingly important now it’s easier than ever to transfer cryptocurrencies online.
WHAT’S THE DIFFERENCE BETWEEN XRP AND ETHEREUM?
Ether (the coin created by Ethereum) and Bitcoin are the two cryptocurrencies currently leading the pack. They’re based on very similar technologies and are both borne out of a desire to remove third parties such as banks and financial institutions from transactions.
However, Ethereum also aims to protect personal data from hackers and to compete against web-based companies that house data.
The Ethereum blockchain allows for smart contracts to be programmed into its system.
A ‘smart contract’ is a contract that’s generated automatically. For example, you may pay a lawyer to generate a document for you. A smart contract will do this instantly, removing the need for an intermediary person or institution.
This means you can use Ether not only for transactions, but also for stock, property and anything else that requires an intermediary institution.
Ethereum’s smart contract also makes it the cryptocurrency of choice for companies raising funds through Initial Coin Offerings. An Initial Coin Offering is where new cryptocurrencies get traded for more established ones like Ether, in the hope that the new cryptocurrency will increase in value.
Ether is also volatile. On the 21st of June 2017, Ethereum lost virtually all of its value in a flash crash. Although XRP hasn’t suffered any major crashes yet, it still depends on the centralised financial institutions that Bitcoin and Ethereum seek to bypass.
XRP has fast network speeds, high scalability, and minimal transfer costs. Time will tell whether that’s enough to make XRP the next big thing.