Ripple cryptocurrency: basics, advantages, future outlook and prospects
General review of the Ripple cryptocurrency: basics of the platform, history, technical features, advantages and drawbacks. Where to buy Ripple and what it is promising.
In December, 2017, the Ripple cryptocurrency incredibly boosted, being the second large cryptocurrency by market cap, ahead even Ethereum. However, it was followed by the coin’s dramatic crash, but the project attracted investors. Ripple is the cryptocurrency platform for payment systems, providing money transfers to any part of the world, a potential SWIFT killer. Although the coin is quite promising, it has some substantial flaws. From this review, you will learn about what prevents Ripple from becoming the leader, what the coin’s future outlook is and if it is worth investing in.
Ripple – the killer of payment systems?
Each cryptocurrency is the payment unit in a certain project, based on blockchain. For example, Augur is a virtual service for fortune-telling, AdEx is a decentralized advertising exchange, Bitradio is a service, providing earning from listening to music. The most popular are still payment systems (forks, trying to copy Bitcoin's idea), and decentralized networks (forks, similar to Ethereum). However, most projects stop at the stage of aggressive marketing campaign and don’t further develop (a vivid example is Bitcoin's fork, Quark). The Ripple project doesn’t refer to any of these groups. It stands out, presenting itself as a kind of an “intermediary” in the foreign exchange transactions, where the direct exchange is impossible.
Ripple – the platform of instant payments
The cryptocurrency prototype first appeared as early as in 2004, so, it can be called of one the oldest projects. Originally, the project was designed as a system for safe transfers between the Internet-users. In 2011, the payment protocol was changed a little and turned into what is known as Ripple (XRP) now. In 2014, the cryptocurrency developer, Ripple Labs, was included into the team, developing mobile applications for foreign exchange payments; and it has been aiming at developing banking services since then.
Ripple is a universal network of reciprocal settlements, which makes it possible to transfer almost any currency anywhere in the world within a few seconds. The general principle of the network is like this: for example, there is a person who needs to transfer money from South Africa to Canada, converting the rand into the Canadian dollar. Another person needs to transfer money from Canada to Venezuela, and the third one -from Venezuela to South Africa. These transactions are very difficult to execute without converting the money into the U.S. dollar each time, and that involves high commission costs.
Ripple provides instant transactions and without any commissions. The system looks on the Internet for people, who want to buy or sell currencies and connects them with each other. The coin itself serves as an exchange equivalent. Each participant can be both the buyer and the seller simultaneously; and the Ripple system links all the participants into a network, meeting the needs of everyone. To facilitate the exchange, there is the option "Allow rippling" in the network; it allows automatic mutual transactions (clearing) between the users.
Among the clients, connected to the network, are large banks, like UBS, Credit Agricole, Union Credit, financial corporations, Cuallix, TransferGo, and the payment network Aurwallex. In late 2017, the suggested possible participation in the network was announced by American Express and Santander, which are planning to make up a system of payments between the USA and the UK.
The Ripple technical features:
Total number of coins in the system is 100 billion units;
No arbitrage. Each system’s participant can develop an own exchanger; the transactions are processed in the network only after the both sides have confirmed it.
There is no real commission. A transaction commission of about 0.00001 XRP serves for technical purposes, in order to prevent possible millions of transfers in both directions with a malicious intention to overload the system and disrupt its proper work.
Ripple benefits also include a higher, compared to BTC, transaction speed (confirmation takes less than 4 seconds) and relative confidentiality, combined with safety. The system can process up to 50,000 transactions per minute, which can be compared to the speed of Visa. Many suggest that Ripple could replace the outdated systems, like SWIFT and Western Union.
Where can you buy Ripple?
Ripple can’t be mined. Previously, the website provided an opportunity to obtain the coin as a reward for performing on your computer different calculations, needed for scientific industries, medicine and so on. Now, you can’t mine Ripple; all 100 billion of coins have been already issued. Therefore, you can only buy Ripple. There are a few ways to buy Ripple:
Exchangers. A good monitoring of exchangers is here: www.bestchange.com. Pay attention to the reserve amount for each exchanger and the mode of exchanging (automatic, semi-automatic). The drawback of exchangers is a relatively high commission. The advantage is their relative safety, compared to the constantly hacked exchanges.
Crypto exchanges. According to Coin Market Cap, the Ripple is traded on a few dozens of platforms. The biggest Ripple turnover is on Bithumb and Upbit. The feature of the South Korean exchanges is that you can buy Ripple only for the local currency KRW (the won) there. On the other exchanges, you can buy Ripple for ВТС, USD, USDT, EUR, JPY. Ripple was enlisted by Exmo exchange in November, 2017.
Brokers. You can make chase on the differences in the XRPUSD rates and buy or sell Ripple through a broker.
Ripple future outlook
Until December, 2017, the Ripple rate hadn’t been growing much, although the cryptocurrency was steadily included in to the TOP 5 largest cryptocurrencies by market cap. Ripple surged sharply in December, when the coin was quickly up to 3.69 USD, from 0.22-0.24 USD, outperforming Ethereum and being the second large cryptocurrency for some time. The official reason was called strong interest in Ripple from Japanese and South Korean exchanges. However, it didn’t last for long. In just 12 days, the coin was down to 0.93 USD. Although, currently the Ripple is going up rather gradually, such a sharp surge and crash look like a wave of pump, rather than justified increase in price. At present, Ripple is trading at about 0.5 USD per coin. You can try speculating the XRPUSD rate here. The last forecast for the Ripple future prospects can be read here.
Although Ripple, just in a few weeks, managed to outperform even Ethereum (followed by a crash), traders doubt in the positive outlook of the coin, and their arguments sound quite convincing. The success of any crypto project depends not only on the marketing strategy and aggressive PR from the developers, but on its competitive performance as well. And it may suggest many flaws for investors:
It is controlled by the developers. The crucial rule for cryptocurrencies is no centralized control, and so, nobody can affect the rates or decisions, taken in the network. Ripple is controlled by Ripple Labs, so, it is not decentralized. The total number of coins has already been mined. 62 billion of coins out of 100 billion belong to Ripple Labs, 5.20 billion is held by Chris Larsen, the former CEO of the project. To crash the Ripple rate, selling the cryptocurrency at the peak of its popularity, it is enough to sell even a part of this Ripple share. Something like this happened in May. 2014, when one of the project founders Jed McCaleb sold his 9-billion share. The Ripple rate was 40% down.
Competition. Ripple is called the killer of traditional payment systems, but there is a reasonable question. Why shouldn’t these payment systems launch their own crypto projects? SWIFT works with over 11,000 financial institutions, and Ripple is far from this result. There are numerous cryptocurrency payment systems, and it is not clear what the Ripple competitive advantage will be. There are also blockchain rivals. For example, Stellar has attracted IBM and Deloitte as clients.
Interest in stable rate. SWIFT charges a fixed transaction commission. If Ripple replaces SWIFT, it won’t become the growth driver for the cryptocurrency. Financial institutions are interested in stability, so they will be just getting rid of the cryptocurrency, in case of its strong volatility.
The crypto market is changing all the time. Just a few months ago, BTC reputation was spotless, and the highest forecasts projected the BTC rate at 50,000 USD – 100,000 USD before late 2018. At present, the Bitcoin share in the market capitalization is down to 32%-33%, from 55%-58%, it is also criticized for being heavy and slow, and is called “the old age”.
The same can happen to Ripple, especially since the coin rolled down from its all-time highs a long time ago. And the fact that Ripple started growing actively only in the December-January period, while many other cryptocurrencies had been up since the spring-summer period, may suggest it is manipulated. The further evidence is that over 60% of Ripple is traded on the South Korean exchanges.
Factor, able to support the Ripple price rise:
General market trend is optimistic.
The network is joined by new participants (financial institutions).
The project is advanced towards decentralization and the protocol updating.
Official from Ripple Labs promised to launch 1 billion coins per month into free trading in order to cut down their influence, but they would do it gradually. Ripple Labs plans to attract independent outer validators and reduce the number of their own validator nodes.
Conclusion. In 2018-2019, the crypto market is going to be of major interest for investors; though the age of BTC is gradually coming to an end. Bitcoin will be replaced by more flexible and progressive projects; and Ripple might be one of them. If the global crypto market sentiment remains positive, the Ripple will also go on growing. Experience will show how Ripple will be able to win in the competition. After all, Ripple is quite suitable for risk diversification. At least, it is clear, unlike for many other projects, that the developers are working on the project and attracting more and more new world-known participants.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.