Just when you think you're getting the hang of understanding cryptocurrencies such as Bitcoin and Ethereum, another disruptive currency enters the arena.
Let us introduce you to 'Ripple" [XRP] crypto! Ripple is the third-largest cryptocurrency by market capitalization, after Bitcoin and Ethereum. It's the latest craze according to some market players.
Dan Doney, CEO of Securrency, explains that Ripple seeks to revolutionize financial services while Bitcoin and Ethereum seek to displace them.
According to reports, it is estimated Ripple owns about 61% (or $16 billion) of XRP. It seems Ripple is still in its very early days but should not be disregarded, because it has billions of dollars worth of cryptocurrency on its balance sheet.
Ripple still remains mysterious though ...
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"As the third largest digital currency by market cap, Ripple remains a mystery to many despite being older and arguably more suited for many financial transactions than its siblings," Doney said. "Bitcoin, Ethereum, and Ripple all use distributed ledgers to transmit value providing security, transparency, immutability and clearing of transactions without intermediaries. But the similarities end there."
"Payment systems today are where email was in the early '80s," Ripple's chief cryptographer, David Schwartz, has been quoted saying. "Every provider built their own system for their customers, and if people used different systems, they couldn't easily interact with each other. Ripple is designed to connect different payment systems together."
Schwartz is also anticipating the possibility of seeing "big companies lose their control over the flow of other people's money just as they've lost control over the flow of information."
Doney goes on to explain one important distinguishing fact is that Bitcoin and Ethereum use mining to seal a block of transactions while Ripple uses a different model.
"Mining is a cryptographic process used to both secure the network and ensure equitable access to the creation of new value on the network," Doney said. "While brilliant in design, Bitcoin and Etherem mining is an ecological disaster: consuming more power than the nation of Iceland at nearly 20TWh/yr, carrying an expensive per transaction price, clearing slowly (~minutes); and supporting limited transaction volume (~400,000/day)."
He goes on to explain that without significant reform, these models can't sustain the volume needed to support global payments.
"On the other hand, Ripple's consensus model is fast -- clearing times ~2 seconds -- consumes negligible power and scales," Doney added. "Purists criticize Ripple as the model has certain features, such as the ability to freeze an issuance (coin), that confer centralization."
These features provide a mechanism to enforce regulations and gain the efficiency and reach of these new models - the best of both worlds.
Doney adds that "pragmatic" startups like Securrency leverage this power to bridge from the old to the new, enabling trillions of dollars of value in legacy value to gain the global reach of cryptocurrencies while retaining investment grade characteristics of traditional securities.
Expect to see more of Ripple as it makes increasing waves in the cryptocurrency sector.
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