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By Hank Wonety
Jan 8th, 2014

Could Ripple be the Future?

In the world of virtual currencies, Bitcoin is the big boss. This because most of the cybercurrencies, which include Litecoin, Peercoin, Namecoin and many more, are merely its clones, with only a few distinguishable features, and offers nothing completely exclusive. For instance, they all fall under decentralised DNS.  Nevertheless, Ripple – a new kid on the bloc – is out to redefine the virtual currency market.

Ripple Overview

  • Cryptocurrency: Ripple
  • Symbol: rippleXRP
  • Code: XRP
  • Price: $0.023
  • Market Cap: $2,311,810,087

There are three things that are synonymous with the definition of Ripple as far as cryptocurrency is concerned. There is the network that utilizes peer-to-peer payment system to send and receive payments, and then there is the currency and finally a distributed exchange. All the three components are the creations of Ripple Labs Inc. and work as one to facilitate easy and cheap transfer of money over the internet.

Ripple uses P2P software and it is presumably controlled by no one; however, the fact that it is distributed by Ripple Labs Inc. makes it non-decentralized and gives room for censorship. This is why currently the internet is abuzz with discussion about Ripple. Many cyber-currency fans are adamant to adopt it arguing that it eliminates the very essence of cryptocurrency.

Basic Features

  • Non-decentralization and could be adopted by the government.
  • Allows conversion between any currencies.
  • Involves issuing of debts as IOUs.
  • There are 100 billion Ripples (XRP) and all of them are “pre-mined”.
  • Largely perceived by cyber-currency community as a scam.

How it Works

ripple currency logoRipple is a currency just like Bitcoin and other virtual currencies, but it also doubles as a payment network through which people can connect with contacts they want to send Ripple payments to, or receive the Ripple payments from.

It also has its own distributed exchange where people interested in buying or selling Ripples publicly float their offers. What’s more, Ripple can be traded for U.S. dollars or Bitcoin.

How the system operates is very technical but I’ll try to explain it. In real sense, Ripple is just an internet protocol, similar to TCP/IP used to convey data or HTTP used to relay websites. However, Ripple is meant to send and receive payments. It works in a way such that it doesn’t discriminate the financial institution or provider you use, just like the case of emails where you can send mails to any email address regardless of the provider your recipient is using.

The three components of Ripple system can be simplified as social network for finance, automated system currency trade and a Bitcoin-like currency. You need to create a web of friends who you can do business with, and that is the network part. In the social network the relationships are defined by lines of credit. The currency, Ripples (XRP), facilitates the transaction as well as prevents network spam since each transaction is charged in Ripples, but which are destroyed (paid to no one) shortly after the event. At the centre of every transaction is the distributed ledger, analogous to Bitcoin’s block chain, which maintains the records of balances and transactions. The distributed ledger also gives users the platform to buy or sell their assets/currencies.

The Banking Concept

Ripple work in a similar way as conventional banks work. When you deposit money to your bank account, the money is credited in your count. This means that the bank owes you the available balance.

Let’s say you have opened an account at Wells Fargo Bank and deposited $1,000. You owe a friend $600 and you decide to pay him via a cheque. Now your friend’s account balance will read $600 more than his previous balance.

When you made the payment via cheque, you transferred the debt the bank owes you to a third party. This is exactly how the Ripple payment system works, save for the fact that instead of money you exchange IOUs (debt). As matter of fact, the whole banking concept is based on trust; you trust that the bank will avail your cash whenever you initiate a withdrawal. In the case of Ripple, there is a counter-party risk given that if you decide to hold dollars in Ripples (XRP), you’ve to trust the person who owes you those dollars. Should you misplace the trust, you could end up with uncollectable IOUs.

In order to settle demands, there needs to be reliable gateways. Ripple uses companies that trade in IOUs. The companies provide cash for equivalent IOUs held. Generally, Ripple work more like Visa or PayPal than Bitcoin, but it applies the same technology as other virtual currencies.

Why Ripple is the Next Big Thing

Since the inception of Bitcoin in 2009, only Litecoin has managed to put up a good fight against it, though there are quite a number of altcoins. The battle to control the virtual currency market has been compared to the social media, where Facebook has been dominant. The main reason for failure of other virtual currencies to battle it out with Bitcoin has been said to be lack of uniqueness, since the other currencies are just but clones of Bitcoin. However, Ripple is very unique and it masquerades as a complement to both virtual and fiat currencies, by offering a decentralized payment system and exchange.

Ripple’s p2p credit concept is intriguing and only one of its kinds. Just like Bitcoins, there are negligible transaction fees but the transactions in Ripple’s case take less than 15 seconds to be confirmed, compared to the Bitcoin’s minutes. The Ripple platform allows users to use whatever currency they prefer. According to While Ripple Labs Inc., this feature makes Ripple a complement rather than a competition to Bitcoin and other virtual currencies. The platform is very easy to use and present cryptocurrency newcomers with a simple way to acquire bitcoins and other altcoins, a process that is otherwise daunting. And with the increasing need for virtual currencies, Ripple is likely to gain traction.


Among the popular altcoins, Ripple posses a great threat to Bitcoin. Its potential has fascinated many, including Silicon Valley firms such as Andreessen Horowitz, Google Ventures, Lightspeed Venture, and The Bitcoin Opportunity Fund. These are major venture capitalist firms and they have all invested heavily on Ripple.

The people who invested in Bitcoins smiled all the way to the bank. However, if you missed out, here is another opportunity. Ripple currently trades at less than $0.03, you can put in your money and wait for your fortune. Given what is happening to Bitcoin in China, Ripple’s centralization might just be what is needed to succeed, as this makes it adoptable by the government. Plus its wide-ranging capabilities make it the cryptocurrency of the moment..

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