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Is Ripple the Successor to Bitcoin?
While all the talk has been about Bitcoin in 2017, many people are betting instead on the world’s second largest cryptocurrency, Ripple.
2017 was the year of Bitcoin. Whether you believe it to be a bubble or not, the gains it made were eye catching, but that’s not the only crypto currency on the block. Several others have had their moment in the spotlight, but at the moment everyone is talking about Ripple.
Better known as XRP, its value has rocketed in the last couple of weeks making it the second most valuable cryptocurrencies. Early in December it was trading at about 25 cents, but its value recently surpassed $3. With many people suggesting Bitcoin’s bubble may be about to burst there are those who ask – is Ripple the next big thing?
What is Ripple?
Many people will be hearing about Ripple for the first time, but like Bitcoin it’s a lot older than you might think. It was created back in 2012 as a way of facilitating digital transfers. Unlike other cryptocurrencies it has strong links to traditional banks. Santander, Bank of America and UBS all use Ripple. In a world of decentralised cryptocurrencies, it is centralised and controlled by the Ripple company.
It also has extremely low transaction fees and faster transaction times compared to bitcoin and this is what Ripple sees as its main advantages. Just take a look at its tagline: ‘one frictionless Experience to send money globally’. It connects big banks and global payment providers and means you can move money across borders almost instantly without incurring high transaction costs.
American Express, recently announced that it had launch a blockchain corridor paving the way for Ripple. It boasts transaction times of 10 seconds compared with traditional banks which can take one or two working days.
Boom or bust
The connection to traditional banks jars with some who prefer the libertarian idea of a truly decentralised currency operating beyond the control of the traditional financial system. However, it is this connection which, some believe, could make it a more stable investment. Its value has been boosted by its adoption by major banks and their involvement can be seen as a reassurance of stability. They are unlikely to invest in a technology they plan to abandon quickly.
That said, investing in all cryptocurrencies is a high-risk game. December was a time of immense volatility for the sector, particularly Bitcoin. Ripple has not been immune to this volatility and earlier in the year it was trading at less than a hundredth its current value. The enthusiasm stems from banks involvement and the hope that, from now on, its fortunes will be more stable.
For all the enthusiasm, though, Ripple is still very definitely in Bitcoin’s shadow. It’s also not the first pretender to the throne; plenty have risen and sunk without trace, but there is reason to hope that Ripple’s performance is a little more sustainable than most. So, if you are one of those that believe Bitcoin is about to come tumbling down, this could be an interesting alternative.
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