Cryptocurrency

Will Ripple be the First Cryptocurrency with a Practical Application?

The cryptocurrency boom has taken the world by storm. The race to displace Bitcoin from pole position is on, and none other than Ripple (XRP) is making its mark. Ripple was a lesser known digital currency until December 2017 when it finally exploded out of the blocks. On 4 January 2017, the cryptocurrency was priced at $0.006385 per unit. At that point it had a market capitalization of $232 million. Fast-forward to January 4, 2018, and Ripple is priced at $2.83981 with a market capitalization of $131.192 billion, and a circulating supply of 38,739,144,847. The meteoric growth of this digital currency makes Bitcoin’s rapid ascent look like a cakewalk. The maximum supply of Ripple is capped at 100 billion units.

Over time, Ripple has displaced multiple other digital currencies to become the de facto #2 cryptocurrency by market capitalization. It is just $120 billion shy of Bitcoin’s market capitalization of $256.9 billion, and yet it is only priced at $2.84 per unit. This begs the question: why is Ripple on the rise? What most people don’t know is that Ripple has many practical applications. It is geared towards the financial sector, notably the banking sector. Between December and January, this digital currency increased in value by 1,000%, yet its price is significantly less than the $15,000 +/- that Bitcoin is priced at. There are billions of dollars invested in Ripple, because people believe in the future of this new technology.

Inter-Bank Transfers with Ripple (XRP)

Back in November 2017, American Express announced that it would be using Ripple for blockchain-style payments. The technology was adopted to help corporate clients in the US transfer finances to UK businesses through Santander in the United Kingdom. American Express is hoping that the blockchain technology will sharply reduce the bureaucratic red tape and costs associated with transferring payments abroad. Ripple, unlike Bitcoin, is not a payment method – it is a mechanism for making international payments. It already works with multiple financial corporations including SBI Holdings, Standard Chartered, and Accenture. The price of Ripple is not dependent on the number of coins that can be mined. Some 55 billion Ripple coins are locked up in escrow and only 1 million coins can be released per month, indicating that there are 45 months to release the remaining Ripple currency. Since corporate clients can use Ripple for remittances, it is enjoying surging levels of popularity.

Ripple is effectively an inter-bank payment method. Recently, a Japanese credit card company adopted Ripple technology, paving the way for its widespread adoption and the meteoric price rise we are seeing. The current system is sluggish, but Ripple – like its namesake – creates ripples with the pace at which transactions can be processed. Customers and banks will have instant feedback about how transactions are processed, who received them, and who sent them. Unfortunately, Bitcoin transactions are extremely slow, and expensive. Ripple is the opposite. Transactions processing costs are fractions of a Ripple – currently at 0.00001XRP. Other cryptocurrencies such as Ethereum (ETH) and Litecoin (LTC) don’t compare to the lightning pace of Ripple.

The “Ripple Effect” on Digital Currency Trading

While many pundits are watching the market capitalization figures to determine whether Ripple knocks Bitcoin off its perch as the top cryptocurrency by market cap, the more important element is which digital currency is adopted and which ones get left behind. Industry analysts anticipate that Ripple will ultimately displace Bitcoin, particularly if Bitcoin’s price undergoes a correction. The fundamental difference between BTC and XRP is that one is decentralized, and the other is centralized. The financial sector likes Ripple because it can control transactions processing and send inter-bank transfers at lightning speed. If Bitcoin enjoys a similar technological enhancement, it may gain the ascendancy once again. Here are 4 reasons why XRP is rallying while many other cryptocurrencies are faltering:

  • The Asian factor is a major issue which is driving Ripple’s stellar growth. Countries like Japan, North Korea, South Korea, China and Singapore have Ripple fever.
  • Altcoins (anything other than BTC) in general are performing better than BTC because there is more to be gained by investing in lower-cost alternatives on a dollar for dollar basis. Newcomers cannot afford to buy individual units of BTC, so instead they pour their money into cheaper alternatives which are still growing.
  • If Ripple lists on Coinbase – the biggest cryptocurrency trading platform in the world – its value will skyrocket and people are cashing in before this happens.
  • Ripple currently has 100+ commercially deployed customers on its roster, including American Express and major other banks.
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