Probably you are here because Ripple is now at $2,45. A month ago it was at $0.2020. Before we delve into the topic at hand, it is important to understand the difference between Ripple and other cryptocurrencies as well as how this difference might affect Ripple’s price moving forward. To start with, although cryptocurrencies are built on blockchain technology to combat the double spend problem, the way this blockchain technology functions differs from one cryptocurrency to another. For instance, Bitcoin uses what is known as proof of work (PoW) to validate a block, whereas other cryptocurrencies, most notably DASH, use an algorithm called proof of stake (PoS).
Remarkably, Ripple uses neither proof of work nor proof of stake. Instead, it uses a unique consensus protocol that is more scalable than anything Bitcoin has to offer. To put matters into perspective, while Bitcoin can process seven transactions per second, Ripple has the ability to process 1500 transactions in the same second. Furthermore, this scalability is complimented with speed. In other words, a single transaction on the Bitcoin network can take up to 60 minutes to process, but the same transaction on the Ripple network will be done in a matter of second.
However, Ripple’s true genius lies in its ability to refurbish an old method for modern purposes. As a matter of fact, Ripple relies on a system for its payment processing that is reminiscent of the Medieval process of “Hawala,” where financial intermediaries were used to make payments and remittances seem instantaneous. What’s even more interesting is that the Ripple network can be used to trade any asset with any other asset. Consequently, just as two people dealing in two different currencies can interact through the Ripple network seamlessly, two people holding entirely different asset classes, let’s say gold and agricultural products for example, can perform a trade on the spot, so long as there are intermediaries who are willing to facilitate this transaction.
Naturally, you should be wandering what this all costs. After all, a network that can help you trade in any asset class, at any time, and at near instant speed must cost an arm and a leg in transaction costs, right? Yet, this is not the case. Transaction costs are minimal, and they are incurred to prevent someone from spamming the network (which means that these transaction costs are used to make sure that people performing a transaction are serious about it, rather than just overloading the network for their own malicious purposes). Interestingly, the money deducted during every transaction is destroyed altogether. Regardless, you shouldn’t worry because the total amount of Ripple coins that will be issued is 100 billion dollars, so losing a fraction of a fraction of that during every transaction is a miniscule price to pay.
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