Ripple 101: Should I Trade this Cryptocurrency right Now?

If you have heard of cryptocurrency, you have most likely heard of Ripple. You may not be very familiar with what it is about, but this article will serve as a guide to its history, as well as why you should invest in it if you can.

What is Ripple?

This is a cryptocurrency – this means that it makes use of cryptography to regulate its management instead of relying on central banks for regulation.

RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK

Its history goes back to 2004 with the registration of the payment protocol RipplePay. Its founder is Ryan Fugger, a Canadian web developer and the aim was to provide a decentralized monetary system in terms of regulation while allowing people to make their money.

The network formed officially in 2005, led by the system RipplePay.com. This led to the development of a digital currency system where members of the network could verify transactions instead of mining coins.

The system was to eliminate the reliance on central exchange, while reducing electricity use compared to Bitcoin and do transactions at faster rates. In 2012, the developer team formed the OpenCoin foundation.

Why is Ripple different?

The world of cryptocurrency can confuse new users because you will hear all sorts of investment advice. With all the information lying around, you may wonder what makes Ripple different from other currencies. Some reasons are:

  • The transparency nature – unlike Bitcoin, which is an open source currency, a private company owns Ripple, so this makes it harder to identify the details of its ledgers. This has a benefit; there are faster upgrades to the system as a result. The company seeks agreement from the users before making any changes – if the change gets at least 80% support for two weeks, the developers upgrade the system.

  • Approach – A solution for asset transfers, more than 100 customers use this for that reason, with more than 75% of them using it on a commercial scale.

  • Circulation scale of the currency – Ripple coin valuation is smaller than other cryptocurrencies, with its circulation being at $120 billion. It is second to Bitcoin, valued at $276 billion.

Transaction time – due to “off-ledger” transactions, Ripple transactions take less than thirty seconds. It works through provider batches – these approve a certain amount of transactions before placing them on the block chain. This acts as a maintenance for the currency security features but also avoids the long process of logging every transaction as they happen.

Alternative coins to use

You know very well that Ripple is a trendsetter indeed – with the massive growth it has had in less than ten years, it is easy to think it is the sole cryptocurrency in existence. However, other coins work equally as well if not better, and we have compiled a list of several of them.

  • Ethereum/ETH – a very recent one from 2015, it enables distribution of applications and running of smart contracts without interference from third parties.

  • Litecoin/LTC – launched in 2011, it has a distinction of being a highly sought after currency together with Ripples and Bitcoin. Formed based on promoting open source payments without control from central authorities. For proof of work, there is generation “scrypts”, which are then decoded by CPUs.

  • Dash – Formed in 2014, it works on a master-code network that enables transactions to be untraceable.

  • Bitcoin – setting itself as one of the pioneering cryptocurrencies in the world, Ripple comes second to it in terms of distribution, and it is acceptable in various financial institutions.

  • Zcash/ZEC – a 2016 product, which offers uses additional privacy and optional transparency in transactions.

  • Monero/XMR – 2014 was the launch year for this currency and its development is unique – it uses donations as well as the power of the community to improve its features. It allows for complete privacy as well through a technique called “ring signatures”.

Technology behind Ripple

Some people may see the currency as a passing phase, though the technology that powers it is not. The Ripple Transaction Protocol technology has revolutionized the accounting sector, and some cryptocurrencies are adopting it for their operations.

How it works

In all transactions, the protocol (also called RTXP) allows instantaneous and direct money transfer during transactions. Because of this, the protocol overrides the usual waiting period and fee of traditional systems, and it allows for varied currencies such as rupees, USD and gold.

The system OpenCoin adjusts Ripple currency to use a common ledger to record all transactions, which independent servers manage. Anyone can own a server, and there is a digital currency, XRP, which is similar to Bitcoin and allows negligible fees during money transfer.

Trading Ripple currency

There are three ways that you can trade Ripple – buying it in the hopes of selling it later at a profit, exchanging Bitcoins with Ripple coins, or speculating on its value without purchasing the token by using CFDs (similar to betting).

Before you start trading in the currency, it (along with all other cryptocurrencies currencies) is very volatile, and prices are subject to very quick changes.

The best way to get it is through a currency exchange (using Bitcoins). However, many risks come with trading the currency, but as long as you understand them, you can become a player in the market.

  1. Find an exchange provider and open an account because there is no official exchange provider. Several factors will determine the choice you make, including regulation and fees charge. The best exchange provider is Coinbase because it allows you to buy Bitcoin through credit/debit cards as well as bank transfers, then you can change XRP to Bitcoin, especially through Kraken.

  2. Make sure to do your homework – this will help you keep track of the exchange rates.

  3. Ensure you protect yourself as you conduct these exchanges, for example allowing two-step verification and avoiding keeping coins in one wallet.

  4. Place a trade using the exchange provider and finish your trade.

There is also another trading option – using LocalBitcoins. The process is generally the same, only that you will need to vet users very carefully. You can then use the Bitcoins you acquire to get Ripple coins.

A third option is not purchasing Ripple, instead using CFDs (Contacts for Difference) through a broker. This is the safest option among the three because it allows you to make money in the shift of market forces without owning a Ripple coin.

Ripple prices and trading history

The market value for the coin has been volatile, though its price has risen, especially since 2017. Here is a brief history of the changes in its value:

2013-2016 – These years saw the coin steadily rising as a valid competitor to Bitcoin, though it took some time to increase in value. The levels remained almost stagnant, with the highest value being in 2013, when it had a value of $0.05. The value also did not rise above $1.

2017 – This was the first time Ripple reached a value higher than $1, with the value being $2.17 on 30th December. It has steadily risen in value ever since, with the current value being almost $4.

Is it worth trading in the coin?

This is a complicated question, because several authorities do not approve of investing in it. The reasons they usually give range from the highly volatile nature of the currency, the unpredictable nature of its value, and the fact that it has private ownership so you cannot get full access.

Based on all these factors, they point to it as carrying too many signs of danger. Also other voices point out the increasing value of Ripple investments – and that if you do not take a chance now, you will regret missed opportunities in the future.

Overall, even though the prospects of the investment look very good on paper, here are some reasons to go slow on it:

  • The element of secrecy – Unlike Ethereum and Bitcoin, the Ripple network is private. In fact, the developers own almost 70% of the generated coins, and this is a major risk because of manipulated deflation and inflation rates. You also cannot get access to the full details in the network.

  • No one outside of the central network knows the full cost of XRP. Its value disappears instead, so the coins are becoming fewer in circulation.

Nevertheless, some factors making the coin better than its competitors do include:

  • The large accessibility – this is because banks and other financial institutions can adopt the software in their machines. It also happens to be more secure than banks due to the high encryption levels.

  • Investment – investment levels are an indicator of success in a project. The Standard Chartered bank and Google Ventures have investments in the project, giving it a vote of confidence.

The risks are great, but if you are prepared to shoulder losses as a probable cost, then you can invest in it.

Conclusion

The rise of Ripple is synonymous with the rise of digital cash. People want to spend money faster without reliance on institutions like banks that require long protocols and time to approve transactions. The benefits are immense if you invest well, but it is best to be careful and not rely on it too much.

Leave a Reply

Your email address will not be published. Required fields are marked *

Real Time Web Analytics