As the cryptocurrency market develops, every digital asset has features inherent to this kind of financial asset. One of the most famous cryptocurrencies is XRP, which belongs to Ripple Labs and should be analyzed, considering its purpose and technical characteristics.
While Bitcoin, Ethereum, and other cryptocurrencies remain popular for their news headlines, XRP remains a unique, specific approach that engages more with actual financial use cases.
This article will discuss ten distinct features that make XRP different from others, setting it the much-needed game-changer barrier in the blockchain industry. Furthermore, the main focus will be comparing XRP, Bitcoin, and Ethereum.
What Set XRP Apart from Other Cryptocurrencies
Initially, XRP was positioned as a payment system that performed significantly faster and offered cheaper transactions than other digital currencies. However, it is only moving in that direction because its creators are focused more on establishing XRP usage in institutions.
One of the main benefits is that it can be exchanged for any currency or valuable instrument, including gold, with a single minimal commission and XRP. Here are some factors that set XRP apart from other cryptocurrencies. You need to check a trusted platform to get regular updates on the XRP price.
Purpose: Utility vs. Decentralization
Most cryptocurrencies, including Bitcoin (BTC) and Ethereum (ETH), are designed with decentralization factors. Where Bitcoin strives to be a digital form of money, Ethereum provides the infrastructure for decentralized application development.
XRP, on the other hand, was built for functionality to enable quick and inexpensive international transactions. Ripple Labs partners with BUSD to incorporate XRP into banking channels to act as a bridge currency in the global market.
Consensus mechanism
Up to the Merge, Bitcoin, and Ethereum used Proof of Work (PoW) protocols, where miners had to solve direct computational problems to validate the transactions. The PoW is a centralized, energy-consuming method that is relatively slower than more modern techniques.
Unlike other cryptocurrencies, XRP doesn't use a blockchain but is instead recorded on its Ripple Protocol Consensus Algorithm (RPCA). This means that transactions can be validated within 3 to 5 seconds without mining the blockchain, making it faster and consuming less energy.
Speed of transactions
Every digital coin has a duration to complete its transaction. Therefore, if the transaction doesn't wrap up within its usual timeframe, then there might be an error or glitch. Transaction speed is a critical factor for real-world use cases:
Bitcoin : Takes an average time of 10-15 minutes per transaction.
Ethereum : Completes transactions in 10-20 seconds (after the Merge).
XRP : Considers transaction validation in 3-5 seconds and is among the leading cryptocurrencies regarding transaction speed. This speed makes XRP more desirable in cross-border payment systems where timely transactions are important.
Transaction costs
The fees you pay for each transaction depend on the coin you are using. The higher fees do not allow the effective use of cryptocurrencies in micropayments in their everyday sense.
Bitcoin: The transaction fees depend on the blockchain size and may exceed several dollars.
Ethereum: Gas fees can be unpredictable and often increase to a level that is not sustainable during high-load periods.
XRP: Again, the cost of a transaction is quite cheap and ranges from fractions of cents to cents.
This makes XRP more appropriate for micropayments and high-frequency transactions due to its relatively lower price.
Supply model
Both Bitcoin and Ethereum employ mining to gradually reduce the introduction of new currencies into the market. Thus, each has a limited supply or creation; Bitcoin has a limited supply of 21 million, to name one.
Like many other cryptocurrencies, including latecomers such as EOS, XRP has its entirety of 100 billion coins pre-mined at the creation of the asset. As for XRP, Ripple Labs possesses a large part of this supply in escrow, which is subsequently launched to meet demand occasionally. Although this has made the process rather predictable, controversy has emerged over-centralization.
Decentralization debate
One of the most critical attributes of blockchain technology is decentralization; as for XRP, the degree of decentralization is in the limelight.
Bitcoin: Implemented in a fully decentralized manner where no particular individual or group has control over the network.
Ethereum: Interestingly, Ethereum offers a decentralized environment, but due to the shift to Proof of Stake (PoS), there are concerns about the centralization of validators.
XRP: Despite the decentralization of the XRP Ledger regarding the validator nodes, Ripple Labs has great control over the delivery of XRP.
Target audience and use cases
The target of XRP and other coins are not the same. Different cryptocurrencies cater to varying audiences:
Bitcoin - Most useful for those searching for electronic gold or looking for an option in case of deflation.
Ethereum – Their primary target is developers who create decentralized applications and smart contracts.
XRP – focuses on banks and payment services, describing itself as a provider of solutions for international payments.
This focus makes XRP unique and allows it to play a more specific role in the crypto market than other cryptocurrencies like Bitcoin.
Partnerships and Adoption
Previously established Bitcoin and Ethereum target a mass audience, while XRP has the institutional backing provided by several hundred banking companies worldwide. Ripple directly engages with banks, payment providers, or remittance companies through RippleNet by utilizing XRP as a liquidity tool.
Hence, the proven use of XRP for practical purposes, possibly cooperating with companies like Santander, SBI Holdings, and many others. These partnerships add value by increasing the overall acceptance of XRP in the mainstream finance industries.
Regulatory landscape
Cryptocurrencies face varying degrees of regulatory scrutiny, and XRP’s situation is unique:
Bitcoin and Ethereum are more accepted as commodities and less likely to be banned than altcoins.
XRP has ongoing legal cases, especially between Ripple and the U.S. SEC.
The SEC lawsuit raised doubts about whether XRP is a security that affects investors. However, if the outcome is positive, this could greatly enhance XRP's overall credibility in the market.
Environmental impact
One of the essential features that sets XRP apart from its competitors is that it is environmentally friendly. Its consensus protocol eliminates the need for mining, among the least energy-intensive processes. Thus, XRP becomes relevant when investors start to consider the impact of their actions on the environment.
Yet another issue is associated with Bitcoin's Proof of Work mechanism—this mechanism consumes a lot of energy. Ethereum was initially a PoW network; however, in 2022, it became a Proof of Stake network, which is more sustainable.
Conclusion
The features that make XRP different from other cryptocurrencies make it effective when used in the blockchain ecosystem. It is relatively useful, swift, and inexpensive compared to other cryptocurrencies, making it attractive for both established financial players and the general public. However, its centralization and current legal issues also mean that potential investors should conduct extensive research.
Having established these fundamental differences, you need to be in a better position to determine where you organize XRP and the general cryptocurrency industry. While it is possible to fiercely argue to be an experienced trader, XRP remains one of the market's most innovative and practical assets that define its position in the future. Thanks to constant innovations and technology, the future of XRP is still very bright. Be prepared for something more thrilling.