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Ripple vs Bitcoin: 3 Differences Between Bitcoin and XRP

By Brian Nibley · November 12, 2021 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Ripple vs Bitcoin: 3 Differences Between Bitcoin and XRP

Bitcoin (BTC) and Ripple (XRP) are both popular cryptocurrencies: As of Nov. 2, 2021, Bitcoin is the #1 cryptocurrency by market cap and XRP is the #7 cryptocurrency by market cap.

But while the two cryptos share some other characteristics, there are also some notable differences when it comes to Ripple vs. Bitcoin. To better understand those similarities and differences, first let’s look at each cryptocurrency individually.

Ripple Basics

Ripple is a payment network and is also the name of the company that created XRP. This is a distinction that often gets glossed over. Ripple and XRP are not exactly the same thing, although the terms are often used interchangeably.

Ripple refers to both the network and the privately-owned company behind it. Ripple is a payment settlement and remittance system that was created to serve as an efficient way of transferring assets from person to person, institution to institution, or across international borders. Ripple is mostly used by large financial institutions and brands itself as “the best digital asset for global payments.”

XRP is the cryptocurrency of the Ripple network.

The Ripple network achieves consensus, or makes sure its transactions are valid, by using a distributed ledger called The XRP Ledger, which is a network of nodes that validate transactions by conducting a poll. XRP, the Ripple crypto, can be sent along this network to transfer value.

Bitcoin Basics

Bitcoin is the first and largest cryptocurrency. The Bitcoin blockchain was the first decentralized blockchain to survive “in the wild,” meaning there is no central authority or company backing it. Some consider Bitcoin to be the only truly decentralized cryptocurrency for this reason.

Bitcoin also has the highest hash rate of any proof-of-work coins, which might be one of its most important distinctions. The higher the hash rate, the more secure the network.

Ripple vs Bitcoin: Similarities

Aside from the fact that both Bitcoin and Ripple are independent cryptos that can be used for payments or speculation by anyone across national borders, there are a few ways in which the two cryptos are similar.

Both Can Be Used Independently

With some exceptions, almost anyone can use and trade BTC or XRP. Whether someone wants to speculate on their prices, use the crypto as a store of value, or use it to send payment to someone else, doing so can be easier than other financial methods. It’s even possible to use cryptocurrencies like XRP or BTC without having a bank account. There’s no difference between XRP vs. Bitcoin in this regard.

Both Transcend National Borders

Both BTC and XRP can be used as payment between people living in different countries — they each exist outside the jurisdiction of any national government. While users may have to deal with taxes, banking regulations, and capital controls when converting into their local fiat currency, crypto transactions can be carried out without anyone’s permission.

Both Are Popular Cryptocurrencies

Both cryptocurrencies are among the top 10 cryptos, at least as of November 2021. For those wondering how to buy Ripple (XRP), the process is much the same as buying bitcoin, in that users will have to create an account on an exchange. (That said because of an ongoing lawsuit filed by the Securities and Exchange Commission , XRP has reportedly been delisted from many crypto exchanges.)

Both Can Be Used for Speculation

All cryptocurrencies that are traded on public crypto exchanges can be used as speculative vehicles. As with most forms of investing, investors try to buy currencies at a low price, hoping to sell again after prices rise and make a profit. While Bitcoin wins the battle of liquidity when it comes to Ripple vs. Bitcoin, they both have higher liquidity than the vast majority of cryptocurrencies. This makes them ideal for trading and arbitrage opportunities.

Ripple vs Bitcoin: Differences

Perhaps the main difference between Bitcoin vs. Ripple is the way their networks are structured. Ripple uses a distributed ledger owned by Ripple, the company. Bitcoin uses a decentralized blockchain owned by no one. But the differences don’t end there.

Supply of Coins and Mining Is Different

Bitcoin has a maximum supply of 21 million coins with about 18.74 million in circulation at the time of writing in mid-2021. New coins must be earned by miners solving complex mathematical problems.

XRP has a maximum supply of 100 billion with more than 45 billion in circulation at the time of writing. XRP coins are not mined. The total supply already exists and about 55% of the coins are held by Ripple.

Recommended: What is Bitcoin Halving and Why Does it Matter?

Transaction Throughput Isn’t the Same

Bitcoin transactions are decidedly slower, and potentially more costly. The Bitcoin network can only handle about 7 transactions per second on average. BTC transactions take about 9.2 minutes on average to be fully settled. Fees can range from a few cents to a few dollars or more depending on network congestion at the time.

The Ripple network can handle about 1,500 transactions per second. XRP transactions settle in about 4 seconds on average. Fees can be a fraction of a penny.

Use Cases Differ

At present, Bitcoin’s biggest use case is “digital gold”. People who have been using Bitcoin as a type of savings account over the last 12 years have outperformed all other investments by a wide margin. Even large corporations have begun to put BTC on their balance sheets. Bitcoin is considered by some to be a hedge against inflation due to its limited supply, and a portfolio diversifier due to its noncorrelation with other financial assets. However, cryptocurrency is exceptionally volatile, and there is no guarantee that Bitcoin will continue to outperform other investments.

XRP was designed as a way to settle payments fast and at low cost. The coin likely has more utility value than it does economic value. If someone needed to send $10 to someone in another country and wanted to do so every day or every week, XRP might work better than Bitcoin due to the low fees and quick remittance times.

Should You Buy Ripple or Bitcoin?

Before investing in either Ripple or Bitcoin it might help to consider a few things first.

First, Bitcoin has a max supply of only 21 million coins. Bitcoins have to be mined into existence and it’s difficult to do so. Bitcoin is the largest crypto by market cap, has the highest liquidity, the highest hash rate, and the longest track record.

XRP has a max supply of 80 billion. These coins were pre-mined, meaning they were all created at once by Ripple. As long as Ripple keeps their promise of keeping some of the supply of XRP locked up, then the coins should, in theory, retain some value. XRP can be considered a more centralized coin than most, since it was pre-mined by one entity and that same entity still controls much of the supply. (Additionally, keep in mind that Ripple is being sued by the SEC over its failure to register XRP as a security.)

Recommended: Is Crypto a Commodity or a Security?

The Takeaway

The Ripple vs. Bitcoin debate has been an intense one at times. Ripple and XRP represent a stark contrast to some of the principles that govern Bitcoin, like decentralization and an economic store of value through proof-of-work mining and a hard supply cap. Some Bitcoin proponents have referred to XRP as the “anti-Bitcoin” at times. They are clearly two very different types of cryptocurrencies.

Despite this, there are still plenty of similarities between the two. Both coins could also play a role in an investor’s crypto portfolio, rather than an investor feeling like they must choose Bitcoin vs. XRP, one or the other.

For investors interested in crypto, SoFi Invest makes it easy to trade cryptocurrency with more than two dozen cryptos available, including Bitcoin, Litecoin, Cardano, Dogecoin, Solana, Enjin Coin, and Ethereum.

Find out how to get started with SoFi Invest.

Photo credit: iStock/akinbostanci


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