Should I buy Ripple?
Many people ask themselves this question after learning that Ripple soared from $0.006 to over $3 in approximately 1 year back in 2017.
Ripple was created in late 2012 and has been on a constant uptrend ever since as adoption and awareness continues to increase. Although some people dislike the connection that Ripple has with the world’s largest banks, many see this as an opportunity.
In this brief guide, we will be covering what the potential of Ripple is and the risks associated with the currency. Hopefully, this balanced report will help you decide whether now is the right time for you to invest in Ripple.
In short, what makes Ripple special?
Ripple was created in late 2012 by Ripple Labs Inc in response to Bitcoin’s slow transaction times and scalability issues. Due to the blockchain’s focus on speed and transaction throughput, it quickly climbed into the top 3 cryptocurrency list on CoinMarketCap.
It takes around 4 seconds for a Ripple transaction to be confirmed. In contrast, Ethereum transaction’s take around 2 minutes and Bitcoin transactions can take over 1 hour.
This has made Ripple the currency of choice for some traders that want to move money from one cryptocurrency exchange to the next one, and interesting case study for the value that Ripple could offer as well to larger players like Commercial Banks.
Currently, Ripple can handle approximately 1,500 transactions per second (Bitcoin can handle about 5 transactions per second). Although the current throughput is more than sufficient at the present time, the development team behind Ripple has confirmed that if necessary, the blockchain can scale enough to match the throughput of VISA (50,000+ transactions per second).
That being said, the unprecedented speed and throughput come with a trade-off in scalability and immutability. At the time of writing, Ripple had 55 validator nodes (nodes that decide if a transaction is approved or not), in contrast, Bitcoin has 10,000+.
The problem with having a low number of validators is that they can get compromised more easily than a network with more nodes. However, Ripple has not had any meaningful security problem up to date, so major security concerns might prove to be unwarranted.
The massive potential of Ripple
Ripple (XRP) was conceived as a currency to facilitate payments and remittances between banks. In our current system, payments between banks take 3-5 days until they are settled, comes with high failure rates, and causes $1.6 Trillion in annual costs (according to Ripple.com). This is, of course, unacceptable in a digital world.
For the past years, Ripple has put a strong focus on establishing key partnerships with core players in the banking industry. At the time of writing, Ripple has secured partnerships with several of the largest financial institutions on the globe, including Santander, Moneygram, American Express, SBI Remit, and more.
This clearly proves that there is interest from the institutional side, and it also clearly showcases the strategic competence of Ripple’s core team.
According to a document from the US Treasury, the SWIFT system handles $5 Trillion per day. What if Ripple can capture even just a small portion of that value?
Risks of buying Ripple
As with every cryptocurrency, there are several risks associated with investing, and you should only afford the money that you can afford to lose. Ripple is a highly volatile asset, and although there have been days where its price jumped by 50%+ in just hours, there have also been days where the price crashed by -30% in the same timeframe.
Furthermore, there is always the risk that better technology can dethrone Ripple as the leading blockchain for banks. At the moment, it seems rather unlikely due to the sheer number of partnerships that Ripple has already secured, but it is a risk that investors need to keep in mind.
Finally, there have also been talks that Ripple (XRP) could potentially be deemed a security by the SEC. If that was the case, then that would make it challenging for regular cryptocurrency exchanges to keep Ripple listed, which would have a negative impact on its price. That being said, this last point is still just pure speculation by the media.