Though the rise and occasional fall of Bitcoin have been exciting to watch, investors are worried that the digital asset may be reaching its peak. This plateau has caused investors to put even more energy into other digital assets.
Ending 2017 with a bang, Ripple has grown around 35,000% since January 1 of last year, surpassing Ethereum, and taking the number two spot of cryptocurrencies. The hype around the digital asset has been building as major institutions adopt the cryptocurrency to handle global financial transactions.
If the 2018 cryptocurrency market is anything like 2017, it is sure to bring us, even more, twists and turns than last year. As the markets grow through 2018, hopefully, businesses and institutions will have a better idea of how cryptocurrencies will change the financial system. The good news is that Ripple may be a strong example of how that change could affect the commercial world.
The Rise of the Cryptocurrencies
Before you jump into Ripple, you should start from the beginning. Anterior to the development of cryptos like Bitcoin, there have been many attempts to create a digital currency. During the notorious 90's tech boom, subjacent versions of cryptocurrencies began to appear within the tech community but with little to no success.
Though never breaking into the mainstream, digital financial systems like Flooz, Beenz, and the somewhat popular Digicash failed to catch on due to various factors that include numerous financial complications, internal company strife, and rampant fraud. Interestingly, unlike the cryptocurrencies of today, these digital currencies relied heavily upon on a "Trusted Third Party" approach. This method meant the creators of the currencies were responsible for facilitating and verifying the transactions that took place. After the failure of these currencies and the companies that created them, many viewed the idea of the of "digital currency" as more of a novelty rather than something of purpose.
The Beginning of Bitcoin
Fast forward to 2009, and there was new hype surrounding the world of digital currencies. Early in that year, an anonymous programmer or group of programmers created the cryptocurrency that you know and love today, Bitcoin. Under the alias, Satoshi Nakamoto, the decentralized currency was a peer-to-peer electronic cash system with no controlling authority, a model similar to peer to peer networks used for file sharing.
What makes Bitcoin so interesting is the absence of a third party. There is no need for something like a bank or a credit card to facilitate or confirm a transaction. The blockchain (a public ledger of all transaction that ever happened within the network is available to everyone) is where every transaction is confirmed and made irreversible by the people in the system.
In the world of payment networks, one of the most significant issues that need to be solved is double spending, a fraudulent technique of spending the same amount twice. A public ledger eradicates this problem because everyone in the network can see all the accounts. In short, a transaction cannot take place unless there is an absolute consensus of all the participants in the network.
The creation of more decentralized financial cryptocurrencies followed right after the creation of Bitcoin, each crypto offering a solution to a different issue in the world's current financial system. Entrepreneur Marc Andreessen describes the momentum shift perfectly, “Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.” Some of the most popular cryptocurrencies include Litecoin, Zcash, and Ethereum.
And what can you do with cryptocurrencies? As cryptocurrencies gained in popularity, digital currency businesses began to pop up online and offline to facilitate those who wanted to spend their newfound digital cash. You can use cryptocurrencies to purchase everyday things like pizza or coffee, and if you have enough, you can even use cryptos to purchase a brand new car.
The more prominent appeal of crypto cash does extend pass purchasing things. The blockchain system itself has proven useful and has slowly been adopted by companies and financial institutions around the world; while the cryptocurrencies have provided a more secure and quick method to complete everyday transactions.
While some have mined and used Bitcoin for illicit materials, most have used Bitcoin as an investment vehicle. Just this year alone, Bitcoin has jumped 900%, starting off at $800 per digital token and approaching $20,000, before falling and floating around $15,000 before the end of 2017.
As you probably already know Bitcoin is not the only cryptocurrency you should be eyeing in 2018. The volatility of bitcoin over the year has triggered a chain reaction across the cryptocurrency market. As investors look to alternatives to Bitcoin, the cryptocurrency system, Ripple has seen unequivocal growth. Investors have been attracted to the "more secure" digital financial network of Ripple. 2017 was the year of the Bitcoin. This year may be the year of the Ripple.
Ripple Across Borders - Ripple's XRP
So now you are probably wondering what Ripple is and why it will matter in 2018? There have been tons of think pieces already claiming Ripple may be the next big thing, and they may be on to something.
Though it was not officially released until 2012, Ripple dates back to 2004, making it older than the popular Bitcoin. Created by Ryan Fugger, the goal was to create a decentralized monetary system that would empower communities to create their own money. Today, Ripple offers a fast, secure low-cost, and guaranteed real-time, global settlement network.
The digital asset part of Ripple is XRP, while Ripple itself refers to the entire blockchain system. XRP is the native currency of Ripple and can only be found on the Ripple system. Since the inception of Ripple, there were precisely 100 Billion XRP created, with no more to be created. Nevertheless, there is only a small amount available at any given moment. According to the XRP protocol, "XRP exists natively within the Ripple protocol as a counterparty-free currency, as Bitcoin does on the Blockchain. Because XRP is an asset, as opposed to a redeemable balance, it does not require that users trust any specific financial institution to trade or exchange it."
Ripple Will Change the Way You Send Money Across the Globe
According to the Mckinsey Global Payments Industry Study, in 2016 over 155 trillion dollars was sent across borders. Any consumer will tell you that sending money across seas can be pricey, slow, and even risky at times. The problems do not just stop at the consumer level. Banks deal with issues too. Even more so, problems like money laundering, thievery, and fraud are all major points of concern. Ripple aims to combat some of these issues.
In short, Ripple connects payment providers, banks, and any other asset exchanges via its RippleNet to provide "one frictionless experience to send money globally." The digital network has already been adopted by hedge funds, financial institutions, and banks. These companies believe that Ripple is far more secure than Bitcoin and other popular cryptocurrencies currently on the market.
XRP is where things really get exciting. The digital asset XRP is what is used for payments on the ripple network. The cryptocurrency allows for a reliable, on-demand way to source liquidity for cross-border payments without the use of nostro accounts. Even more so, XRP allows the users to easily access and send assets to new foreign markets at a lower foreign exchange cost. Compared to other cryptocurrencies, whereas they may take hours, XRP only takes approximately 4 seconds to settle a payment.
According to Ripple CEO Brad Garlinghouse, “The liquidity needs of banks today is managed with literally ten trillion of float that sits in these nostro and vostro accounts. We believe very strong this is an inefficient model. You can use digital assets to fund liquidity, and Ripple is uniquely positioned to capitalize on that. Bitcoin takes four hours to settle a transaction. XRP takes 3.6 seconds.”
Unlike Bitcoin or Altcoin, it does not require "mining". Rather the coins are pre-mined and are slowly released over time as the network is used.
The Rise of Ripple
Ripple's rise in popularity was triggered by the cryptocurrency events that occurred in 2017. After falling almost 20%, investors are more convinced that Bitcoin may not have lasting economic value. Looking for something more secure, investors have been searching for a cryptocurrency alternative.
Just over the past weekend Ripple has hit over 100bn in market value, moving its way far past the other crypto cash systems like Ethereum. At the time of writing, Ripple is floating around $2.67 after jumping more than a whopping 35,000% in about one year.
One of the biggest factors that have influenced this growth has been the adoption of Ripple by major companies. Japan's three largest credit card companies are adopting Ripple to handle payments and settlements. Before that, in October, Ripple had licensed its blockchain technology to over 100 banks eventually attracting American Express and Michael Arrington's 100 million cryptocurrency hedge fund to use Ripple's XRP.
Just like in the last 24 hours the Ripple cryptocurrency has created billionaires because of its rapid rise. As of January 1, the market cap of Ripple's XRP reached a massive $88.9 billion. The co-founder and former CEO Chris Larsen holds 5.19 billion XRP and a 17% stake in the company giving a net-worth approximately of 37.3 billion and making him the 15th richest American. The current CEO, Brad Garlinghouse's 6.3% stake in the company puts his net worth at at least $9.5 billion.
Ripple in 2018 - Expectations
Though Ripple is sure to grow even more in 2018, it might not grow as rapidly as Bitcoin. As stated above, there is always a very limited supply of Ripple's XRP. This limit could slow down exponential growth in the currency.
Though it is doubtful that the currency will be anything like bitcoin, the adoption of Ripple by major companies has signaled a changing of the guards in the cryptocurrency market. Who knows, maybe there are more cryptocurrencies that will move to the forefront of the market. As stated by Melanie Swan, "Cryptocurrencies are just one example of decentralized technologies. And now that the Internet is big enough and diverse enough, I think we will see different flavors of decentralized technologies and blockchains. I think decentralized networks will be the next huge wave in technology. The blockchain allows our smart devices to speak to each other better and faster.”
2018 is sure to be an interesting year for Ripple, blockchain technologies, as well as other cryptocurrencies.