By most measurable standards, 2017 was the year of the cryptocurrency, with a total market capitalization increase of over 1,600% — and many believe this is just the beginning.
Ripple, which trades as XRP, has the third highest market cap amongst all the cryptocurrencies. Currently, Ripple coins in circulation amount to over $39 billion.
Cryptocurrency Mining
Most cryptocurrencies come into existence in one of two ways: an initial coin offering (ICO) jump starts the supply or the currency is mined into existence.Cryptocurrency mining uses computer processing power and special mining software to decode encrypted hashes.
You can think of hashes as pieces of a puzzle. These hashes are part of a block that verifies transactions for a given cryptocurrency. Once enough hashes are decrypted, the block is recorded to the blockchain and a reward is awarded to the miner in the form of cryptocurrency. For most coins, the difficulty level increases as more coins are brought into circulation, requiring more processing power for each new coin to be mined into existence.
For some newer coins and some coins that use decryption algorithms designed to maintain an even playing field for miners such as Monero, a standard dual core or quad core processor can be used to mine the cryptocurrency, although mining as part of a pool is usually more effective than solo mining and mining on lower spec hardware is likely to burn more electricity costs than it earns in cryptocurrency production.
Other coins, such as Ethereum, are commonly mined using graphics processing unit cards (or banks of GPU cards) as opposed to computer processing units (CPUs.) Bitcoin, while technically possible to mine with a GPU, is ultra-competitive and has become the territory of specialized hardware known as ASICs. The advanced hardware requirements needed to mine Bitcoin have centralized mining efforts, making China the largest producer of Bitcoin in the world – at least for now.
What is Ripple?
Ripple was conceived as the currency for a centralized payment system, which is both its allure and a common reason why some in the cryptocurrency community don’t believe Ripple is an equivalent to other cryptocurrencies, particularly because of its centralization and corporate control. Ripple is focused on fast and inexpensive bank-to-bank transactions, while also providing business-to-business transfers and peer-to peer-transfers.
A Ripple transfer can take place in seconds, compared to minutes for an Ethereum transfer, hours for a Bitcoin transfer, and often three to five days for a traditional bank transfer of standard currencies. An average Ripple transfer costs less than half a cent, among the lowest of all cryptocurrencies and possibly thousands of times lower than the costs for a traditional bank transfer.
Why XRP can't be mined
A handful of cryptocurrencies can’t be mined in the traditional sense. This group includes Ripple. At the outset, 100 billion Ripple coins launched the currency. Ripple Labs, formerly OpenCoin, still holds about 60% of the currency in ledger escrows.
Ripple management can release up to one billion coins per month, but the expected release rate is much less than the one-billion-coin upper limit, with the unused balance being rolled over into a new escrow which will not be released until the first month in which no escrow is scheduled for release. That sounds complicated, but all it means is that the supply of Ripple isn’t likely to open suddenly, flooding the market and crashing prices. Instead, an orderly increase in supply is expected.
Ripple's role in the cryptocurrency hierarchy
Each cryptocurrency has a reason for its existence. In some cases, the currency exists as an alternative to established fiat currencies, with decentralization and a value determined by an active market being key draws. Privacy is a goal of some currencies, such as Monero, Zcash, and Dash. Ripple is instead focused on being a fast and cost-effective way to transfer money. In January, Ripple announced in a tweet that three of the top five money transfer companies worldwide would be using XRP in payment flows in 2018, with more expected in the pipeline.
Much of the excitement over Ripple focuses on the news that over 100 banks and companies have signed up to use the company's xCurrent system to transfer money. However, the xCurrent system does not use Ripple tokens (XRP). Ripple tokens are used with the company's xRapid transfer system, a system with a fledgling user base.
Ripple market value and market cap
The value of Ripple currency rocketed from .006 (a fraction of a penny per coin), close to its trading range since 2013, to an all-time high of $3.84 per coin on Jan. 4, 2018. Ripple is trading at $0.32 and has a market cap of 15 billion. Prior to its massive run-up in late 2017, XRP was the coin that crypto traders loved to poke fun at because its price barely moved relative to other coin values.
Supply stats
Ripple's supply is roughly 38 billion coins, looking only at the number of tokens in current circulation. In total, the supply is 100 billion coins, with the Ripple company able to release up to 1 billion additional coins per month as needed. Historically, most of these reserve coins have been held in escrow, with the unused coins rolling over into a new escrow to be released at a later date.
Other ways to profit
Ripple's massive price run-up has attracted both investors and speculators, bringing a new volatility to XRP with opportunities for both short term trades and long-term investing. Ripple isn’t available on the Coinbase exchange or the GDAX trading platform, but a number of other exchanges provide trading opportunities for XRP, including Binance and other well-known exchanges.
Gatehub also serves as the “official” online wallet for XRP, offering both a wallet service from which you can send and receive money as well as Gatehub’s trading feature, allowing users to trade in popular coins such as Bitcoin and Ethereum and to trade against fiat currencies. The Gatehub wallet can be funded with U.S. dollars, which can then be used to purchase Ripple or other digital currencies.
Alternative coins
Ripple can't be mined, and Bitcoin has become an industrially mined currency, placing the hardware and power requirements out of reach for most people. Ethereum, Litecoin, Monero, and Dash remain popular among altcoin miners. Mining success rates and profitability depend on a number of factors, including hardware and the availability of pools that coordinate mining efforts. Many miners choose to focus on the altcoins with higher market caps, with the hope these currencies have more staying power. Cryptocurrencies, particularly newer currencies, have a way of disappearing into obscurity.
Final thoughts
Ripple holds a unique place in the cryptocurrency market, promising acceptance in mainstream financial transactions for banks, corporations, and even individuals, although the focus is on larger institutions. The long-term value of the currency itself, XRP, will be largely dependent upon the level of acceptance Ripple achieves in becoming an alternative or even a preferred way to transfer money around the world.
While Ripple can’t be mined, there are plenty of trading opportunities for either short term trades, taking advantage of XRP’s newly discovered volatility, or for long-term trades for the true believers who wish to build a position in a limited-issue currency that could become the backbone of many financial transactions in the future.
Frequently Asked Questions
Why is XRP so cheap?
One of the biggest reasons that XRP is so cheap is because the security and Exchange Commission (SEC) has been trying to sue ripple over an illegal security offering.