If you’re reading this then you’ve probably already been introduced to Bitcoin. If not, I recommend reading my first article entitled: A Beginner’s Guide to Bitcoin. While Ripple is not directly related to Bitcoin, knowing what Bitcoin is and where it came from as well as how the blockchain works will help you understand Ripple and the problems it aims to solve.
What is Ripple?
Simply put, Ripple is both a digital currency and a real-time payment settlement network used to connect banks in order to execute cross border transactions. That’s a lot of fancy words to say that Ripple was created to enable instant bank transfers and settlements transactions on a global level. I’ll explain why this matters in a moment.
Like Bitcoin and Litecoin, the Ripple network was built using an open source protocol. This basically means that a community of developers actively contributed and collaborated to its development. Like Bitcoin and Litecoin, Ripple was also built using blockchain technology. This use of the blockchain makes Ripple decentralized as there are validators all over the world verifying transactions and permanently recording them on a public ledger.
Where did Ripple Come From?
Ripple was conceived by Jed McCaleb, an American programmer who also created the Mt. Gox exchange and founded Stellar, another cryptocurrency. Created in 2011, Ripple was released in 2012 with the purpose of enabling “secure, instantly and nearly free global financial transactions of any size with no chargebacks” which has caught the attention of major banks, who are its main adopters and who Ripple was primarily built for.
Why does Ripple matter?
When I worked in banking, I had a customer come in to request a wire be made to his sister who was studying in Spain. Because I worked for a smaller bank, the wire had to be remitted to Wells Fargo who acted as an intermediary before being sent to Santander Bank in Barcelona. The fees weren’t too bad. He spent $15; she probably was charged $10-$20 to receive it. The real problem was it took over a month for her to receive it!
Cross border transactions are not an easy task. Local, national, and international compliance can make this process slow and inefficient. Ripple aims to solve that by connecting banks around the world in order to execute cross border transactions quickly and more efficiently, potentially saving banks and their customers billions of dollars a year.
This combination of speed, savings, and global reach is why Ripple has gotten much attention with banks such as UBS in Switzerland and Santander in Spain have already began using the network for real time settlement. Banks and payment providers can use the digital asset XRP to further reduce their costs and access new markets.
If none of this exciting to you its because, as I mentioned above, Ripple was created primarily for enterprise use. Ripple is to business-to-business, whereas coins like Bitcoin and Litecoin are person-to-person (p2p). Having worked in banking, I can appreciate what Ripple is trying to achieve and can see how big it will be if they are successful. Most people, however, are mostly interested in it as an investment opportunity.
Should I invest in Ripple?
I’ve recently started forming an investment strategy where I start looking at coins based on the number of new people who have asked me about them. If I had one Ripple for every call, text, tweet, and DM I’ve gotten over the last two weeks about Ripple, I would have 1000 Ripples. In fact, that’s what motivated to write this article; there was no way I could keep up with the amount of people who were asking me about Ripple.
One thing you have to understand is some basic economics. The total supply of Bitcoin that will ever be produced is 21 million. The total supply of Ripple will be 100 billion. That’s over 4700x more! This is one of the factors that fuels the rising price of Bitcoin. The scarcity makes it more valuable. This is why Ripple is currently trading near $1. I’ve seen predictions of Ripple at $10, $20. DO YOU KNOW HOW MUCH BUYING VOLUME THAT WOULD TAKE?! That would take literally billions of dollars worth of purchasing.
With that being said, I do own a bag of Ripple. I bought it at around 25 cents. Since then rumors have begun circulating that Ripple will be added to Coinbase, which I believe is the primary factor that’s fueling the pump. With no official announcement from Coinbase, it’s still speculative. However, if this is true then I expect the price to skyrocket as people race to purchase it.
From a psychological perspective, I’ve noticed most new people would rather own a whole than fractions of another. For example, 100 Ripples in your wallet looks better than .00003 Bitcoin. This is the same reason kids will trade a $1 bill for 50 pennies because they mistake quantity for value.
Should you buy? I’m not qualified nor certified to give financial advice. In fact, this article is purely for educational purposes. My goal here is to help break down the fundamentals and assist you in considering all the factors at play. If you believe that Coinbase will add Ripple soon then there is the potential for the price to rise quickly. As always, the choice is up to you.
How do I buy Ripple?
This question is the main barrier to entry for new people. In other words, not knowing how to buy Ripple is what’s holding most people back. As far as I’m aware, currently there is no way to buy Ripple with dollars. This means that you’ll have to buy ripple on an exchange with another cryptocurrency, most likely Bitcoin. This process requires multiple steps:
- Make a Coinbase account and buy Bitcoin
- Make a Binance account (this is where you’ll buy Ripple)
- Rather than having to pay Coinbase’s outrageous fees to withdraw, send your Bitcoin to GDAX (an exchange owned by Coinbase) and send for free
- Withdraw your Bitcoin from GDAX and send it to Binance
- Purchase Ripple on Binance
At first this may seem intimidating but it’s not too complicated. This video will take you step by step through the process in more detail: [Video]
Another option is to use an instant exchange like ShapeShift. Without having to create an account, you send Bitcoin (or any other major cryptocurrency) to ShapeShift and they exchange it for Ripple. Here’s what it looks like:
I’ve used ShapeShift before; it’s a pretty convenient way to exchange one coin for another if you don’t want to use an exchange like Binance or Bittrex. You’ll need a Ripple wallet to receive your asset. I got the Toast Wallet from the App Store on my phone. You’ll need at least 20 Ripple in the wallet to activate it. I would still send Bitcoin from GDAX rather than directly from Coinbase. This video will walk you through the process in more detail: [Video].
Each cryptocurrency that is created is done so with a purpose in mind. Ripple was made primarily for banks and other enterprise uses. Investing in Ripple does not require you to be an expert or even care about who’s going to use it. However, my hope in writing this article was to create a comprehensive guide to Ripple and give people a basis to made an educated investment decision.
If you made it this far, I just wanted to personally say thanks for reading! If you had any additional questions or just wanted to say hi, you can comment below or reach me on twitter @ChrisAllenDunn or @BitcoinDunny.
Also, Coinbase, one of the largest Bitcoin exchanges, has a pretty cool referral program. If after reading you decide you want to move forward, use this link to sign up and we both get $10 worth of Bitcoin when you purchase.
Lastly, these articles, while short, do require a significant amount of time for research, writing, and proofreading on my part. If you find these articles useful, feel free to send at a tip of any amount at these address:
BTC: 1P8ZCe4vUBCzd4eVCvfXYtYJ9HP1gbe38f
LTC: LZYVDCGFRLmLWQokQxEG3EjpBbqF1uayxT
XRP: rGBmuAj79njWAet3kDVwQGFUk9zcL3YTA5
