Although Ripple shares some similar characteristics with Bitcoin, it is a vastly different project. As a cryptocurrency, it uses cryptography to secure transactions, but it doesn’t actually have a public blockchain.
Instead, it has a network of nodes that validate transactions, but these are not necessarily anonymous P2P nodes, they are participating banks and financial institutions. Ripple’s coins, known simply as Ripple or XRP, were not mined into existence, they were simply issued.
And unlike Bitcoin which exists by virtue of a distributed network of participants, Ripple is not only the name of the coin, it is also the name of the company that developed the protocol. Unlike Bitcoin’s pseudonymous founder, Satoshi Nakamoto, the Ripple founders developed Ripple in the open, with Ripple even applying for and being awarded a New York BitLicense to operate.
So from the get-go, we see that this is an apples and oranges comparison.
So, What Exactly is Ripple?
Ripple is considered a bit of an oddity among cryptocurrencies because it doesn’t have its own public blockchain. Internally, the XRP Ledger network runs on an internal blockchain which they call an “Enterprise blockchain” ledger, it doesn’t use proof-of-work and little else is known about it.
Ripple was originally designed as an asset transfer system, for the purpose of sending instant and secure transactions across network participants. The idea was that anything digital of value could be transacted, including fiat, cryptocurrencies, commodities, even loyalty points and mobile credits. The native Ripple cryptocurrency token was added at a later stage of development and can be used for settling trades on the network.
Ripple certainly doesn’t share the cypherpunk roots of Bitcoin and other cryptocurrencies, but by this very virtue it was instantly more appealable to banks, financial intermediaries and institutional investors seeking digital payments solutions.
Ripple received angel funding to develop its protocol. Early round investors include finance industry giants such as Andreessen Horowitz, Pantera Capital, Google Ventures, IDG Capital Partners and Santander InnoVentures.
Not being a typical blockchain and being managed by a company, it doesn’t really make sense to compare Ripple with Bitcoin, feature for feature. Ripple being centrally controlled, and with Bitcoin being a decentralized blockchain, there is not much of a point pitting them as rivals. If anything, similar to other networks like Counterparty and Omni, Ripple can be looked at as it’s own independent platform which may even complement the Bitcoin and other cryptocurrency networks. For instance, you can store, send and receive other currencies on the Ripple network. These balances are held in accounts, unlike XRP which is the native currency with no counterparty risk.
The Ripple project actually pre-dates the Bitcoin blockchain, and their mission from the beginning was not to offer an alternative to the world’s financial system, but rather to upgrade it and bring it out of the dark ages.