In the cryptocurrencies market today, there are several cryptocurrencies, some of which failed, and some successful. As such, it is important to ask questions before investing your hard-earned money in any cryptocurrency.
Ripple, for example, is a peachy investment, but like all investments, it comes with its fair share of risks. In this article, you’d get to learn more about the concept of the Ripple network. We’d also talk about the pros and cons of investing in Ripple which will help you know whether it is worth investing in or not.
What is Ripple?
Ripple is amazing technology because it is more than a cryptocurrency, it can also function as a digital payment network. As such, the Ripple token has an advantage over other cryptocurrencies because it is every bank and financial institution friendly because it is very similar to the SWIFT system. Also, like Bitcoin, the Ripple token is based on the blockchain network with its cryptocurrency, XRP.
However, unlike Bitcoin which uses blockchain mining to confirm its transaction, Ripple uses a consensus mechanism. Overall, the Ripple token has several functions and uses, hence it is very valuable and ranks as one of the top six digital tokens on the blockchain network by market capitalization.
Pros of investing in Ripple?
No doubt, every cryptocurrency has potential. But does Ripple have potentials that make it investment-worthy? Well, it does, and here’s a quick look at why it is a good investment.
● Partnership and investors
When researching cryptocurrencies, it’s very important to also look into information like founders, major partners, and investors. Ripple has the backings of financial institutions such as MoneyGram, American Express, amongst others just to mention a few. As such, this is a good sign that Ripple is a good investment because banks use it.
While Ripple can be purchased for a couple of bucks right now, it has serious potential to grow. When you come to think of it, Ripple’s revenue grew by over 28,000% in 2020. With such a huge turnover in one year, even if the growth may be low this year, its potential is quite pronounced.
● Low transaction fees
A very common issue with most cryptocurrencies out there is high transaction fees. But Ripple’s transaction fees are insanely low. This reason alone makes Ripple token a very competitive money transfer technology.
● Market cap
Market capitalization is another important aspect of cryptocurrencies investors should look into before investing in it. And Ripple has a seriously large market capitalization, placing it as the world’s fourth-biggest crypto. Note that the larger a crypto market capitalization, the more it will be resistant to volatile market dips and cycles.
● Doesn’t use proof-of-work (PoW)
Unlike the popular crypto Bitcoin that uses Proof-of-Work, Ripple makes use of consensus ledgers to confirm its transaction. While PoW comes with its advantages, its demands make it difficult to perform transactions. But consensus ledger technology of Ripple spends less time handling designs and processors which translates into faster transaction time.
Cons of investing in Ripple?
As we said earlier, every investment comes with risk, especially cryptocurrency investment. Below we highlighted some of the risks of investing in Ripple.
● XRP is not truly decentralized
XRP is not truly decentralized, nor is it centralized. The majority of XRP is handled by Ripple. Nevertheless, Ripple cannot simply rewrite the ledger records. This is because the majority of the XRP ledger validators are not in the hands of Ripple, but managed by an organization. Hence, this leaves some aspects of XRP not managed at all, or managed well.
● Ripple owns a large share of XRP
Another danger of investing in XRP is because the majority (about one-third) of XRP is owned by Ripple CEO and other board members. It quite risks having so much XRP in a few hands because it could lead to an over-inflation of the price of the token.
● All Ripple coins have already been pre-mined
Unlike other cryptos that are limitless e.g., Ethereum or still being mined e.g., Bitcoin, Ripple is different. This is because all Ripple coins have already been pre-mined. This means that the supply of Ripple is very limited, which could push the demand high in the future, leading to insanely high prices and profit for early investors.
To sum things up, note that if you are comfortable with the cons of investing in Ripple, then it is a great investment deal for you. The fact that it supports bank transfer technology makes it such a valuable coin. And with a limited supply, XRP has a very high potential to produce a high turnover of investment in the nearest future.