Most bitcoin naysayers come from the world of traditional finance – banks, venture capital, and so on. Ripple CEO Brad Garlinghouse has now joined them with the claim that bitcoin is like Napster, a necessary and transformative failure. Naturally, he thinks his company’s XRP coin is superior, but is he right, or is he just pumping his own cryptocurrency?
Brad Garlinghouse, Ripple CEO. Image from Coinstaker.com
The Failure of Napster
When Napster was created, it was not initially intended to be a business. Instead, it was a tool that would eventually give birth to the various peer-to-peer and filesharing networks that are omnipresent today. For those that don’t remember or were too young to experience it, Napster was a piece of software that allowed anyone to share and download MP3 files, regardless of copyright. This allowed for the instant and free distribution of copyrighted music to anyone and everyone in the world in a largely anonymous way.
Napster as it looked in 2001, Image from Archive.org
Napster did not operate forever, however, and was eventually shut down due to pressure from the music industry. The legacy of Napster still lives on as consumer’s relations with the music industry have shifted significantly, and the expectation of needing to buy a $20 CD in order to get music are now effectively gone forever.
For a brief time Napster was brought back as a legally compliant paid music service, but it died quickly.
This is what Ripple CEO Garlinghouse thinks of bitcoin. That while the technology is essential and transformative, it will eventually die due to failing to be “engaged with regulators to solve a real problem”
Ripple’s XRP Superior to Bitcoin?
According to Garlinghouse, Ripple’s XRP is not only superior to bitcoin due to its supposed compliance with regulators (despite being sued for securities fraud earlier this year), but that it is also somehow financially or technologically superior. Garlinghouse cites the classic example of buying coffee with bitcoin. According to him, bitcoin transactions take 20 minutes to complete, and the transaction fee would double the cost of buying coffee.
Clearly, Garlinghouse is not familiar with SegWit and Lightning Network. Both of these technologies allow for significantly cheaper and faster bitcoin transactions. Additionally, while a bitcoin transaction could take several minutes to confirm, that does not mean it takes 20 minutes to appear on the blockchain and be a reliable indicator of funds sent.
I would sell someone a cup of coffee on zero confirmations. Probably more. One confirmation. I would sell someone a flat screen TV. Two confirmations. Maybe a fancy flat screen TV or a cheap car. Three confirmations a really nice car. Four conformations a fighter jet. Five confirmations an aircraft carrier.
In other words, stores could very reasonably sell someone a cup of coffee at zero confirmations. That means just a few seconds is all that’s needed, not “20 minutes”.
Things get even more impressive when Lightning Network is involved. Specifically when using the technology, transactions complete in just a few seconds and cost less than a penny.
XRP Still Lacking Real Use Case
Let’s compare the usefulness of Ripple’s XRP coin compared to bitcoin.
Today, bitcoin can be used directly to make myriad of different sorts of purchases. Bitcoin can even be used to directly purchase gold and silver. Bitcoin is by far the most commonly accepted cryptocurrency around the world, and also the most available in terms of exchange support, online purchase with fiat currency, and with the sheer number of compatible ATM devices worldwide.
Ripple, Worth the Hype ?
Now let’s look at Ripple. Its XRP coin which was primarily created to facilitate bank-to-bank payments has so far never been used by a single bank, ever. The number of stores or businesses that accept Ripple as a payment is trivial compared to bitcoin, and the same can be said for the number of exchanges like Coinbase that would sell it directly for fiat currency. Further, only a small handful of ATM devices sell Ripple directly.
Just in terms of adoption, bitcoin is light-years ahead of Ripple. Further, the primary goal of Ripple’s XRP coin, to be used by banks, has still never happened and no bank has announced even a tiny degree of intent or interest to use XRP for anything whatsoever. Ripple has only managed to sell other technologies they have created and that are unrelated to cryptocurrency. Back in January the company said they were doing a trial with MoneyGram (not a bank) but the public has yet to hear whether or not this led to a real world partnership.
He Who Controls the Coin
Another significant point to mention about Ripple and its XRP coin is that it is completely dominated by the Ripple company itself. Ripple the company and its employees and advisers are sitting on billions of XRP coins. Ripple is a centralized company, with a centralized network, and a largely centralized blockchain.
Compare this to bitcoin. No individual company controls bitcoin or its issuance. It’s network is much more decentralized than Ripple’s, and bitcoin transactions are mined and processed all over the globe. Because of the wide support of miners, bitcoin is also arguably the most secure cryptocurrency on earth.
The most important point here is that while there are billions of XRP coins locked up and waiting to flood the market, bitcoin is under no such artificial controls or restrictions. One of the main points of cryptocurrency is that there should be no central authority manipulating the supply. With Ripple and its XRP coins, there is a central authority, and they have almost unlimited power in terms of their potential for manipulating the supply of bitcoin on the market.
Where lies the truth?
Ripple and its XRP coin may appear to be very promising to a number of investors. However, we must remember that XRP coins simply aren’t being used for much of anything besides investor speculation. Bitcoin, on the other hand, is already out there every day processing real-world transactions and payments. The technology still has a long way to go in order to continue scaling, but this is happening with each passing day. The XRP coin, on the other hand, is the Ripple corporations attempt to put a suit and tie on cryptocurrency. But so far, no major bank seems interested.
And so, when Ripple CEO Garlinghouse says that Ripple is in every way superior, we would ask that he not just make wild claims, but instead prove them.