Peter Kent - Cryptocurrency All-in-One For Dummies

Transaction speed and fees: This area is where Ripple really starts to shine. Bitcoin’s transaction speed can sometimes go up to an hour depending on fees. And the fees can reach $40 depending on demand.Ripple’s transactions, on the other hand, can settle in as little as four seconds. Fee-wise, even when the demand was high in mid-2021, Ripple’s transaction fees averaged $0.003 — a fraction of that of Bitcoin. You can compare different cryptocurrencies’ historical transaction fees at https://bitinfocharts.com/comparison/transactionfees-btc-xrp.html .

Number of transactions per second: At any given second, you can make around four Bitcoin transactions. Enter Ripple and recent wonder-coin Solana, and raise the number to 1,500 and 29,000 respectively. Although some Bitcoin forks aim to resolve this issue, at the time of this writing, Ripple and Solana are well ahead of the game.

Coin amount limits: Bitcoin and other mineable cryptocurrencies have finite numbers of coins, which come into the market only through mining. But XRP is limited to the 100 billion coins in circulation now, largely to appeal to Ripple’s (the company’s) biggest clients, which are large financial institutions.

The following list gives you a summary of Ripple’s main features:

Ripple’s token symbol for investors is XRP.

Ripple’s XRP isn’t mineable. There are no miners whatsoever.

Coin creation and algorithm processing happen through consensus, not PoW.

Transaction time can be as little as four seconds.

Transactions can be made anonymously.

Ripple isn’t fully decentralized.

Energy cost per transaction is minor.

Because these unique features are so different from Bitcoin’s, some people believe Ripple’s XRP isn’t truly a cryptocurrency. Ripple is actually a strange hybrid of a fiat currency (the traditional form of currency backed by a local government, such as the U.S. dollar) and a traditional cryptocurrency. This is because generally speaking, Ripple specializes in serving financial institutions like American Express more than focusing on the spread of Ripple’s XRP among everyday users.

Cardano has been hovering around the top five-largest cryptocurrencies by market cap in 2021. As of September 2021, its market cap is around $67 billion, making it the fourth-largest cryptocurrency after Bitcoin, Ethereum, and Tether.

Ethereum co-founder Charles Hoskinson established Cardano in 2015, and successfully launched it in 2017. Hailed as a greener, environmentally friendly alternative to other computational-heavy coins, Cardano’s ADA coin has skyrocketed in popularity. Since its launch, an investment in Cardano has returned over 7,000 percent to its investors.

Fun fact: ADA, Cardano’s coin, is named after Countess Augusta “Ada” King, daughter of the poet Lord Byron. She worked on a theoretical computation engine in the 1840s, and is regarded by many to be the first computer programmer.

If you had invested $1,000 in Bitcoin on January 1, 2019, it would’ve grown 1,004 percent by the end of September 2021. But if you had invested $1,000 in Cardano, then it would’ve grown about 4,930 percent. Not too shabby.

Cardano and Bitcoin are both decentralized, they both act as a medium of exchange, and they both have bright futures as absolute trust in fiat currencies is on the decline. Cardano is very different than Bitcoin in a few notable ways, however. Cardano is built from the ground up to serve as a smart contract platform. It also doesn’t have the extreme computer processing requirements that Bitcoin miners face every day. Here’s a basic list of how Cardano and Bitcoin compare to each other:

Mining: One of the major differences between Cardano and Bitcoin has to do with mining. Mining Bitcoin is becoming more difficult and expensive as time goes by. To really make money mining Bitcoin, you need very powerful computers. Cardano, on the other hand, doesn’t require mining, and so there is no need for ultra-expensive, dedicated computer equipment and air-conditioned facilities. Bitcoin mining uses a proof-of-work protocol, meaning that your specialized computer hardware churns through a mind-boggling number of computations per second. Cardano’s system requires a fraction of the computing power, as you swap, in a manner of speaking, the heavy computational load of Bitcoin mining for the staking of your own Cardano ADA coins. Staking means that you make a certain amount of your ADA coins temporarily un-spendable until a Cardano transaction has been verified as complete. This somewhat over-generalized explanation is called proof of stake (PoS).

Total number of coins: Bitcoin has a finite number of 21 million coins. Cardano also has a finite, maximum supply of coins, totaling 45 billion.

Transaction speed and fees: On Bitcoin’s network, transaction confirmation time averages around ten minutes and sometimes much longer. For Cardano, the speed can be as short as the generation of one block in 20 seconds. Cardano’s transaction fee is also considerably lower than Bitcoin’s, averaging less than $0.30 in mid-2021.

Cardano’s main traits include the following:

Cardano’s token symbol for investors is ADA.

Cardano is not mineable.

It uses a proof-of-stake (PoS) protocol rather than proof of work (PoW).

Transaction time for a new block is around 20 seconds.

Transactions can sometimes be made anonymously using certain exchanges.

Cardano is decentralized.

Cardano’s energy cost per transaction is a fraction of Bitcoin’s.

Although team Bitcoin and team Cardano argue their respective cryptocurrencies are the best, each cryptocurrency has their own unique advantages and drawbacks. The best way to go about your investment strategy may be to diversify your assets not only between these options but also among the other categories of cryptocurrencies in this chapter. Find out more about diversification in Book 5, Chapter 5.

The preceding sections introduce some of the most well-known cryptocurrencies that also have some of the largest market capitalization on average. But being famous doesn’t necessarily mean they’re better. In fact, many analysts and investors believe some of these celebrity cryptocurrencies may vanish within ten years (see Book 5, Chapter 2for more). Also, having a bigger market cap doesn’t necessarily mean having a brighter future. Their current popularity may just be the proverbial 15 minutes of fame, and they may therefore have lower growth opportunity compared to those that are less known.

Chances are that if anything should happen to a core cryptocurrency, a hard fork may come along that saves it. As explained in Chapter 2of this minibook, if you’ve already invested in a cryptocurrency when it forks, you get the same number of new coins anyway. That’s why I’ve recommended to my Premium Investing Group members to start their cryptocurrency portfolio by first diversifying among the top ten largest ones by market cap and then get into other, different categories. You can stay up to date with my most recent cryptocurrency investing strategies at https://learn.investdiva.com/join-group .