November 10, 2024

XRP Advantages and Disadvantages

Ripple Advantages

  • Fast settlement. Transaction confirmations are incredibly fast. They generally take four to five seconds, compared with the days it may take banks to complete a wire transfer or the minutes or potentially hours it takes for Bitcoin transactions to be verified.
  • Very low fees. The cost to complete a transaction on the Ripple network is just 0.00001 XRP, a small fraction of a penny at current rates.
  • Versatile exchange network. The Ripple network not only processes transactions using XRP. But it can also be used for other fiat currencies and cryptocurrencies.
  • Used by large financial institutions. Large enterprises can also use Ripple as a transaction platform. IndusInd Bank, Santander and Bank of America are a few using this network, demonstrating it already has larger institutional market adoption than most cryptocurrencies.

Ripple Disadvantages

  • Somewhat centralized. One of the reasons that cryptocurrencies became popular is that they were decentralized, taking control away from large banks and governments. The Ripple system can be somewhat centralized because of its default list of validators, which goes against this philosophy.
  • Large pre-mined XRP supply. Though most of the Ripple supply not held in circulation is stored in escrow, it’s possible large quantities may get introduced at inopportune times, which could impact XRP’s value.
  • SEC action against XRP. In December 2020, the SEC filed a lawsuit against Ripple, saying that since it can decide when to release XRP, the company should have registered it as a security. The company has denied the allegation.