Ripple is an open-source payment protocol used by financial institutions — commercial banks and central banks — for financial transactions among themselves. These transactions include payments for buying and selling, or transfers from one currency to another. In brief and practical terms, it facilitates transactions between financial institutions in much the same way that the SMTP system operates email. The Ripple protocol performs a comparable function for banks. Within this system, there is also a digital currency called Ripple, also known as XRP.

The operation of this system is driven by two main parties. The first consists of recognized financial institutions with which dealings are accepted. These institutions serve the role of holding balances on behalf of the customer who initiates the transfer. The second consists of market makers, who are primarily responsible for providing the liquidity necessary for the transaction to be completed. The system contains 100 billion Ripple units. Each Ripple contains one million smaller units. Twenty billion of the total supply went to the laboratories that developed and created the Ripple protocol system, while the remaining eighty billion are distributed, with their price determined by the forces of supply and demand.

It is worth noting that many people turned to Bitcoin, attracted by its remarkable price increase and fascinated by stories of enormous profits achieved in very short periods, while overlooking an important point. When we compare Ripple, the virtual currency, with Bitcoin from the beginning of 2017 to its end, we find that Ripple investors achieved a higher profit margin than Bitcoin investors.

The list of digital currencies is long. In terms of percentage increase, Ripple ranked first, while Bitcoin came ninth on that list. In my view, the marginalization of Ripple is due to several factors, including the absence of a striking price surge in its unit value. In addition, its fixed available quantity of 100 billion plays a major role when compared with the approximately 16 million Bitcoin available at that time. Despite all this, Ripple recorded an increase of 35,000% during the year in question, while Bitcoin rose by only 1,300%.

The discussion above should not be understood as a recommendation to buy Ripple. The rise and fall of its price are not matters that can be predicted easily. As we explained in a previous article discussing Bitcoin, the fundamental analysis of virtual currencies depends on the legitimacy of those currencies, and that legitimacy is not established at the present time, because central banks will not accept prices being governed by a fixed currency that neither increases nor decreases with national output.

To achieve profit from trading these currencies, your technical analysis must be extremely strong, while taking into account the high risks associated with fundamental analysis, which may help you forecast prices before making a buy or sell decision. You may ask: how can I forecast effectively? This depends on your ability to complete technical and statistical analysis after gathering available data, reviewing previous observations, following news developments continuously, and dealing with a trusted and approved entity that enables you to trade them.

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