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Ripple vs. Ethereum

Cryptocurrencies are on an upward trajectory, with awareness increasing steadily and some coins, like Bitcoin, now becoming a household word. When you look at market capitalization, Bitcoin is still the leader, making it difficult to avoid comparison with the crypto-juggernaut, but Ethereum and Ripple follow in total value with the second and third highest market caps. Not bad for cryptocurrencies that are much younger and trade for a fraction of Bitcoin’s price.

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What is Ripple?

Ripple is both a company and a cryptocurrency. Ripple the company, doing business as Ripple Labs, Inc., provides global payment solutions — a faster and less expensive way to transfer money anywhere in the world.

Ripple coin, which trades as XRP, is the cryptocurrency used with some of the company’s payment systems. The company describes XRP as 1,000 times faster and 1,000 times cheaper than a Bitcoin transaction.

Notably, XRP transactions are also much less expensive than traditional methods of transferring money and allow transfers to be completed in seconds as opposed to hours or even days for traditional bank transactions.

Ripple (the company) has formed partnerships with over a hundred banks to use its xCurrent payment settlement system, which settles cash transactions with nearly real-time efficiency. In early 2018, the company announced that MoneyGram, one of the world’s largest money transfer companies, will be using XRP in its payment flows.

Western Union will also be incorporating Ripple’s xRapid solution, which uses the XRP cryptocurrency to settle transactions.

What is Ethereum?

Ethereum finds its roots in Bitcoin. Bitcoin was born during the financial crisis of 2008 and sought to answer a need for a currency that didn’t require a bank. The network became the bank, with each node (computer server) holding the full ledger of Bitcoin transactions.

By decentralizing, no bank is required for sending money. Ethereum uses a blockchain structure, similar to Bitcoin and other cryptocurrencies — but then adds to its functionality by introducing the ability for the currency to be more than just a store of value or a way to transfer value. Ethereum can hold programs and “smart contracts” on its blockchain as well, providing applications that live on the blockchain or a set of rules for individual transactions.

Through its Swarm functionality, Ethereum can also hold information, distribute cloud storage where no single node can read your data and your storage isn’t reliant on a single storage provider.

Ethereum’s ability to expand its functionality in ways we haven’t yet imagined is part of what has made it so popular in such a short amount of time. It’s not just another alternative currency, and if adoption rates continue, it could prove to be a disruptive technology. Ether is the internal network currency for Ethereum, although the currency is often instead referred to as Ethereum, making the term Ethereum a broad term that might describe the network and technology or the currency.

Similarities between Ripple and Ethereum

Unless you want to explore the inner workings of blockchains, there are more differences between Ripple and Ethereum than there are meaningful similarities. The two currencies serve different goals, with Ripple aimed primarily at banks and large corporations that need to transfer money, whereas Ethereum is as much a platform for decentralized applications as it is a currency.

Both coins are in the top three cryptocurrencies in regard to market cap

Currently, Ethereum boasts a $60 billion market cap, while Ripple’s total market value is $26 billion. Both currencies have more than doubled their market cap in the past 12 months.

Smart contract support

Ripple Labs has its own open source project for smart contracts, called “Codius”, which aims to interact with any type of cryptocurrency. Ethereum supports smart contracts natively, while the Codius project from Ripple labs aims to add the ability to attach smart contracts to any cryptocurrency. 

Differences between Ripple and Ethereum

Ripple is centralized — at least for supply

The debate continues about whether Ripple is centralized or decentralized. In regard to supply, there is no debate. Ripple Labs created the entire Ripple supply and can flood the market with XRP, however unlikely that might be in the short term. Ripple supporters say such concerns shouldn’t worry investors. Validation of Ripple transactions, on the other hand, promises to be more decentralized than some other cryptocurrencies as time goes on due to the consolidation of the hashing power that validates blockchain transactions for Bitcoin, Ethereum, and others placing more control over those currencies in fewer hands.

Ethereum is decentralized

For now, it’s fair to call Ethereum a decentralized currency. No single authority controls the supply or transaction verifications. The system, however, falls short of a true democracy because as the difficulty of mining increases, it requires more resources and specialized hardware and hashing power is increasingly represented by fewer mining pools.

Ethereum can be mined

This makes Ethereum an expanding supply, currently based on “Proof of Work” (PoW), which requires miners to solve encrypted codes to add transactions to the blockchain. Ethereum is transitioning to a “Proof of Stake” (PoS) system that requires miners to own a qualifying amount of Ethereum to mine more Ethereum. With the change from PoW to PoS, mining difficulty will change as well, opening opportunities for mining to more people and wresting control away from the larger mining pools.

Ripple is a fixed supply — but Ripple Labs holds uncirculated Ripple in escrow

 A small amount of Ripple is destroyed with each transaction, making Ripple a shrinking supply — albeit by minuscule amounts relative to the overall supply, which includes the Ripple still held in escrow. One hundred billion Ripple coins exist, with about 38 billion of those in circulation.

Ethereum on Coinbase

Building a position in Ethereum is easy. Ethereum can be purchased with a credit or debit card as one of a handful of coins available on Coinbase and GDAX, Coinbase’s trading platform. Ripple is available through some smaller exchanges, some of which require Bitcoin or Ethereum to purchase Ripple. Purchasing Ripple isn’t quite as straightforward as purchasing Ethereum, but active cryptocurrency investors shouldn’t find any difficulty in navigating transactions.

Final thoughts

Both Ripple and Ethereum share enthusiastic markets, with investors propelling the value of the cryptocurrencies from relative obscurity into the top three of all cryptocurrencies. For ease and inconvenience of transactions, it’s hard to beat Ethereum and its easy access on exchanges such as Coinbase.

Ethereum is also available through many brokerage accounts  — albeit at a steep premium — using Grayscale’s Ethereum Classic Investment Trust (ETCG). Ripple remains attractive as well, having backed down from its exuberant highs and maintaining a comparatively stable price range of about $0.60 to $0.70 per coin in recent weeks.

No ETF for Ripple exists yet, but if the currency continues to show promise, it’s likely that XRP will find its way into an investment vehicle as well at some point.

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