Both Ripple and Ethereum are two cryptocurrency initiatives with a lot going for it. They both have solid development teams with well-outlined visions, strong connections to incumbent businesses, enterprises, and, increasingly, the support and goodwill of players from both the financial industry and lawmakers.
The platform has been set for both these projects and their growth, and all that remains is they continue to execute their plans, and do their best to overcome their respective challenges and obstacles, of which there are many, despite the strength and ingenuity of the teams behind the growth of the projects.
Let us set aside Bitcoin, the progenitor of all modern cryptocurrencies, which I think we can all agree is well placed to survive long into the future (perhaps it will someday be replaced by something, but that is a discussion for another time.)
Our discussion today will be centered on Ripple and Ethereum, which arguably is as exciting as any discussion about Bitcoin. The former represent the future of the market, at least in terms of the diversity of use cases that are being imagined for cryptocurrencies, while Bitcoin is primarily a store of value and means of exchange - though responsible for establishing the market and inspiring many individuals and teams to take the idea and run with it (and how they have!)
Much media attention has been given to the market caps of both and how the two projects are trading ranks on cryptocurrency market platforms (this happened a few times last year as well), but there is little point in this. It gives the impression - at least to newbie investors - that these two are somehow competing with each other. The real question is, how do these two projects stack up as investment opportunities? Can both projects coexist and perhaps even benefit from each other’s existence? Should an investor examine both closely as the potential alpha projects in their respective domains?
Ethereum vs. Ripple AKA Apples and Oranges
Personally, comparing Ethereum and Ripple seems like a matter of comparing apples and oranges. They are both with their own purposes and use cases, and have fingers in different pies. Unlike, for example, Bitcoin and Bitcoin Cash, or Bitcoin and Nano (formerly known as RAI blocks), or Ripple and Stellar Lumens, or Ethereum and EOS - unlike all of these pairs, Ripple and Etheruem do not “compete” with each other, taking away each other’s market shares. They have very distinct purposes that are separate from each other’s ecosystems, for the most part.
Consider Ripple, which is a purely financial industry focused project that is working on connecting financial institutions and building “SWIFT 2.0”, as Ripple CEO Brad Garlinghouse might himself say (indeed, he spoke about it this way to like this eteran financial industry executives.) The most praised and purposeful reason for Ripple’s existence is its capacity to facilitate cross-border transfers for banks and financial institutions at a cost that is almost negligible, while also being conducted in a fraction of the time it would take for a non-blockchain based system. Several pilots have already shown these benefits in the field.
In concrete terms, this means that migrant workers would lose a lot less in fees when sending money back to their families back home and in a time that would be very beneficial for them. This is crypto’s benefits and initial vision in a nutshell: financially helping people who need it the most.
Ethereum, on the other hand, is envisioned as a global decentralized computer that can handle more complex operations that something like Bitcoin and Ripple. Smart contracts, which Ethereum pioneers, is a versatile tool whose applications and benefits are touted as changing several industries - practically any industry, in fact, as smart contracts effectively take over the roles of humans in certain processes, the end result of which is that the automation makes these processes more efficient, faster, fairer, cheaper and less prone to error. The significance of smart contracts cannot be underestimated.
What other differences do the projects have, besides their purposes?
Well, quite importantly, at least from a technical perspective, the fact that Ethereum is more decentralized than Ripple, and that the XRP token has been pre-mined, with the tokens being distributed by Ripple every now and then. The latter point has implications for how investors and users might perceive the token and, indeed, it has caused some friction in the community - even going so far as to spur some users to threaten a hard fork. In terms of performance, Ripple, at the moment, clearly outperforms Ethereum, taking some 3 - 5 seconds to process a transaction.
Ripple, as a permissioned blockchain, differs so greatly from Ethereum in terms of how its ecosystem develops and pans out, that it is worth mentioning in a little detail. Granted, many third party developers are working so strongly in both ecosystems. By how the ecosystem develops and pans out, I mean that Ripple’s prospects largely come down its much vaunted RippleNet, a group of over 200 financial institutions who have opted to implement Ripple’s technology in its various services. Ethereum, meanwhile, has the Ethereum Enterprise Alliance, an equally impressive consortium of various prominent companies.
Besides this, there are some technical differences in the two networks. Ethereum has no cap to its token supply, while Ripple has a total cap of 100 billion tokens, portions of which it periodically releases into the market. Ethereum works on a Proof-of-Work algorithm (soon to be Proof-of-Stake), while Ripple, as mentioned, has had its tokens pre-mined.
Should You Invest in XRP or ETH?
There’s a very simple answer to this question: yes, yes and yes.
They are both solid projects that are at the top of their respective games - and none of their competitors come close. Think of it like this: only the most ardent technology and cryptography enthusiasts gave Bitcoin any thought in its early days. The masses only arrived when they realized there was money to be had.
Not that there’s anything wrong with that - it is an investment vehicle, after all. The point here is that the true supporters of Bitcoin saw in it the potential for something really big, and their genuine support has paid off handsomely for them. Could this be the case for both Ripple and Ethereum, two efforts younger than Bitcoin and operating in more uncharted territory?
Whatever people might say, I believe there is no competition between the two i.e. if you are investing in XRP does not mean you think Ethereum is going down. They are separate initiatives that can coexist quite happily.
The point is clear, in my personal opinion: investing in both XRP and ETH is a good idea. They both have very different purposes; they are both being developed by strong teams, with an ecosystem of phenomenally hard working third party developers as well; they have established themselves within incumbent entities in several industries, forming large consortiums of prominent companies who are actively encouraging the development and growth of their respective networks; and, of course, while this could be argued, they are both are currently the best at what they do.