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Ripple, Bitcoin and Ethereum: Each to Their Own

 6 min read / 

With lightning quick transaction times (1,500 transactions per second) and low transaction costs, ripple aims to be “one frictionless experience… sending money globally using the power of blockchain,” states Ripple CTO Stefan Thomas, adding that, “financial institutions can process their customers’ payments anywhere in the world, instantly, reliably and cost-effectively using just one API.” Being increasingly adopted by banks (including UBS and Santander), ripple’s latest expansion in Asia, including an office in leading FinTech market, Singapore, shows promise that ripple’s value could enhance its claim to take on other cryptocurrencies, including bitcoin.

Both bitcoin and ether have dominated headlines throughout 2017, being seen increasingly as indicators of the health of the market. Up and coming ripple finds itself fulfilling a niche market, backed by banks, providing lightning-fast transactions. With bitcoin being seen as the ‘gold’ of the currency market, and ethereum as the developer hub, ripple is the facilitator of better transactions in its own individual niche.

Versus Bitcoin

Bitcoin is the household name that has become the posterchild of the crypto world to observers. Being crypto mining in its purest form, it has global reach and currently holds the largest market share. Using blocks to hold data in a distributed ledger format, bitcoin’s blockchain presents a secure, decentralised method to facilitate transactions.

Having undergone a hard fork, August 1st, 2017, splitting the currency in two, with Bitcoin Cash emerging, the fork displays the prowess of bitcoin, its ability to adapt to change and evolve to continue its decentralised currency platform will enable it to continue existing in adversity. The fork did not tarnish bitcoin’s $44.4bn market cap at the time of the fork, making it larger than ethereum (ether), ripple, litecoin, dash and every other cryptocurrency combined.

A third currency could split the user base even further, calling into question which is the ‘true’ iteration of bitcoin. Independent stock research analyst and founder of Standpoint Research Ronnie Moas foresees bitcoin surging to $5,000 by 2018, as cryptocurrencies continue to diversify and present a greater range of applications. This can also be attributed to investors and developers seeking refuge in a strong and sustainable, standardised currency. Resultantly, investors will continue to remain with bitcoin until other platforms prove themselves superior.

In this light, whilst there is clearly a speculative element to investing, this results in bitcoin being a safer investment than other currencies, lower down the food chain. Until another currency can break the circle, bitcoin is under no threat. This is also building upon the major influence that bitcoin exerts in the crypto sphere, particularly as more regulators more to secure up laws surrounding the exchange of an investment in cryptocurrencies.

The Devil Is in the Detail

Ripple is considerably different from bitcoin because ripple is not simply another currency, rather it is essentially a global settlement network for other currencies, including dollars, bitcoin, euro and pounds and even extending to other tradable values, including frequent flyer miles. Facilitating this transaction network requires users to pay a small fee in XRP, ripple’s native token.

Whilst ripple runs similarly to bitcoin, the purpose of ripple is different – “to serve as the middleman for all global FX transactions.” Should ripple succeed in fulfilling its niche and conquering that market, the potential is high.

Ripple’s advantage over bitcoin is the settlement speed. The consensus mechanism deployed by the Ripple Consensus ledger opens and settles transactions in four seconds, assuming the use of XRP assets. Rather than being another crypto asset that investors could hold in their portfolio, it is a specialised tool seeking to disrupt financial technology.

Ripple’s underlying technology also provides an advantage: banks want to utilise the transaction speeds and security. The perfect illustration of ripple’s innate advantage is working with Chinese banks to implement the technology at a time when bitcoin and ICOs are under attack. Ripple is safe and even promoted by Chinese crypto-efforts. Building upon a strong, existing presence in Asia, utilising Chinese banking partnerships to launch new iterations of products alongside helping increase China’s technological and financial literacy, ripple will rise in popularity as bitcoin and other ICOs are left at the mercy of Beijing.

Versus Ethereum

Despite being the more established cyptocurrency, bitcoin should be thought of as primarily an investment vehicle, whereas ripple and ethereum, whilst also being traded on the same market, have emerged as the early leaders in enabling business arrangements.

Ethereum’s strong leadership, combined with a deep sense of community and a rich ecosystem of developers and investors, provide it with functional governance and a diversified range of applications. Predicated on being much more than a currency, the digital platform utilises a blockchain that is oriented around facilitating other applications, essentially a programming language if you will. The central innovation, Ethereum Virtual Machine (EVM) makes this possible, enabling the use of smart contracts as well as a currency exchange. These ‘dapps’ (decentralised applications) enable ethereum to be more versatile than bitcoin, with ether (the coin) being used to pay for services, fees or as a currency itself. As a result, ether is the fuel in the ecosystem, behaving differently than other coins. To use the EVM, one needs have ether.

Depth vs Width

Due to its applications, ethereum has more avenues for growth: as more developers use the EVM, the more the currency will be worth and the more services that can be offered, meaning it could become self-contained. Much more than simply a currency, the ethereum ecosystem is home to a whole host of different ‘dapps’ and other coins.

In regard to ICOs: launching ICOs remains ethereum’s largest use case and the largest proponent of the success of the utility coin. Since 2016, more than $1.6bn worth of investment has been driven by ethereum. Its biggest strength is, therefore, its greatest weakness; any negative regulation targeting ICOs is likely to directly impact ethereum’s value, in turn affecting those coins tied to the ethereum ecosystem.

Ripple has exciting advantages for banking and international transactions, whereas ethereum is a key player in developing newer cryptocurrency technologies. These ‘dapps’ provide a range of functions, as compared to ripple’s single, yet disruptive, application. In this manner, ripple and ethereum occupy different roles, as compared to each other, which is clearer with bitcoin as the backdrop. Ethereum has its own Minecraft (Etheria), its own Twitter (EtherTweet) and its own high-speed transaction network (Raiden Network).

Conclusion

Ripple has been the recipient of increasing support and it is easy to see why – rather than being another coin to add to the portfolio, the underlying technology has disruptive capacities in the financial world. Potentially immune to the ICO regulatory uncertainty and seemingly unfazed by crackdowns in South Korea and beyond, ripple has a strong foothold within its own niche. Should it retain that power, the future could be bright, particularly if China incorporates such technology with its own plans for a sovereign cryptocurrency.

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