Ripple Vs Ethereum | An In-Depth Comparison of Bitcoin’s Biggest Competitors
The cryptocurrency industry has become a war zone for new and old coins alike. Thus far, three have emerged as the leaders of the coin market: Bitcoin, Ethereum and Ripple. Bitcoin, of course, remains the undisputed king, but Ethereum and Ripple — coming in at number two and number three respectively — could someday be in position to call Bitcoin’s supremacy into question.
Aside from their shared competition for the crypto market cap and their use of blockchain technology, Ripple and Ethereum have very little in common. The two platforms have completely disparate goals: Ripple is a global, cross-currency payment system, while Ethereum is a software platform for decentralized applications and smart contracts. This, along with the platforms’ numerous other differences, will be explored in the following topics:
- Ripple and Ethereum Side by Side
- Ripple (XRP) Overview
- Ethereum (ETH) Overview
- Ripple: Technology and Future Developments
- Ethereum: Technology and Future Developments
- XRP and ETH: Price History
|Mining Algorithm||None||Ethash (PoW)|
|Blockchain Programming Language||C++||Go, C++, Rust, solidity|
|Avg Blocktime||3.5 sec||14.2 sec|
Ripple is a real-time gross payment system first-conceived in 2004 by Ryan Fugger and officially launched in 2012. Its goal is to eliminate the high transaction fees and processing delays of online payments by providing a frictionless experience when sending money globally with the power of blockchain technology.
According to Ripple’s chief cryptographer, David Schwartz, “Payment systems today are where email was in the early ’80s. Every provider built their own system for their customers, and if people used different systems, they couldn’t easily interact with each other. Ripple is designed to connect different payment systems together.”
Unlike other digital currencies, Ripple is intended to act as a complement to traditional financial institutions rather than as a direct competitor. This is accomplished by serving as a sort of bridge between otherwise separate institutions. Due to the many benefits of the blockchain (distributed ledger) technology powering Ripple, over 100 international financial institutions have adopted it as a payment method so far.
In the same way, Ripple’s own coin, XRP, isn’t designed to dominate other currencies but is instead used as an intermediary for transactions between various digital and fiat currencies.
Ripple, the company behind the Ripple protocol, was co-founded by CEO Chris Larsen and CTO Jed McCaleb in 2012 under the name OpenCoin. Larsen had previously co-founded and piloted the affairs of E-LOAN, an online financial company, while McCaleb had a strong background in digital currency, having been the creator of Mt. Gox (which he sold in 2011, before the infamous hack). The company rebranded to Ripple Labs in 2013 as the network was beginning to grow and eventually shortened the name to just Ripple. Since its inception, Ripple has seen investments from numerous venture capital groups and financial institutions, including the Bitcoin Opportunity Fund, Vast Ventures, Andreessen Horowitz, FF Angel IV, and Lightspeed Ventures Partners.
Ethereum is a blockchain platform that provides developers with tools to develop and deploy smart contracts and decentralized applications on Ethereum’s blockchain. Ethereum’s focus, therefore, is much broader than that of many other cryptocurrencies. Rather than focusing on a narrow range of specified functions, Ethereum offers potentially limitless applications to be built upon its blockchain — as long as there are developers to create them.
The Ethereum cryptocurrency is called Ether and it acts as fuel to power the Ethereum blockchain. Both developers and their users spend Ether to pay for transaction fees and other services on the Ethereum platform.
The project was conceived in 2013 by Vitalik Buterin and was publicly announced in 2014. The development of the Ethereum platform commenced that same year and it was launched in August 2015. Ethereum is developed by the Ethereum Foundation, a Swiss non-profit led by Buterin, Patrick Storchenegger and Jeffrey Wilcke.
Ripple is an open-source, distributed payment system that allows for instant payments with minimal fees, even between different digital currencies. Ripple facilitates these payments through the use of gateways, which are independent businesses that store customer deposits in fiat currencies like Euros (EUR) or U.S. dollars (USD) and exchange them for cryptographically signed issuances representing the same value on the Ripple XRP Ledger. Users can then use that issuance to make transactions on the Ripple platform. This protocol enables transactions between multiple currencies to occur without a central authority to monitor the exchange, and users can always withdraw their XRP balances from the gateway that originally created the issuance.
For those making cross-currency transactions, Ripple employs a pathfinding algorithm to obtain a set of currency swaps that offer the customer the lowest possible fee. Since the platform is open to everyone to act as a market maker, market forces work to push fees to a minimal level.
The XRP Ledger is maintained through the Ripple Protocol Consensus Algorithm, which differs from traditional proof-of-work systems used by many other cryptocurrencies. In Ripple’s case, all of the 100,000,000,000 XRP coins were pre-mined during the currency’s launch, which means that there are no miners at all. Instead, Ripple’s shared ledger is “managed by a network of independent validating servers that constantly compare their transaction records.” New transactions are added to the previously closed ledger when the network of nodes achieves a supermajority in consensus about the validity of transactions. If there is significant disagreement between the nodes, the consensus process will be attempted repeatedly until the supermajority is achieved.
Despite its potential, Ripple has also seen its fair share of controversy — most of which revolves around community concerns that Ripple is extremely centralized. For example, Ripple officially owns around 7 billion of the total 100 billion XRP coins (7%); however, Ripple also controls an escrow account containing approximately 55 billion XRP. The total amount of Ripple-owned XRP therefore is about 62 billion, which is significantly more than the current circulating supply owned by everyone else. Beyond this, Ripple has also been the primary validator for the XRP Ledger — another form of centralization. Ripple has always claimed to be “decentralized”, but many in the crypto community remain skeptical.
All controversies aside, Ripple shows no signs of slowing down. The company is in the midst of making numerous upgrades to the network aimed at improving speed, scalability, and efficiency. Further plans have been detailed in two recent white papers: the first describes plans to modify the algorithm which powers the platform, while the second highlights potential upgrades to the connectivity between different nodes. It is also believed that the technologies described in both white papers would enhance the total security of the platform, and hopefully, this would boost the number of its users.
At the heart of Ethereum is a piece of software known as the Ethereum Virtual Machine (EVM), which allows for the verification and execution of code on the Ethereum blockchain. This code is contained in what are called “smart contracts.”
Smart contracts are computer programs that automatically execute set actions when required conditions are met. Smart contracts can facilitate the transfer of money, property, shares, or any valuable content run on the EVM. For example, a smart contract might be set to store an amount of ether. Then, using the logic programmed into the contract, it could automatically transfer that ether to other accounts, as well as other smart contracts without any possibility of fraud, downtime, or any form of third party interference.
Ethereum also provides support for decentralized applications, known as dapps. Dapps can theoretically be very similar to traditional computer applications, but they reap numerous benefits by running on Ethereum’s decentralized blockchain, including increased security and reduced risk of downtime caused by server outages.
The Ethereum platform is maintained by a network of participating computers called nodes using a proof-of-work algorithm called Ethash. Nodes are run by miners which, as with other cryptocurrencies using proof-of-work algorithms, lend out their computer processing power to the network in exchange for ether. However, Ethereum is currently in the process of transitioning away from this proof-of-work system and toward a proof-of-stake system. This change is expected to bring about numerous benefits including a more distributed network of nodes.
This change to the mining algorithm is set to come, along with a whole suite of other changes, as a part of Ethereum’s current development stage, called Metropolis. Goals during this stage include:
- Introduction of Zk-SNARK (a privacy protocol for smart contracts and transactions)
- Proof of stake early implementation
- More flexible and robust smart contracts
- Account abstraction (aimed at making Ethereum more user-friendly)
- Sharding and Plasma (innovative solutions to improve scalability)
XRP and Ethereum have both exhibited steady growth over the past few years, but Ethereum has consistently had the larger market cap of the two. At this point, Ethereum’s market cap is about twice as large as Ripple’s, indicating that Ripple still has a ways to go before taking back that number two position.
The battle described at the beginning of this article is somewhat misleading. There’s a battle for market cap, sure, but in reality, Ripple and Ethereum are so different from one another that it’s a bit of a stretch to suggest that they are really in direct competition with one another.
Ripple aims to use blockchain technology to revolutionize the way we make payments online — allowing for faster, cheaper, more efficient transactions. Ethereum is using blockchain technology to revolutionize the structure of applications — allowing developers to access all of the advantages of the blockchain without having to build one themselves. Both platforms have earned their positions at the top of the market cap charts, and there’s likely enough room for both of them.
As for which coin is most likely to surpass Bitcoin for that number one position, we will just have to wait and see.