Ethereum VS Ripple

Curious to know the difference between Ethereum VS Ripple? Want to have in-depth knowledge of Ripple and Ethereum? You have landed in the right place. Both Ethereum and Ripple are among the most promising projects in the cryptocurrency space today and their prices will surely rise over 2024, which makes for a reasonable argument to have them in your portfolio.

In this guide, Ethereum vs. Ripple: which one should be in your portfolio, we are going to distinguish between these two coins.

Ethereum VS. Ripple — A Comparison Guide

We’re all familiar with Bitcoin — the ‘king of cryptocurrency’ which introduced us to the world of digital assets back in 2009. But what are the most important and traded cryptocurrencies other than Bitcoin? 

Ask this to a crypto investor and you’ll probably get this reply: Ethereum and Ripple. It’s no secret that these altcoins are some of the biggest names in the business. However, a quick Google search might raise as many questions as it answers. 

What is Ethereum? What is Ripple? And most importantly, which one should be in your portfolio? 

If you’re feeling confused trying to work out ‘Ethereum VS. Ripple — which one should be in your portfolio?’, keep reading. We’ve put together a complete comparison guide so you can choose the best investment for you. 

What Is Ethereum? 

Let’s start with the basics. The most important thing to understand about Ethereum is that it’s not simply a cryptocurrency. Ethereum is also the name of its blockchain technology platform, which enables users to carry out secure, decentralized crypto transactions via smart contracts. This open source blockchain is known as a decentralized application, otherwise known as a dApp

Ethereum

A smart contract is an automatic contract in which the terms of the agreement (or transaction) are encoded. It’s 100% secure and allows people to carry out online transactions without going through a third party, such as a bank or other financial body. 

Ethereum’s native currency is called Ether (ETH). If you’ve ever wondered ‘what is Ethereum mining?’, Ether holds the key to the answer. Ethereum mining is simply the process of mining new Ether, which is generated as a reward when miners verify transactions through the blockchain. 

First launched through an ICO (initial coin offering) in 2014, Ethereum has quickly become the world’s second largest cryptocurrency behind Bitcoin. Its market cap is currently $38,366,232,947 — but like many cryptos, it’s notoriously volatile and can undergo multiple percentage swings throughout the day. 

What Is Ripple? 

Like Ethereum, one of the key points to know about Ripple is that it’s not just a cryptocurrency. Ripple is commonly used as a catch-all term to describe both its platform (a payment network which is actually called RippleNet) and its virtual currency (called Ripple XRP). This means if you’ve ever searched for Ripple on crypto exchanges, you may have stumbled across it without even knowing! 

Ripple XRP
How to invest in Ripple XRP

RippleNet was designed to make it simple for banks and other big businesses to send real-time global payments. Carrying out these transactions can be incredibly expensive due to exchange rates and processing fees — not to mention slow! 

By using Ripple XRP as a universal currency, RippleNet enables these businesses to make cross-border payments without having to worry about changing exchange rates. 

Ethereum VS Ripple: How Do They Compare? 

So, you now know the basics of Ethereum and Ripple. Because both cryptos are a payment platform as well as a native currency, there’s no denying the two share similarities. But if you’re still struggling to decide ‘Ethereum VS. Ripple which is better?’, it’s time to delve into the key differences between the two cryptos. 

Speed

We’ve already mentioned that Ripple was designed to eliminate the slow transaction time between global companies. It’s no surprise, then, to hear that Ripple payments are staggeringly fast — in fact, the network is able to process more than 10,000 different transactions in a single second. That’s 1,000 times faster (and also 1,000 cheaper) than a Bitcoin transaction. 

Ethereum is currently a lot slower than Ripple — almost 670 times slower, to be precise! Ethereum can only process around 15 transactions every second. This might not sound like a long time to wait for your funds, particularly if you’re used to waiting days for fiat transactions to show up in your bank account. But those extra seconds mean that Ethereum exchange rates are much higher than those on the Ripple network, as well as making it much less energy efficient. 

However, could this be set to change? The hotly anticipated launch of Ethereum 2.0, which will see the Ethereum technology migrate to an upgraded platform, could revolutionize our assumptions about the crypto. 

The shiny new Ethereum platform, known as Eth2, is able to process far more transactions than its predecessor. In turn, this will make it a lot more energy efficient. At the moment, each Ethereum transaction requires an incredible 22.65 kwH of energy. Admittedly, this is better than Bitcoin, which requires almost the same amount of power as a daily American household to process each transaction. However, it hugely limits Ethereum’s speed and capacity. 

With the launch of Phase 0 of Eth2 planned for 2020, many investors have jumped at the chance to buy into Ethereum before its release. This is because the upgrade could spark a surge of interest in the crypto, resulting in a positive effect on its price. 

Supply

Another key difference between Ethereum and Ripple is the amount of each crypto that’s available. There’s a fixed answer to the question ‘how many Ripple coins are there’ — 100 billion XRP. According to CoinMarketCap, there are 45,011,240,343 XRP currently in circulation. 

Ethereum, on the other hand, has a limitless supply of Ether. CoinMarketCap lists its circulating supply as 112,537,007 ETH, so there are significantly fewer Ether tokens than there are XRP. 

Because you can’t mine XRP in the way you can mine Ether, the remaining Ripple supply is tightly controlled by the company. To stop investor concerns, around 55 billion XRP are held in an encrypted account, which makes it easier for users to keep track of the maximum amount of XRP in circulation. 

Market Performance

In terms of their market cap (which is short for market capitalization), Ethereum and Ripple are placed as the second and fourth cryptocurrency in the world, respectively. The stablecoin Tether has only recently tipped Ripple to the third spot, after undergoing rapid growth earlier this year. 

Ripple price and 24 hour trading volume are both much lower than those of Ethereum. The price of XRP is currently just $0.247700 and its trading volume is $2,002,707,204, whereas Ethereum’s price is $372.24 and its trading volume is almost $17,000,000,000. 

According to these figures, XRP might be the fourth largest cryptocurrency by market cap, but it’s trading significantly behind the top three. However, this shouldn’t necessarily put you off if you’re considering adding Ripple to your portfolio. 

Ripple differs from its top competitors (Ethereum, and Bitcoin) because it was designed for a different purpose. Remember that Ripple is primarily aimed at big banks, with customers including the Bank of America and JP Morgan. This means that it’s a lot narrower in scope than Ethereum, which can be used to carry out a range of decentralized finance (DeFi) services. 

Consensus Mechanism

When it comes to their systems, Ethereum and Ripple rely on very different algorithms. These algorithms are known as consensus mechanisms. This might sound complicated, but a consensus mechanism is simply the name used to describe the rules which enable blockchain systems to carry out certain processes. 

The consensus mechanism which Ethereum uses is known as a proof-of-work algorithm (PoW). As part of a PoW system, cryptocurrency miners have to compete to solve complex mathematical equations with their computer hardware in order to add blocks to the blockchain. This process requires a huge amount of power, which is why the Ethereum platform is currently so inefficient. 

Ripple, on the other hand, uses a consensus mechanism that’s known as a Federated Byzantine Agreement (FBA). Again, this might sound pretty complicated. But put simply, FBA works by connecting each node (a server that’s connected to the Ripple network) to a small number of other nodes. Each group of nodes will overlap with another group, ensuring that every node is connected .

To validate each transaction, a fixed number of nodes must reach a consensus (or agreement) that a block is correct before it can be added on to the blockchain. This means the technology is incredibly secure, as well as fast. 

Currently, Ripple’s FBA mechanism is a lot more efficient than Ethereum’s PoW. But again, the release of Ethereum 2.0 could change everything.

The Eth2 upgrade will see Ethereum switch from a proof-of-work to a proof-of-stake consensus mechanism. A proof-of-stake (PoS) mechanism works by asking its users to ‘stake’ a certain percentage of their cryptocurrency funds as collateral in order to validate each transaction. Someone who ‘locks up’ a certain amount of Ether as a stake is known as a validator. 

By embracing a system which relies on cryptocurrency validators rather than miners, Ethereum will be closing the gap between its technology and that of Ripple. 

Should Ethereum Or Ripple Be In Your Portfolio? 

Ethereum VS Ripple: Which one to Buy

There’s no ‘one size fits all’ answer to the question ‘Ethereum VS. Ripple — which one should be in your portfolio?’ The best investment for you will depend on a variety of factors, including your preferred investment style, your current portfolio, and your attitude to risk. 

As with any investment, neither Ethereum or Ripple is a sure-fire money-maker and it’s always important to carry out your own due diligence. Let’s take a look at some of the reasons why you might consider investing in one over the other. 

Why Might You Invest In Ethereum?

  • The launch of Ethereum 2.0 is scheduled to take place before the end of 2020. After Phase 0 of the launch is complete, the efficiency of Ethereum is expected to skyrocket. As more people start to use the platform, and more transactions take place, we could see a positive effect on the price of Ether. 
  • Ethereum supports many of the top cryptocurrency tokens in the DeFi sector. The demand for decentralized financial services (for example, insurance, savings, and loans) is growing fast, so investing in Ethereum could be a way of cashing in on this industry growth. 
  • Ethereum has a wide range of high-profile investors. From companies such as Microsoft to prominent angel investors such as Joseph Lubin and Gil Penchina, Ethereum has attracted the attention of people who have had a knack for spotting the ‘next big thing’ in the past. It’s even won over the actor Ashton Kutcher! 

Why Might You Invest In Ripple? 

  • Because Ripple XRP is used for a specific purpose within the financial sector, its price isn’t generally affected by the same factors which affect cryptos such as Bitcoin and Ethereum. If you’re looking to diversify your portfolio, investing in Ripple XRP could be a way of buying into new cryptocurrencies without placing your portfolio at the mercy of industry trends.
  • Digital transformation is one of the main aims of the financial sector. (In fact, recent statistics suggest a third of all financial services firms in the UK have ‘digital transformation’ as their top business priority). As problems with exchange rates and legacy systems make online payments difficult, many companies are starting to look towards technology such as Ripple. 
  • Ripple is overtaking traditional competitors. Its transaction speed is faster than that of VISA — so as people increasingly look towards challenger services, Ripple should be high on everyone’s radar. 

Ethereum VS Ripple – Final Word

Simply put, Ripple project is better for transaction fees, while Ethereum is better for decentralisation, Ethereum also has much more use cases.Whether you’re an experienced crypto trader or taking your first steps into the sector, Ethereum and Ripple are potentially strong contenders for your investment portfolio. We hope this comparison guide has helped demystify these major cryptos for you — so you can continue to do your own research, learn more about these technologies, and find the best investment.

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