Curious to know the difference between Ethereum VS Ripple? Want to have in-depth knowledge of Ethereum and Ripple? You have landed in the right place. In this article, Ethereum vs. Ripple: which one should be in your portfolio, we are going to distinguish between these two coins.
Learning Of Content
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 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? What is the main difference between Ethereum and Ripple? Is Ethereum a better investment than 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.
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 $204 billion — 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!
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.
Ripple was first released in 2012 and XRP has a current market cap of $20 billion.
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.
Ethereum vs. Ripple - Key Differences
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, will be 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.
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 45,404,028,640 XRP currently in circulation.
Ethereum, on the other hand, has a limitless supply of Ether. CoinMarketCap lists its circulating supply as 115,084,297 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.
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 $0.46 and its trading volume is $5,185,960,520, whereas Ethereum’s price is $1,760 and its trading volume is almost $20,624,157,710.
According to these figures, XRP might be the seventh 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 (Tether, 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.
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.
Ripple vs Ethereum: Price History
In terms of price movement, there really is no comparison of Ripple vs Ethereum. The former has always traded at a much lower price point and its legal troubles meant it missed out on much of the crypto bullishness that hit the market at the start of 2021.
XRP traded well under the dollar for the first few years of its existence, finally reaching parity with the currency in 2017. Whilst increases in those looking to invest in Ripple has regularly pushed up the value of XRP, ultimately it is interest from financial institutions that has had the biggest impact. With banks like Santander and Fidor Bank pledging their support, the price of XRP began to move throughout 2017, finally hitting an all-time high of $3.08 in January 2018.
Ripple then looked to have a bright future and seemed to weather many of the market downturns affecting other cryptocurrencies - including, to some extent, the onset of the COVID pandemic. However, as we have noted, prices were hit hard by the SEC ruling in December 2020, sinking to around $0.25.
Since then, XRP has recovered well but hasn’t experienced the huge price increases as seen by the likes of Ethereum. By February, XRP had climbed back to $0.62 - perhaps not an impressive figure in itself but nonetheless representing growth of around 150% on the beginning of the year.
It’s now strange to think that Ethereum was worth less than $1.00 in 2015, but even in 2017 ETH struggled to creep past the $10 mark. However, that year saw a surge in cryptocurrency prices, during which several prominent figures chose to invest in Ethereum. Prices soared to over $1,400 by January 2018, before the bubble famously burst and ETH slumped as low as $85 before the year was out.
Ethereum was slow to recover. Throughout the remainder of 2018 and much of 2019, ETH bumped against a $250 barrier, despite the altcoin being widely regarded as the most advanced of the major tokens. ETH weathered the COVID storm reasonably well and by December 2020 it had climbed back up to a respectable $615 per token.
The first few months of 2021 were an exciting time for cryptocurrency and anyone who had chosen to invest in Ethereum during its sluggish post-2018 period found themselves rewarded, as Ethereum soared to a record-breaking $1,936.72 by February. There then followed a lull - which was experienced by the wider crypto market - but ETH rallied again and once more passed $1,900 in March.
Has Ripple Weathered its Legal Storm?
Anyone thinking to invest in Ethereum will inevitably need to keep a close eye on the development of the Ethereum 2.0 upgrade and ETH’s shift to a proof-of-stake consensus mechanism. Those looking to invest in Ripple, on the other hand, are faced with an entirely different situation, but one which nonetheless requires ongoing monitoring.
This is, of course, Ripple’s ongoing legal tussle with the U.S. Securities and Exchange Commission (SEC). Back in December 2020, the price of XRP took a serious hit when the SEC filed a complaint claiming that XRP is actually a security and not a commodity or other type of asset. As such, its unregistered issuance broke federal securities laws. This development saw the price of XRP drop by around 30% almost overnight and several prominent exchanges - including Coinbase - delisted the cryptocurrency.
Incidentally, by the time of the ruling, the SEC had already declared that Ethereum and Bitcoin were not securities, due to their decentralised nature. Ripple, on the other hand, being owned and operated by a corporation, has been treated differently. The SEC is now suing the firm, claiming that chairman Chris Larsen sold undeclared securities.
Despite some initial doom-mongering, Ripple recovered well - largely thanks to the significant crypto market uplift at the end of 2020 and throughout the first quarter of 2021. This saw Ripple claw its way back to the $0.62 mark and, whilst this wasn’t quite the $0.64 XRP traded at before the SEC ruling, it was certainly received as a positive sign as to the token’s long-term potential.
But things aren’t over yet. Larsen’s lawyers hit back at the initial ruling, claiming that the Justice Department and FinCEN considered XRP as a “virtual currency” rather than a security. They also say that the SEC allowed XRP to flourish without providing legal clarifications.
At the time of writing, there was no settlement on the horizon and the discovery period of the trial is set to run until August 16, with a hearing to follow. As such, any potential investors will need to keep a close eye on proceedings. It should also be noted that the ruling could well have a knock-on effect for how all cryptocurrencies are regulated in the US in future.
Ripple vs Ethereum: What the Experts Say
Inevitably, most expert opinions on Ripple relate to the SEC lawsuit. Prominent blockchain and crypto lawyer Jake Chervinsky has warned that the development could be very negative for Ripple. “If XRP is considered a security, it becomes unnecessary. To date, the alleged violation is a fatal blow,” he said. “The accusations against executive individuals are also noteworthy. SEC is playing hard. ” In addition, Chervinsky stated that if XRP is deemed a security, it will most likely mean that no transactions can be made with anyone doing business in the US.
However, there is plenty of optimism surrounding the banker’s cryptocurrency. Pseudonymous trader Kaleo believes XRP is in the right position to make another run at its all-time high (ATH) of $3.84.“The possibility of a breakout leading to a return back to the old ATH is too tempting not to punt a long on,” he told Daily Hodl.
Meanwhile, Coindesk reports that Japanese investors are sticking with XRP. “XRP was probably the single most popular token or cryptocurrency in Japan,” commented Mike Kayamori, founder and chief executive officer of crypto trading platform Liquid Global. Meanwhile, Yoshikata Kitao, SBI chief executive officer and board member at Ripple Labs, tweeted that Japan’s financial authority, the FSA, had already made it clear that XRP was not a security. “I’m optimistic that Ripple will prevail in the final ruling in the U.S.,” he added.
New Zealand-based crypto analyst and influencer Lark Davis is very bullish on ETH. He notes that in March, “we had the second biggest Ethereum outflow from centralized exchanges with 235,000 Ethereum withdrawn in a single hour. When the price went down, buyers stepped up big time.” Davis goes on to say that this “shows that right now interest is very high in Ethereum” and that “demand still red-hot for Ethereum.”
Meanwhile, macroeconomist and crypto analyst Alex Saunders, who is founder and CEO of Nugget’s News, believes that Ethereum’s myriad applications and the ongoing Ethereum 2.0 upgrade means that ETH could well hit $10,000 over the next year or so.
Finally, Ethereum consultant Ryan Berckmans is even more optimistic. He believes that the move to proof-of-stake will help ETH hit $20k. “Next year, Ethereum switches to proof of stake. Ethereum may produce $20b+ in cash for ETH holders during our first year using proof of stake. In my opinion, this cash machine will greatly help us get to ETH at $20k,“ he said.
Should Ethereum Or Ripple Be In Your Portfolio?
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.
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.
Now you know the key differences between Ethereum and Ripple. If you're feeling inspired to start investing in Ethereum and/or Ripple, or this article has provided some extra insight to your existing investing knowledge, you may be pleased to know that eToro provides the ability to invest in Crypto assets and CFDs on up to 90+ cryptocurrencies. Ethereum and Ripple investors can build a diversified portfolio with the most popular coins.
Ethereum VS. Ripple — Infographic
Did you like our article Ethereum VS. Ripple: Which One Should Be In Your Portfolio? Then please share it with anyone who might find it helpful.