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Overview

Ripple has roots in a company called Ripplepay that predate Bitcoin and blockchain technology. It was first conceived as a network for banks to use as a settlement system. Essentially, the Ripplepay network was a way for participants to trade debt with each other. After the advent of Bitcoin and blockchain technology, Ripplepay was taken over by a company called Openpay, which is now Ripple Labs. When Ripple labs took over, they incorporated a blockchain into their process and created a token called XRP in order to help facilitate more liquidity in their system. However, they differ from Bitcoin and other cryptocurrencies in how their token works, such as having a consensus protocol in place of proof-of-work. This consensus protocol is one of many differences that make Ripple controversial in the cryptocurrency market.

Purpose of Ripple

Ripple is directly targeting banks as its market, aspiring to become the default network that banking institutions use as a settlement system for all their transactions. The Ripple network, as conceived before blockchain technology, allows participants to trade debt of any kind. In this paradigm, a financial institution can store a debt made of any currency or other assets on the network, it does not necessarily have to be converted to XRP. XRP can be used as a medium of exchange or for handling fees associated with transactions of other types.
Anyone can buy XRP, but this is almost entirely for speculative purposes, because XRP is not targeting end users transacting among themselves directly.

Technical

Ripple’s software is open source and any developer can submit proposals on their Git repository. However, because of the way the Ripple network is constructed, it is not a decentralized, trustless system.
The consensus protocol used by Ripple requires that each node on the network must be trusted by at least one other node on the network. In theory, any transaction can go from any node to any other node so long as each node trusts its immediate connection, even if it does not trust all nodes on the chain. However, in order for a transaction to be verified on the Ripple ledger, all nodes must eventually connect back to a servers operated by Ripple Labs which run the algorithms that establish consensus. This means that Ripple ultimately has central control over the network, and one needs to have trust in the company that runs it, Ripple Labs. This is the root of the controversy surrounding Ripple, as many cryptocurrency advocates believe this violates a central ideology of cryptocurrency, which is to be decentralized and trustless.

Market

Ripple is number 3 in overall market capitalization, though it’s place relative to other cryptocurrencies might not be the most relevant measure of Ripple’s potential, because it is mainly competing to replace non cryptocurrency inter bank systems such as the SWIFT network.
Ripple Labs has set aside 55% of the tokens it has created for itself, which is a source of concern for investors, as it means Ripple Labs has a great deal of control over the market value, depending on whether they decide to hold or sell their holdings.
As of 2018, Ripple Labs is facing a lawsuit in the US by a plaintiff claiming that XRP is a security, and therefor has certain responsibilities to “shareholders” that they have not lived up to. Ripple Labs claims that XRP is a currency, and therefore not beholden to the laws that govern securities. Ultimately, only the SEC determines whether something is a security or a currency within the US. However, the market is paying close attention to how this lawsuit plays out, as any result may have an effect on how if the SEC regulates Ripple, and how that might affect its value.

Image courtesy of Carty Sewill, http://cartyisme.com/

Ethereum Overview

Ethereum has maintained its position as the second largest cryptocurrency for long enough that it appears firmly established as a stable entity in the cryptocurrency space. In addition to its popularity and significant market capitalization, it is also targeting a slightly different use-case than Bitcoin, meaning it has the potential to forge its own identity, separate from Bitcoin and other contenders.

Purpose

Ethereum was designed from the start as a platform to develop “smart contracts”. Essentially, a smart contract is a way for two people to record any kind of exchange, and with a blockchain being an immutable record, that record can be referenced and verified by anyone. Currency is merely one form of contract, and the main currency on the Ethereum blockchain is their native token, called Ether. While other forms of contract besides currency are theoretically possible, by far the most popular use of this blockchain has been to create new alternate currencies. These additional currencies on the blockchain are referred to as ERC20 tokens. ERC stands for “Ethereum Request for Comments”, and 20 is a number designation for when the standard was created that allowed for new token creation. By using this blockchain, new coins are able to leverage the established trust of Ethereum, which could be seen as an advantage over other coins that start from scratch.

Ethereum is currently the go-to standard for smart contracts and token creation. However, since its creation, there are many new blockchains which aspire to capture the smart contract market, in whole or by focusing on niche applications. Ethereum has a considerable head start, but things can change surprisingly fast in the world of cryptocurrencies.

Technical

Ethereum can be mined on Graphics Processing Units, or GPUs, which are a type of computer chip that has long been available for people to purchase for their computers to improve the visual experience of games, media, and other uses. By making Ethereum available to mine on widely available hardware, it takes advantage of an existing broad base of computing power. However, one disadvantage to using GPUs instead of a dedicated computer chip is that computations are slower and energy consumption is higher, and subsequently it is relatively a more expensive process.

Ethereum encrypts all transactions with a hashing algorithm called Kekkak-256, which provides a similar level of security to the SHA-256 algorithm favored by Bitcoin. Also, like Bitcoin, all transactions are pseudo-anonymous, meaning that users of the system are not named in any way on the system, but the numbered transactions themselves can be viewed publicly on a blockchain explorer. (https://etherscan.io/ for example)

Market

As of May 2018, Ethereum has a market capitalization of roughly 79 billion US, which is less than half of Bitcoin, but more than double the next coin down the list — Ripple, at roughly 3.5 billion. As one goes down the list of coins, the volatility increases exponentially, but Ethereum, near the top, has so far mostly been on the rise for over a year and a half. It is, however, notable that the initial surge in investment in Ethereum coincides with the beginning of the highly fractious scaling debate within the Bitcoin community. While this may simply turn out to be the catalyst that helped launch Ethereum into its own future, it may also indicate that its success may still be contingent on the fortunes of its predecessor, Bitcoin.

Image courtesy of Carty Sewill, http://cartyisme.com/