Bitcoin Vs. Ripple: Which is a Better Investment?

In light of bitcoin's extreme volatility of late, where more than $6,000 in coin value was lost in the span of a month, those looking to invest in digital currencies or altcoins are looking for the next big thing. In the last year, many of bitcoin's would-be competitors have stolen market share from bitcoin, with the trend unlikely to change in 2018.

As part of a continuing series, we will compare bitcoin with the coins that are seeking to displace bitcoin as king of the hill. In this article, we will be looking at Ripple.

For a time, Ripple surpassed Ethereum as the second-largest altcoin by capitalization. While a surge in Ether price helped Ethereum to regain second-place, the excitement surrounding the remittance, payment, and settlement (RPS) solution is still palpable, especially in light of more banks signing on to the Ripple protocol.

Tales of the Tape (as of January 28, 2018)

	Bitcoin	Ripple
Purpose of coin	Proof-of-concept for altcoin model; digital currency	Transaction fee-marker for blockchain-enabled remittance, payment, and settlement system
Governance	Decentralized; overseen by not-for-profit foundation; decisions determined by a democratic vote among nodes and miners	Owned and run by a private company; decisions determined by amendment process where changes must have consistent support of 80 percent of the network's servers for at least two weeks to pass
Number of coins	21 million; 16.83 million mined	100 billion/38,739,142,811 in circulation (XRPs, when used in the system to pay for transaction fees, are destroyed, so the number of actual XRPs will continuously decrease. XRPs are pre-mined, with the company holding 62 percent of the XRP supply in reserve.)
Market capitalization (as of January 28, 2018)	$198.37 billion	$55.19 billion
Obstacles to success	Changes notoriously difficult to achieve; slow transaction times; high transaction fees	Refusal or resistance by the financial industry to abandon industry-standard SWIFT
Transaction time (average)	1,570 minutes (one day, two hours, and ten minutes); seven-days high: 11,453 minutes (seven days, 22 hours, 53 minutes); current transaction fee: $9.824; transactions expedited by paying miners	Four seconds (Ripple can process transactions without needing to   record the transaction to the blockchain in real-time.) Current transaction fee: less than one cent.
Reason for success	As the first digital currency, there is a sense that bitcoin must succeed for the industry to succeed. With many of bitcoin's "imitator" coins being tied to bitcoin in an irrevocable way, there is a "we all succeed or we all fail" mentality currently in place.	The cross-border payment system that is currently in place is dysfunctional, with slow, lost, or shrunken payments being forced to be accepted. With some feeling that SWIFT cannot adapt quickly enough to meet the challenge, some are embracing Ripple as a way to reform a broken system.

Understanding Ripple

If a person living in the United States wanted to send a payment to, say, South Africa, he or she would go to a money transmitter, like Western Union. Western Union would then send that payment through its network of cross-border payment vendors. Each of these vendors would require a fee for their service, would process the transaction on their own time, use their own vendors to process the transaction, and communicate with their successor vendor in their own style. Western Union would have to monitor the transaction through this complicated maze of handlers, knowing that there is a possibility that not all of the payment may make it to South Africa, or worse, the payment may disappear entirely - with Western Union having little recourse, but still being obligated to pay off the payment. Even in the best of conditions, the process took hours or days to complete.

This reality makes it difficult to conduct transnational business in an increasingly globalized world. While blockchain is not the only answer to solving this problem (the industry leader, SWIFT, is handling this by upgrading its messaging system, making tracking simpler), blockchain-technology could theoretically make processing a cross-border payment as easy as sending an email.

XRP is a specialized altcoin, and its only monetary value is to pay for the transaction costs of using the Ripple network. However, as XRP does have a clear purpose, can be amended relatively easily, and has been designed to quickly accommodate large numbers of transactions cheaply, XRP may be a more attractive long-term investment than bitcoin. 

However, due to the specialized nature of XRP, it can also be argued that comparing XRP and bitcoin is as unfair as comparing apples and oranges. Some would argue that XRP is not an altcoin at all, as it is controlled by its company. It is reasonable to think that the successes of one may not reflect or distract from the successes of the other. However, only time will tell.

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