Ethereum VS Bitcoin VS Ripple — Investment & Technology

Ethereum VS Bitcoin VS Ripple — Investment & Technology analysis

With all the new crypto-currencies & ICO(s) coming to market everyday, it’s really hard to understand the underlying motive & purpose of each of them. This is essential to understand both from investor’s & technologist’s point of view — one would be putting in wealth to grow while the other would be putting in time for better opportunities and to ride the block-chain wave(will cover blockchain in a different story in detail). Will talk about the intrinsic value of each of them as an investment asset.

At this time, we are taking a look at the top 3 crypto-currencies which are or have the potential to reshape the world as we see it, we will be restricting ourselves to understand:

  1. What Bitcoin, Ethereum & Ripple are, their similarities & differences.

1.a) What Bitcoin, Ethereum & Ripple are & similarities:

Each one of them is a crypto-currency based on the blockchain technology. You can think of them as siblings, mother is ‘BLOCKCHAIN’ !! These currencies in themselves are meaningless without blockchain, which does all the magic here — it is enabler of decentralized applications. In contrast to current client-server applications where we have one(or cluster) centralized server/s governed by some specific pre-defined authorities blockchain network is not governed by anyone but by everyone. Here we have different(millions & number is ever growing) nodes participating in the network which are building block of blockchain network. Each node is having a copy of the network & it’s data — whenever a change is registered in the network, all the participating peer nodes needs to agree to the authenticity of the change.

Enough for now on blockchain, this is just a high level view — there is much more to this — POW, transactions, mining, hashing & what not !!! But will save this for next story on blockchain.

For now, bottom line is that all three of these uses the same underlying technology with different flavors of implementations.

1.b) Differences:

Difference between these crypto-currencies lies in their purpose — the sole motive of the lives. And which is why they use different state of tune blockchain implementations. More in next section — purpose.

2) Purpose:

2.a) Bitcoin: It is launched in 2003 by Satoshi Nakamoto(not real name) with the purpose of challenging the centralized & money making(through transaction fees)model of banking institutions. Idea was to introduce an alternative INTERNATIONAL currency which is not governed by any centralized financial institution & hence is free from all the evils like transaction fees, devaluation of personal wealth by banks printing more currency notes & so on.

The number of bitcoins ever be produced will be 21 Million(including genesis block) & these are not available all at once but are produced at constant rate by the process called mining(not going in details here). Hence it is free from devaluation problem where banks prints more money & hence devaluing your personal wealth. But at the same time because of the limited number(21 M) ever be produced, it also limits itself as being used as the alternate to FIAT currencies because world population will ever be growing but not the number of bitcoins as such — tough there are 100,000,000 Satoshis(smallest possible denomination of a bitcoin) in a bitcoin but even then it can not be distributed wisely among the population on earth. For instance Nakamoto himself is believed to own up to roughly one million bitcoins.

In contrast — there is a another school of thought which consider bitcoin as an investment asset rather than a currency. I am also on of those :)

2.b) Ethereum: In contrast to bitcoin, ethereum has been developed to promote & utilize the underlying technology — Blockchain. Think of Ethereum as a open source project for developers/communities & industries to start utilizing the blockchain. Ethereum in itself is a blockchain only on which anyone can deploy the decentralized applications using the ETHER. Now, Ether is a fuel/fees that you need to pay to utilize Ethereum infrastructure. So, not Ethereum itself but it’s fuel — Ether is the cryptocurrency here.

I think of Ethereum as the enabler & pioneer of this huge technological revolution. Think of it as Google of internet(by the way Ethereum is backed by Google). I see it not going anywhere & certainly do not see it as a currency but definitely as a very good investment asset(reason in coming section).

2.c) Ripple: It is more in line to Ethereum from purpose standpoint — not currency but a blockchain provider. But here is the catch, while Ethereum is focused to enable everyone to utilize the blockchain tech on the other hand Ripple is focused to a specific industry — banking. It is dedicated to handle the money transfer problems like huge transfer times, for instance as of now if you want to transfer money from US to UK, it will take 2 working days while with Ripple in place it can be done in 6 seconds!!!

As of now, Ripple is already adopted by 40 banks & 100 more banks are expected till Q1 of 2018. That’s huge !!

Again not a currency but an asset for sure.

3) Investment aspects:

3.a) Bitcoin: As i said, i don’t see it as a currency which can replace the banking currencies because of the above mentioned limitation(21M bitcoins in total only). But then it is an asset for sure. Recently price touched $10K to a bitcoin, that’s huge. But then the problem is, i do not see any intrinsic value in bitcoin — that is why not sure of it’s future. On intrinsic value — some claim that the mining process takes lots of time and money(around $1000 for a bitcoin) & hence it justifies it’s intrinsic value, i don’t agree to that though — for me it’s waste of money & electricity, after all it is not adding any value.

For long term investers, i do not see it as a good asset because sooner or later people will realize the fact that it does not has any intrinsic value & hence prices will drop drastically for sure. Having said that, excellent opportunity for traders, having short term horizons.

3.b) Ethereum: As i said, Ether(fuel of Ethereum network) is the real hero here not Ethereum itself .

So from intrinsic value perspective, Ether does hold the ground as it is required by masses to use Ethereum infrastructure.

I places my bet on this for the long term investors.

3.c) Ripple: Ripple is used by the banking industry heavily & will be backbone in the coming times for the banks all around the world. Banks do money transfers between different entities using the Ripples(XRP). In one way or the other this is backed by the banking industry & they will be hugely dependent on it, i don’t see it going anywhere & will continue to rise.

Perfect time to dive in as it is still under valued, perfect for long term investments — has huge intrinsic value. I put more money in Ripple than Ethereum only because you can get more out of your money as the Ethereum prices are already up.

4) Technology aspects:

For tech enthusiasts, bitcoin does not presents much of the opportunities unless you want to try your hands on mining & related actives.

Ethereum is the hero here as it is for everyone — different industries will be solving different use cases using Ethereum. This will be mass utilized & follows the Google’s policy not charging for the product itself but for the services.

Ripple is also a good opportunity but your options would be limited largely to banking industry.

5) Conclusion:

  • Bitcoin good for traders for short term investment goals but lacks intrinsic value & hence not worthy of long term investments.

Please note, these are my personal views on these crypto-currencies, if you feel otherwise — happy to listen & discuss with you.



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