Ripple and Bitcoin Cash: Two Sides of the Same Coin

Bitcoin, despite its aptness for storing value and recognition as “the digital gold”, is now considered a novelty. Compared to cryptocoins that came out not long after bitcoin was first introduced, the father of all cryptocurrencies is an aging, yet successful giant. Its functionality is simple, slow, and resistant to change, leaving the market ripe for new coins to satisfy investor demand from both retail and institutional sources. Platforms like dash, ethereum and litecoin can do all that bitcoin does and more, yet the latter thrives due to its first-mover advantage and notoriety in the marketplace.

In bitcoin’s shadow, two of the most popular alternative cryptocurrencies, Ripple (XRP) and bitcoin cash (BCH), are gaining momentum. Though they differ considerably in age, market sentiment, and infrastructure, these two coins have a shared destiny. Both bitcoin cash and Ripple seek to fill the holes that bitcoin left behind. However, the ways that they go about this ambitious mission contrast sharply.

Not Twins, But Brothers

Though bitcoin cash and Ripple are both cryptocurrencies taking their inspiration from the original bitcoin project, released in late 2008, the distinct ways that they expand upon the original white paper is crucial. Both exist as separate potential solutions to a major issue unaddressed in bitcoin’s original documentation: scaling. This debate has raged within the community for years. The argument is that the cryptocurrency industry will die unless it can effectively serve its entire potential audience, which at this rate is likely to be billions of concurrent users. Bitcoin has proven its inability to cater to many clients at once without imposing high fees and absurdly long transaction times, and so new projects have sprouted up to provide a similar concept absent these drawbacks.

Bitcoin cash and Ripple both provide answers to this scaling problem, but in strikingly different ways. Split from bitcoin during August 2017’s hard fork, bitcoin cash is like bitcoin but uses a blockchain with larger blocks, keeping transaction times and prices down. Another part of bitcoin cash’s ecosystem is a special difficulty adjustment algorithm, which automatically assesses and alters the profitability of mining the chain to maintain miner participation in a productive manner. The hard fork, its new algorithms and democratic structure make bitcoin cash the community’s chosen competitor, and their support gathers more momentum each day.

Ripple also tackles the scaling issue, but with the backing of high-profile institutional partners instead of support from the cryptocurrency community. Unlike the checks and balances that encourage miners, users, and network nodes to participate in blockchains like that of bitcoin cash, Ripple is a centralized solution. Under the control of a single authority, which advertises itself as a platform for big finance, Ripple works directly with banks, credit card issuers and other large partners to improve its functionality. Special rules make it the fastest and cheapest way to transact digitally, including a protocol that simply creates new coins as needed, and destroys old ones after they are used to conduct transactions. As revolutionary as this is for big firms, it changes the dynamic for Ripple traders as well.

Highlighting Their Differences

Consequent of its unique characteristics, Ripple is by far the most stable cryptocurrency in existence. Throughout the lifespan of the cryptocurrency market, Ripple has consistently stayed within a tight range of less than $0.10 variance, even as its market capitalization has fluctuated significantly. Its purpose as a tool for institutional investors to reduce their overheads is the reason behind this phenomenon. If banks are going to rely on Ripple as a medium to exchange other assets inexpensively, price volatility complicates this notion, and so Ripple is purposely kept relatively static.

The retail investor community uses Ripple for a similar purpose. To hedge their other cryptocurrency investments, transfer money between other coins without undue exposure to volatility, and keep their portfolios diverse, investors rely on Ripple’s more stable properties almost exclusively.

Bitcoin cash, on the other hand, entertains as much volatility as its older brother bitcoin. Decentralization, miners, and other staples of cryptocurrency functionality have contributed to speculation in the coin, as is common. At the end of the day, bitcoin cash is a vision of the “future” as cryptocurrency rebels see it, while Ripple has helped show markets what functionality institutions value most.

Asking Hard Questions

The presence of two solutions to the same problem begs the question: which has the better chance of success – and how is this success measured? Ripple and bitcoin cash present a contradiction in the goals of the cryptocurrency community which is the idea of investment versus infrastructure. Is price more important than function? In many ways, bitcoin and bitcoin cash already exemplify this struggle, but Ripple represents an outlier even further off the spectrum due to its input from institutional participants.

If worldwide adoption of blockchain comes at the price of people’s ability to speculate and make money, many believe it is not worthwhile. The benefits of institutionalized cryptocurrencies and the cost savings they bring have big implications, but do not outweigh the advantages that bitcoin cash could deliver for a wider array of cryptocurrency participants.

For now, these two ideas (and the coins behind them) exist in relative peace because neither group is the key decision-maker in which solution will ultimately prevail. It may be that speculative and rigid cryptocurrencies can both survive. With institutional money coming soon for cryptocurrency in more ways than one, the market may get its answer long before it’s expected.