How Did Ripple XRP Become More Valuable Than Ethereum?
By December 2017 Ripple overtook Ethereum, becoming the second most valuable digital currency in the world. Ripple offered faster and less expensive ways to transfer money around the world. It was described by many as 1,000 times faster and 1,000 times cheaper than a Bitcoin transaction. It formed partnerships with a plethora of banks around the world and to the surprise of many communities, found itself overtaking Ethereum in value.
Head Start of XRP Over Ethereum
The Ripple network was made in 2012. It was designed to serve the cross-border payment needs of the banking industry. This didn’t stop non-banking entities and individuals from purchasing their own stake in XRP, the native token of the Ripple network.
Ethereum was made three years later. It enabled people to use smart contracts between themselves so that transactions could be automatically made. Unlike Bitcoin, a maximum amount was not placed on the amount of Ether to be issued, which put into question its underlying value as a cryptocurrency.
Rising Partnerships and Expectations
In 2017, Ripple’s price rose 380 times, from $0.0065 to $2.40. The increase in price naturally was caused by rising expectations of the usage of the token as it fostered relationships with key banking partners around the world. In several instances, XRP was the best performing digital currency out of the top 20 coins. Many put this down to perception rather than actual use. The reality was that only a handful of partners actually used XRP. With time, however, use increased as more banks were onboarded onto Ripple’s xRapid platform, a platform which helps financial institutions reduce liquidity costs.
Proof-of-Work or Consensus
Proof-of-work is a way transactions on the blockchain are verified. As part of the process, decentralized participants on the blockchain show that they have contributed the required processing. Proof-of-stake, on the other hand, secures a network by requiring participants to show that ownership of currencies on the platform.
In late 2018, XRP maintained position ahead of Ethereum. One possible reason was the backlash following negative sentiments on the mining of cryptocurrencies in the period. The influence of cryptocurrency miners on networks was highlighted as disputes arose between them, which had a negative effect on proof-of-work mining cryptocurrencies like ethereum, bitcoin, and bitcoin cash. Unlike proof-of-work dependent currencies, the consensus dependant tokens such as XRP and XLM weren’t as negatively affected.
Ethereum derived a significant proportion of its value from ICOs in previous years. Most new tokens made are through Ethereum. In order to participate in ICOs, investors needed to buy Ethereum, therefore raising the demand for Ethereum. The number of risky projects in the ICO space troubled many potential investors who chose not to participate in ICOs. Many projects that were not related to Ethereum or blockchain in anyway chose to carry out ICOs then sell tokens raised for profits as soon as possible. Expectations arose that although the price of Ethereum could be increased through ICOs, the subsequent sale of funds raised would increase supply and consequently reduce the price.
It is 2019-May to be specific. Ethereum is on its way to cross its record value. The amount of locked funds by more legitimate projects in the Ethereum ecosystem has increased significantly. Although there are a few bad actors in the field, there are also many genuine participants working to create products that last and produce a profit.