On the surface, JPM Coin and Ripple might seem completely different from each other. Or exactly alike, depending on how you’re looking at it. While these two projects have widely variant histories, today they’re both competing to be top dog in the world of blockchain for banking. Read on to learn the origins of each and discover the similarities and differences in two of blockchain’s biggest projects.
JP Morgan enters the blockchain arena
JP Morgan’s blockchain efforts, which started much later than Ripple’s, have picked up tremendous speed in the last year. Since the bitcoin boom in 2017, JP Morgan’s CEO Jamie Dimon had been publicly bashing BTC as a bubble and a scam. Meanwhile he was leading the company in developing their own Ethereum-based Quorum Blockchain and the bank’s very own ‘cryptocurrency’.
However, what started out as a coin for bitcoin enthusiasts to makes jokes about on Twitter is now grabbing some attention. In fact, as America’s biggest bank, JPM has thrown more money into hiring blockchain talent than any other company in the world.
The bank’s namesake, J.P. Morgan, was born in 1837 and entered the family business during the late 1850s. At the time, the bank financed railroads and major US manufacturing companies such as General Electric. It later became one of New York City’s iconic banks, Morgan Trust.
Incidentally, my grandfather got a job with Morgan Trust in NYC as a Cuban immigrant in his late teens. With only a sixth grade education, he worked his way up to Bank Clerk, handwriting numbers in ledgers long before computers were around. He retired from the bank many years later. I still remember the blue pens with white erasers that he would give to his grandchildren, etched with “Morgan Trust”. To this day, even with scandals and through multiple recessions, the Morgan brand remains strong.
But the crypto crowd does not wax nostalgic, and when the bank introduced JPM Coin on Valentine’s Day 2019, there was a collective eye roll. Because the design of cryptocurrencies sprouted from a desire to rid our society of greedy, monopolistic banks. But in the midst of this eye roll and indignation at the big bank’s move into crypto, there also was a sliver of hope. Maybe JP Morgan would help bring global adoption and legitimacy to cryptocurrencies. Hopefully, this type of attention would lift us out of the long crypto winter without any of us selling our soul.
From Ripple’s Beginnings
On the other hand Ripple, with its armies of supporters (and legions of haters) has been in the crypto trenches since 2004, formerly as RipplePay. Co-founded by Jed McCaleb (CTO) and Chris Larsen (CEO), it started out as an open source platform designed for enabling fast, cheap transactions.
Now it is a firmly rooted real-time gross settlement system (RTGS) that helps banks, payment centers, and other businesses transact and exchange cross border currencies 24/7. Like Ethereum, NEO, Waves and many others, Ripple is both a platform and a cryptocurrency. Its design allows for fast and cheap transactions in real time.
Ripple’s protocol token, XRP, has graced the Number 3 spot on CoinMarketCap behind BTC and ETH for over a year now. Once it even jumped into second place during the depths of the bear market. The coin itself is what enables the instant and direct money transfers for Ripple’s enterprise clients.
Why do people dislike Ripple so much?
Even with its steady growth, proven success and massive following, Ripple has also maintained somewhat of a tarnished reputation, just like with many big banks. The crypto community’s misgivings lie in several areas.
- First, in the massive allotments of XRP tokens to Ripple’s founders. One Co-Founder, Jed McCaleb, announced he would be selling off all his XRP. He promptly faced a lawsuit as Ripple begged to differ. He ended up giving $2 billion worth of XRP to charity and the rest of his 5.3 billion went into a custodial account. Now he can only sell off a small percentage each day. The current leader of Ripple, CEO Brad Garlinghouse, also is a big owner of XRP and no one really knows how he came to have it. Transparency is king in blockchain projects and at any hint of shenanigans, people might think it’s a scam.
- There also was a conflict of interest. This arose when Ripple hired New York regulator Ben Lawsky to be on Ripple’s Board of Directors. Lawsky had played a key role in creating a “BitLicense” which he helped develop to legitimize cryptocurrency businesses while bringing them under compliance. This license was not meted out easily and seemed mostly geared toward bank projects. The crypto crowd did not take kindly to this. Nor did they like the fact that New York awarded Ripple the very first BitLicense. And that regulator? Lawsky soon left governmental affairs completely for a lucrative job consulting companies on how to get the BitLicense he had helped create.
- Last but not least, being a cryptocurrency for bankers during the wild west crypto era did not go over well for Ripple’s image from the standpoint of cryptocurrency purists.
How is JPM Coin similar to Ripple (XRP)?
Not surprisingly, both JP Morgan and Ripple share much in the way of their blockchain projects. Let’s take a look at some of their similarities:
- In the most general sense, both entities want to enable instant payments using blockchain technology for their banking and payment processing customers.
- They both would like to carve out a chunk of the remittances pie. Think of all the people that leave their country to find work and send their paychecks home to support their families. Over $689 billion in remittances moves across borders each year according to the World Bank. Most of this money involves payments to people in developing nations. Now, these workers can send money faster and more cheaply. That is if Ripple and JP Morgan plan to pass down the cost savings to the most at-risk people in the transaction. Thus far, they’ve spoken mainly of cost savings for themselves and their biggest customers.
- Both are eager to latch onto the 3rd-party-less feature of cryptocurrencies. At least when it comes to Correspondent Banks. Those intermediaries take their cuts in the current system of payment processing and international wires.
- JPM Coin and XRP both deal with negative press from the hardcore bitcoin crowd. It’s as though they can do nothing right no matter how great their successes.
- Both plan to have the capacity for higher transaction per second rates than bitcoin and other altcoins. At this point, XRP has consistently managed 1500 transactions per second. JPM Coin is still in its early stages of development but one could expect they will be competitive on this end very soon.
- Neither coin can be mined. Just another reason for bitcoin lovers to shun bank coins.
- They both seek to improve upon the Swift system of interbank wires. This pertains mainly to institutional payments clients. But at some time in the future, services will likely roll out for retail customers as well.
- Last but not least, both projects are considered centralized. However, as many of you know, decentralization is a moving scale. As more decentralized applications come to market, these two big projects may be trying out ways to at least appear less centralized.
Major Differences between JPM Coin and Ripple
Below are a few of the ways in which the two projects set themselves apart.
- The rate of new bank customers. JPM Coin has developed a base of 200 partnering banks through the Interbank Information Network (IIN). The IIN resides upon JP Morgan’s Quorum blockchain. Ripple has also signed up 200 bank customers thus far. But they’ve taken longer to acquire that number when compared to JP Morgan.
- JP Morgan designed their coin to be a stable coin based on USD. Each token derived from their Ethereum-based Quorum Blockchain will be worth $1.00. On the other hand, XRP is backed by Ripple Labs. Some might say (i.e. Jamie Dimon) that the JPM Coin solves the same problem Ripple does. Only with a stable, valued coin and clear company leadership.
- There’s more clarity to leadership and organizational roles at JP Morgan. With Ripple, it’s not clear who controls the ledger. There are 150 validator nodes that are distributed. Whereas with JPM Coin, each member bank will essentially be a validating node on the blockchain.
- JPM Coin may have more trouble convincing it’s big bank customers to use their coin. Whereas Ripple started out with smaller banks ie. in Mexico and has been working its way up.
From our summary above, it looks as though JPM Coin and Ripple have more in common than what first meets the eye. As time goes by and these protocols grow in scope, we’ll look forward to seeing whether these bank projects have a chance in the fickle crypto industry.
Also published on Medium.