Many investors feel that cryptocurrencies are the future. MicroStrategy(NASDAQ: MSTR) chairman Michael Saylor sees Bitcoin(CRYPTO: BTC) as the only currency worth holding for the next 100 years. Noted growth investor Cathie Wood expects digital assets to reshape the financial markets on a global level.
But these famous crypto bulls almost always focus on Bitcoin, perhaps throwing a few bones to the Ethereum(CRYPTO: ETH)smart contracts system. If tomorrow's millions will be made from Bitcoin and Ethereum investments, is there any room for Ripple(CRYPTO: XRP) millionaires in the crypto market?
How XRP's use case sets it apart from Bitcoin
XRP and Bitcoin are both cryptocurrencies. They rely on publicly available transaction ledgers, protected against unauthorized modification and other frauds by several layers of rock-solid encryption.
And that's essentially the end of similarities between these two assets. Bitcoin was made to store monetary value for the long haul, and its design documents compare this ledger to physical gold. The shiny metal is a rare element that is expensive to find and extract from ore veins in the earth. Bitcoin is a digital coin with a limited supply enforced by the underlying computer code. There will never be more than 21 million Bitcoins, and 94% of that supply is already circulating on the open market.
XRP also has a limited supply, but was designed with very different goals in mind. This is the functional token of the RippleNet payments service, managed by Ripple Labs in partnership with dozens of local banks around the world. Its purpose is to move money across international borders with low fees, fast transactions, and unbreakable security. XRP tokens have carried more than $2.8 trillion around the world since the system was created in 2012.
RippleNet's efficiency could revolutionize global payments
So the question is not whether XRP can measure up to Bitcoin, but whether there's a place for RippleNet's international money transfers in the long run. If you have recently sent money abroad or received a payment from overseas, you'll probably give that idea a huge thumbs-up.
Border-crossing payments often take days to process, with several go-betweens extracting fees along the way. They also tend to come with unfavorable exchange rates, keeping more money in the payment processors' pockets. RippleNet charges 0.00001 XRP per transaction today, even for very large money transfers. That works out to about 50 millionths of a dollar per transfer, or 5 thousandths of a cent. Each transaction is settled in three to six seconds.
So yeah, there are real reasons to prefer Ripple and XRP over old-school banking processes. This is already a successful service, very likely to grow larger over time as people get used to cryptocurrencies in daily life.
Where XRP might go after overcoming the SEC challenge
XRP has long struggled in the shadow of a legal challenge from the U.S. Securities and Exchange Commission (SEC), which challenged the way Ripple Labs sold tokens to investors without first registering them as stock-like securities. The courts have sided with Ripple, and the SEC might not file an appeal of that verdict. The deadline for that filing is October 7, giving the Commission less than a month to decide.
The cryptocurrency did not skyrocket when this legal matter got its final verdict. The coin price fell more than 50% when the SEC filed its lawsuit in December 2020, and XRP's chart has looked like a cross between Ethereum and Bitcoin since then.
From a pure market mechanics perspective, XRP looks like a lower-priced version of Bitcoin. But the two currencies are fundamentally different, so that may not be a fair analysis.
It's hard to say exactly how far XRP might rise from today's $0.56 per token. Still, I do expect the RippleNet payments service to gain traction over the years, and the XRP token should gain value accordingly. I won't call XRP a get-rich-quick idea, but the token does seem undervalued today and patient investors should pocket significant returns in the long haul.
In other words, XRP could very well make millions for its investors the usual way -- through patient long-term investing in a valuable business idea.
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Anders Bylund has positions in Bitcoin, Ethereum, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.
