Ripple’s XRP (XRP), recognized as the third-largest cryptocurrency by market capitalization, gained significant attention when former President Donald Trump referred to it as a “valuable cryptocurrency,” alongside Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Cardano (ADA), as part of a proposed US strategic cryptocurrency reserve.
Trump’s executive order on March 6 initiated a new framework for alternative cryptocurrencies—the Digital Asset Stockpile—overseen by the Treasury.
While opinions within the crypto community vary on XRP’s value in relation to Trump’s comments, an examination of the altcoin’s practical use is essential.
XRP’s potential in the banking sector
Introduced in 2012 by Ripple Labs, the XRP Ledger (XRPL) was created to facilitate interbank settlements. Initially, it provided three business solutions: xRapid, xCurrent, and xVia, which were later unified under the RippleNet brand. XCurrent enables real-time messaging and settlement between banks, xVia serves as a payment interface for financial institutions to execute transactions via RippleNet, and xRapid, now integrated into On-Demand Liquidity (ODL), aids in cross-border transactions.
Only ODL necessitates XRP; the other services enable banks to utilize RippleNet without needing to hold the token. This indicates that the adoption of Ripple’s technology by banks doesn’t necessarily influence XRP’s price.
Several prominent banks, including American Express, Santander, Bank of America, and UBS, have utilized xCurrent and xVia. However, data on users of the XRP-powered ODL service is limited. Known users include SBI Remit, a leading Japanese remittance service, and Tranglo, a major remittance company in Southeast Asia.
XRP’s role within Web3
XRP also functions as a gas token. However, in contrast to Ethereum, where fees are awarded to validators, a small portion of XRP is burned as a measure against spam.
Within Web3, XRP’s function is minimal. Ripple does not offer complex smart contracts or decentralized applications (DApps), unlike Ethereum. The platform provides only basic Web3 features, such as a token issuance capability and support for native NFTs under the XLS-20 standard, which was introduced in 2022.
The XRPL Web3 ecosystem remains small, with its modest DeFi sector holding $80 million in total value locked (TVL), as reported by DefiLlama. XRPL tokens collectively have a market capitalization of $468 million. Most of these are decentralized exchange (DEX) tokens (SOLO), meme coins (XRPM), along with wrapped Bitcoin and stablecoins.
As of now, the Web3 sector on XRPL remains niche, lagging behind established smart contract platforms like Ethereum and Solana.
Debate among experts on XRP’s role in a strategic reserve
Representatives from Ripple Labs have consistently advocated for fair treatment of cryptocurrencies, with CEO Brad Garlinghouse reiterating this stance on January 27.
Garlinghouse stated,
“In a multichain world, I believe we need a level playing field instead of a competition between tokens. If a government digital asset reserve is established, it should represent the entire industry, not be limited to one token (be it BTC, XRP, or any other).”
However, not all cryptocurrencies serve identical functions. Bitcoin’s chief role is to act as a “geopolitically neutral asset akin to gold,” as noted by crypto analyst Willy Woo. XRP’s purpose remains somewhat ambiguous, yet few individuals in the cryptocurrency community would contend that it could stand as an independent currency.
This ambiguity arises primarily from one of Ripple’s more contentious features—its permissioned structure. Unlike Bitcoin and Ethereum, XRP does not depend on miners or staking to secure its network. Instead, it operates via a Unique Node List, a collection of trusted validators responsible for transaction approvals. While this enhances efficiency and speed, it prompts concerns regarding censorship, corruption, and security vulnerabilities.
Bitcoin advocate and Casa co-founder Jameson Lopp expressed strong sentiments regarding XRP’s prospects:
“There’s Bitcoin, then there’s Crypto, and then there’s Ripple. Ripple has criticized Bitcoin at a level that only rivals BSV’s legal disputes. Ripple seeks to enable CBDCs and has consistently oriented itself around servicing banks. Few initiatives are as opposed to Bitcoin as Ripple.”
There is a clear divide between Bitcoin enthusiasts and Ripple supporters, especially after Ripple co-founder Chris Larsen collaborated with Greenpeace to launch an anti-Bitcoin campaign.
Nonetheless, Lopp’s analogy to CBDCs holds some validity, given the permissioned nature of XRPL. It reflects a prevalent perception within the crypto sphere that XRP is more a banking tool than a genuinely independent cryptocurrency.
Even though the XRPL blockchain is extensively applied in banking, the utility of XRP is still a subject of debate. This is emphasized by the fact that around 55% of the 100 billion pre-mined coins remain in the possession of Ripple Labs, raising concerns about potential market manipulation and the long-term viability of the coin.
This content is intended for informational purposes only and should not be construed as legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views or opinions of any organization.