At the end of December, Solana (SOL -5.25%) flipped XRP (XRP -1.80%) to become the fifth-most valuable cryptocurrency. This capped off an impressive run for Solana in 2023. At one point, Solana was up more than 1,000% for the year.
All this has me thinking it's finally time to forget about XRP. The former crypto market darling is still bogged down in litigation with the Securities and Exchange Commission (SEC). Until that regulatory matter is cleared up, XRP shows no signs of breaking through the $1 price level. Contrast that to Solana, which now seems to have a very bright future ahead of it. Let's take a closer look.
Solana is on pace to topple Ethereum
The primary investment thesis for Solana is that it is the new Ethereum (ETH -0.28%). Since 2020, crypto investors have been touting Solana as a potential "Ethereum killer," and that scenario now seems to be finally playing out. While there are plenty of other Layer 1 blockchain challengers out there, Solana seems to be the one with the best chance of displacing Ethereum.
Simply stated, Solana is a faster, cheaper, more efficient version of Ethereum. While Ethereum had to pull off a very complicated technical transformation (known as The Merge) to become an energy-efficient, proof-of-stake blockchain back in 2022, Solana launched right out of the box as a proof-of-stake blockchain. Whether it's transaction processing speed or overall transaction throughput, Solana seems to have the superior technology.
Granted, the "best technology" does not always win. There are a lot of other factors to consider, including first-mover advantage and network effects. That's why Solana has taken nearly four years to finally catch up to Ethereum. But the investment narrative around Solana certainly seems to be shifting. A number of very smart investors -- including Cathie Wood of Ark Invest -- now seem to buy into the idea of Solana as a faster, more cost-efficient version of Ethereum.
Solana has some big-time growth catalysts in place
While Ethereum has been around longer than Solana, Solana has one thing Ethereum does not: a mobile crypto strategy. First announced back in the summer of 2022, this mobile crypto strategy has steadily been taking shape over the past 18 months.
Image source: Getty Images.
Last May, Solana finally launched the first-ever mobile crypto phone, the Saga. The goal of the crypto phone was to usher in a new mobile-first approach to crypto. Think about it -- today's smartphones are not crypto-native. They are designed for neither crypto users nor crypto wallets or for buying non-fungible tokens (NFTs) while waiting in line for a coffee from your favorite barista. So, Solana -- led by a talented team of former Qualcomm (QCOM 1.45%) engineers -- decided to change all that.
This mobile crypto strategy also includes a mobile payments component. In February 2022, Solana launched Solana Pay, a blockchain-based payment protocol for merchants who want to accept crypto at the point of sale. Again, this builds on a very intuitive idea: Some people want to pay with crypto, and most merchants want to avoid high credit card processing fees. As a proof-of-concept, Solana announced an integration with Shopify (SHOP 1.11%) at the end of August.
Yes, of course, these mobile crypto initiatives could absolutely fail. But they are the types of big-time growth catalysts that XRP simply does not have right now. As long as the legal drama with the SEC stretches on (which could be until the end of 2024), it's highly unlikely that XRP will be able to do much of anything in the U.S. market.
At the same time, the company behind the XRP token (Ripple Labs) is hemorrhaging cash to pay lawyers. According to Ripple executives, these legal costs could wind up being more than $200 million.
Before you dump all your XRP tokens
While I'm highly confident that Solana could be an unstoppable crypto in 2024, there's also a chance that XRP could soar in price this year. Last summer, when XRP scored a major legal win in its ongoing SEC court case, the price of XRP doubled nearly overnight. So, there is upside potential. If you're currently holding XRP tokens, it could be worth waiting to see what develops.
Over a long-term horizon, though, Solana appears to be a far superior investment. As soon as Solana flipped XRP at year-end, that should have been a wake-up call to XRP investors. It's finally time to look for a new crypto champion, and right now, that champion appears to be Solana.
