Crypto is back in the headlines as Bitcoin has seen a recent price surge, up more than 10% this month. Although the "OG" crypto gets most of the media focus, another coin that's been around for some time, XRP (XRP +0.75%), presents a unique opportunity.
XRP is the functional token of the RippleNet payment service. This digital money-transfer network can send money across international borders both quickly and cheaply.
Currently trading just above $0.50, XRP is well below its all-time high of $2.70. Is now the time to invest?
XRP has a unique value proposition
XRP is unique in the world of cryptocurrency in that it is intended to be used by institutions as opposed to the general public. Of course, anyone can buy and use XRP, but its primary use case is to facilitate transactions and payments between banks and other financial institutions.
It was developed and launched in 2012 by a team of developers hoping to solve the inherent problems in Bitcoin as the developers saw it. These included inefficiencies, slow transaction times, high monetary costs, and environmental impact. XRP is designed to address all of these.
CRYPTO: XRP
Key Data Points
XRP is fast
XRP's main target, banks, primarily use a settlement network called the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Sending money between banks domestically or across borders can take days. Bitcoin payments often take 10 minutes or more. XRP transactions, on the other hand, take a few seconds.
This is one of the biggest things XRP has going for it.
XRP is cheap
Bitcoin transaction fees can be as much as $20 or $30 and could be much more depending on market conditions. Normal RippleNet transactions cost a fraction of a cent. For large cross-border payments between banks, RippleNet can cut costs by about 60% versus SWIFT.
XRP is scalable
Bitcoin can only process a handful of transactions per second. RippleNet can handle up to 1,500 -- potentially more with further optimization.
XRP is sustainable
Much ink has been spilled on the environmental costs of Bitcoin. The network uses as much power as many countries do in a year. RippleNet uses just 50 households' worth of power a year.
It's not all rosy for XRP
The cryptocurrency has some issues as well. The world of crypto puts an emphasis on "decentralization" and many find XRP to be far too centralized for their taste. Ripple Labs is the name of the company that grew out of the original development team. The Ripple company is technically independent of the XRP cryptocurrency, but that independence is not absolute -- and many investors still use Ripple as a catch-all name for XRP, RippleNet, and Ripple Labs. It's not hard to see why Ripple (the company) holding nearly $50 billion XRP in escrow could be a concern for investors.
The fact that Ripple is in a four-year fight with the Securities and Exchange Commission (SEC) makes this relationship even more concerning. The SEC alleged XRP is essentially a security and the company illegally raised funds with it. Although a judge has ruled largely in Ripple's favor, the case is still in limbo as appeals are filed.
Furthermore, and this is a biggie, the banks that utilize Ripple's payment network do so without needing to utilize the coin itself. This undercuts the main value proposition XRP has. The promise of widespread use by the banking system and the ensuing spike in demand seems unlikely at this point.
The verdict
In my view, there are better alternatives. XRP does deliver on speed and efficiency, but it is not the only cryptocurrency to do so. It seems clear at this point that although Ripple has found success in the Banking community, that hasn't translated to more use of the coin. I think there are better investments out there, including Bitcoin. Even under $0.60, I would choose to put my money elsewhere.
