Over the last four months or so, XRP (XRP 0.65%) has seen a five-fold increse in its price prompting significant developments in the blockchain platform, including offering investors the ability to tokenize short-term U.S. Treasuries through its blockchain. On Feb. 25, XRP's project roadmap got another significant update that make the cryptocurrency an even more compelling investment.
If you are looking to invest in the crypto space, and want to allocate $4,000 of your savings that aren't part of essential spending, XRP could be an excellent choice. Over the four years and beyond.
Let's go over each of the blockchain's planned upgrades to see how they make it a more attractive purchase than before.
CRYPTO: XRP
Key Data Points
1. More compliance features for institutional holders
Many types of investors hold XRP, but it's designed to be used by banks, currency exchange houses, and other financial institutions so that they can dodge currency exchange fees and international transfer costs when they transact with each other, which they need to do all the time. Those target users are beholden to their local laws, which can vary considerably from place to place. Therefore, holding XRP in a way that is compliant with those laws can be challenging.
So when Ripple, the company that issues XRP, said that it'd be introducing more tools for users to implement their compliance policies, it was a major bullish factor because it makes the coin far less burdensome to hold for its target holder base. When paired with the blockchain's newfound capability to store and track certain real-world assets, improving these compliance features is even more important than in the past, as the overall regulatory burden for users is increasing rather than decreasing.
Investors should expect that there will be more buying pressure for the coin from these financial institutions as a result, as they'll be more comfortable using it to transact now that they can have greater confidence in complying with the laws they're subject to.
2. An automated market maker
XRP's blockchain will now support an automated market maker (AMM) for its stablecoins, tokenized real-world assets, and other tokenized assets. That's a big deal for the banks that might want to buy and hold the coin.
AMMs have a handful of advantages, and you're probably already familiar with most of them. For instance, when you buy a stock, you probably know that there's a difference between the bid (the price buyers are willing to pay) and ask (the price sellers are offering to offload the asset) rates, known as the spread. Your broker tells you this information, and via an automated system, attempts to fill your order with the best price possible, which is to say, the lowest price if you're buying, and the highest price if you're selling. However, thanks to high volatility in prices, the spread in cryptocurrencies isn't always reasonable. But thanks to this upgrade, investors can expect more efficient price optimization.
For example, financial institutions can transact with larger sizes than they could before (which increases liquidity), as they will have more confidence that their transactions won't fall victim to inefficient pricing. For less-liquid (but still important) investments like tokenized real-world assets, that's especially important, so this move will certainly drive greater adoption of the coin, which is what makes this upgrade a new reason to buy it.
3. Data oracles for outside information
From a technical standpoint, it's often difficult to bring sources of data from outside a blockchain, like economic data, onto the chain in a way that's usable for the purpose of creating smart contracts or other types of automation. But now, XRP will have what's called a data oracle, which grants on-chain developers the ability to easily integrate outside information into contracts and similar on-chain programs.
Once again, this upgrade will make XRP a juicier option for its intended audience. Most investors who just hold it won't notice much of a difference, though.
4. Privacy-protecting transaction identifiers
In cryptocurrency, one of the fundamental problems is how to allow wallets to interact with each other in a way where the identity of the holders are verifiable, but so the holders themselves (or third parties) cannot determine with confidence who the transactors are. With its new upgrade implementing decentralized identities, XRP has a workaround for that issue, which may improve the privacy of those who choose to use it for transfers or other purposes.
The idea is to enable institutional investors to transact with others in a way that preserves privacy, but which also allows them to be compliant with the necessary regulations. Especially for larger transactions with real-world assets, this upgrade is important. For example, it's very hard to imagine making a major purchase like buying a house without having at least one of the parties involved being able to confirm that the other parties in the transaction are legitimate and who they claim to be.
Given that XRP is a sector leader in offering this capability, it's yet another reason to invest.
