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XRP vs Stablecoins: Will Ripple Ever Become Mainstream International Payment Processor?

Last Updated May 5, 2024 9:12 AM
Teuta Franjkovic
Last Updated May 5, 2024 9:12 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • XRP peaked at a $132 billion market cap in 2018, but currently sees minimal real-world use.
  • It remains the sixth most valuable cryptocurrency, but critics call it a “zombie coin” due to its lack of impact.
  • Unlike Bitcoin and Ethereum, Ripple boasts partnerships with banks but hasn’t dethroned the SWIFT system yet.
  • Ripple’s launch of a US dollar-backed stablecoin could provide a more stable and user-friendly payment option.

Riding the 2018 crypto frenzy , XRP peaked at a $132 billion market cap, briefly making co-founder Chris Larsen an $8 billion man.

Despite early ambitions, Ripple Labs currently sees minimal real-world financial activity . Few believe it’ll dethrone SWIFT, the dominant player handling trillions in daily bank transfers. Meanwhile, the growth of stablecoins threatens Ripple’s goal.

Ripple Targets Financial Whales While Crypto Market Churns

Notably, this aligns perfectly with Ripple Labs‘ target audience. While Bitcoin (BTC) and Ethereum (ETH) cater to broader audiences, Ripple explicitly targets the heavyweight players in the global financial sphere.

Conceived by Jed McCaleb and David Schwartz, the Ripple payments protocol has entranced the cryptocurrency sphere for an extensive period. Evolving continually, the cryptocurrency has solidified its position as one of the premier blockchain networks globally, garnering attention and forging strategic alliances with banks and financial institutions across the globe.

In its inaugural decade, numerous financial institutions, such as Bank of America and Banco Santander, eagerly joined Ripple’s pioneering network. To finance their ambitious venture, company executives issued 100 billion XRP tokens and sold $1.4 billion worth to the public. By early 2018, during a surge of cryptocurrency excitement, XRP reached a market cap of $132 billion, propelling cofounder and executive chairman Chris Larsen to a net worth of $8 billion.

High Price, Low Utility: Is Ripple’s XRP a $36 Billion Bluff?

However, Ripple Labs is often characterized as a “crypto zombie” because of its perceived lack of impact on global money flows and its failure to disrupt SWIFT, the Belgian banking cooperative which carries $5 trillion in daily interbank transfers.

Despite this, Ripple’s blockchain, primarily recording XRP transactions, continues to operate, albeit with limited utility. Despite that, XRP maintains a market value of $36 billion, making it the sixth biggest cryptocurrency. This contributes to cofounder Larsen’s estimated net worth of $3.2 billion – less than half his 2018 valuation.

Still, Ripple’s XRP ledger earned only $583,000 in fees  for processing transactions across its network last year. This, in turn, led to a high “price-to-sales” ratio of 61,689. While XRP tokens trade actively, primarily driven by speculation, alternatives like stablecoins such as Tether, with $100 billion in circulation, offer more efficient means for international blockchain payments.

Is Your Crypto Dead? Unveiling the $116 Billion Graveyard

Be it as it may, Ripple is not the only blockchain facing challenges. While Bitcoin and Ethereum dominate the blockchain landscape, over 50 blockchains, including at least 20 considered “functional zombies,” trade at values exceeding $1 billion. Despite this, the recent SEC approval of spot Bitcoin ETFs has propelled crypto markets to new heights. The 20 blockchains, with aspirations ranging from a universal world computer to an untraceable payments network, boast a combined market value of $116 billion , yet most have few active users.

However, the longevity of XRP and similar crypto projects is assured for the foreseeable future. With substantial reserves, Ripple and others can sustain operations for years to come. Ripple, for instance, holds $24 billion worth of XRP tokens in escrow , available for sale over the next four years.

Presently, the San Francisco-based company employs 900 individuals and continues to make moves, such as its recent acquisition of digital asset custody operation Standard Custody & Trust. Meanwhile, Ripple remains engaged in pilot crypto programs with central banks in various regions, including in Georgia and Palau.

Ripple Takes Aim at Mainstream with US Dollar Stablecoin Launch

However, not everything is so gloomy. Ripple’s recent entry into the stablecoin market marks a significant step in its quest to become a mainstream payment option. By launching a stablecoin pegged to the US dollar, Ripple is not only broadening its service offerings but also providing a more stable and reliable form of digital currency that could attract everyday users looking for less volatility in their digital transactions.

The move to provide transparent monthly attestation reports about its reserves could help build trust among users and regulators. This is crucial, considering the scrutiny that stablecoins, particularly Tether, have faced in the past regarding the adequacy and transparency of their reserves.

By positioning itself alongside giants like Tether and Circle, as well as newer entrants like PayPal, Ripple is navigating a competitive but rapidly growing market. Expanding its stablecoin offerings to regions beyond the US, such as Europe and Asia, could however further Ripple’s reach and influence, tapping into markets that might be looking for alternatives to the current stablecoin leaders.

Overall, Ripple’s strategic move into the stablecoin market could one day enhance its appeal as a versatile and reliable payment system, potentially accelerating its acceptance among a broader audience. For now, though, we will have to wait and see.

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