As the United States considers the creation of a strategic digital asset reserve, Ripple’s XRP — the third largest cryptocurrency by market capitalization — has been thrust into the spotlight. This comes after the former President Donald Trump acknowledged XRP as a significant cryptocurrency, alongside Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Cardano (ADA), in an executive order issued on March 6.
However, the crypto realm remains split over XRP’s true value and function. As such, it’s worth delving deeper into the altcoin’s utility.
Developed by Ripple Labs in 2012, XRP Ledger (XRPL) was crafted with the aim of facilitating interbank settlements. It initially offered three enterprise solutions — xRapid, xCurrent, and xVia — all of which have since been rebranded under the RippleNet umbrella. However, only On-Demand Liquidity (ODL) — the successor of xRapid — necessitates the use of XRP, implying that banks can adopt Ripple technology without ever having to hold the token.
While XRP is utilized as a gas token, its role in the Web3 sphere is relatively minor. Unlike Ethereum, Ripple doesn’t support complex smart contracts or decentralized apps (DApps). It only provides basic Web3 features, such as a token issuance mechanism and native NFT support under the XLS-20 standard, introduced in 2022.
There are differing opinions regarding XRP’s position in a strategic reserve. Ripple Labs CEO Brad Garlinghouse has continually championed equal treatment of cryptocurrencies. However, not all cryptocurrencies serve the same function — Bitcoin is often viewed as a “geopolitically neutral asset like gold,” whereas XRP’s role remains ambiguous. This is primarily due to Ripple’s permissioned nature. Unlike Bitcoin or Ethereum, Ripple doesn’t rely on miners or staked tokens to secure the network but on a Unique Node List (UNL) — a group of trusted validators responsible for approving transactions. This raises questions about potential censorship, corruption, and security risks.
Despite Ripple’s popularity in banking, concerns about XRP’s utility persist, particularly given that Ripple Labs still holds roughly 55% of the 100 billion pre-mined coins. This concentration of holdings raises concerns about potential market manipulation and the coin’s long-term stability.
This article is for informational purposes only and should not be construed as legal or investment advice. The opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
