XRP vs. Ethereum: Why Ethereum Could Soar

Key Points
The way each cryptocurrency is structured can have a big impact on investor returns.
If Ripple can sell more stablecoin solutions, it may not benefit XRP holders.
Increased transactions on Ethereum translate to higher fee revenue and value for investors.
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Ethereum (CRYPTO: ETH) and XRP (CRYPTO: XRP) have a lot in common. Both sit in the top five cryptocurrencies by market cap. They're also native to two popular smart-contract blockchains, which means developers can use them to build other projects. However, they differ greatly in purpose and structure.
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As the crypto industry stands on the precipice of huge change, those differences could mean one stagnates while the other soars. In this article, I'll break down why Ethereum is better positioned to gain from growing stablecoin adoption.
Comparing XRP and Ethereum
Ethereum's price rose 24% in the past year to close at $2,175 on March 15. In contrast, XRP declined 34% in the same period, closing at $1.45. Both are trading at about 55% lower than their all-time highs, suggesting that they have room to rebound if crypto investment sentiment recovers.
The XRP Ledger, the blockchain behind XRP, was designed to reduce the friction in cross-border payments. It is considerably faster and cheaper than Ethereum, which is a broad smart-contract platform with multiple uses. Ethereum has almost 45 times more full-time developers on its network, which bodes well for long-term evolution. It also accounts for almost 44,000% more of the stablecoin market than the XRP Ledger.
| Metric | Ethereum | XRP / XRP Ledger |
|---|---|---|
| Market cap | $279 billion | $93 billion |
| Value of stablecoins on-chain | $164 billion | $374 million |
| DeFi total value locked (TVL) | $59 billion | $51 million |
| Transactions per second | 15-30 | Up to 1,500 |
| Full-time developers | 3,611 | 81 |
Stablecoin growth affects Ethereum and XRP differently
Stablecoins surged last year as confidence in these on-chain versions of traditional currencies grew. Research from The Motley Fool shows that 50% of U.S. consumers are open to using them. The big advantage is that they reduce the costs involved in making payments and moving money, particularly internationally.
We're talking about an industry that could grow from about $325 billion today to as much as $4 trillion by 2030. Buying cryptocurrencies like Ethereum or XRP is one way to get exposure. However, because of the way each is structured, Ethereum is a much better bet.
Without getting too bogged down in its mechanics, Ethereum's relatively high fees and built-in token burning mean it gains value from increased transaction volume. More stablecoin transactions would almost certainly push its price up. A higher Ethereum price is good for the Ethereum Foundation, a non-profit that supports the ecosystem. But it doesn't directly profit from stablecoin growth on its network. Plus, it plans to reduce its role as the blockchain matures.
In contrast, Ripple, the company behind XRP, is a private company that charges clients for its services. It is building its stablecoin business, and recently bought a stablecoin platform called Rail. On its face, that sounds good for XRP. The hitch for XRP holders is that since Ripple is selling those services, the main beneficiaries are its private investors. The XRP Ledger gets used, but the transaction fees -- about $0.0002 -- are so minuscule that it doesn't add much value for XRP holders.
There are many ways the stablecoin story might unfold. For example, traditional players may build their own blockchains rather than rely on public ones. But one thing is certain. The structure behind the two blockchains means Ethereum investors are much better positioned to benefit from stablecoin growth than those holding XRP.
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Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.