Source: Cointelegraph Original: "{title}"
The third-largest cryptocurrency by market capitalization, Ripple's XRP, gained nationwide recognition after President Trump mentioned this "valuable cryptocurrency" alongside Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Cardano (ADA), positioning it as part of the United States' planned strategic cryptocurrency reserves.
Trump's executive order signed on March 6 established a new framework for these altcoins—a digital asset reserve managed by the U.S. Treasury.
While the cryptocurrency community remains divided on whether XRP is truly as valuable as President Trump claims, a deeper examination of the actual utility of this altcoin is necessary.
The Potential Role of XRP in Banking
The XRP Ledger (XRPL) was launched by Ripple Labs in 2012, designed for interbank settlements. It initially offered three enterprise solutions: xRapid, xCurrent, and xVia, which were later rebranded under the RippleNet framework. xCurrent is used for real-time messaging and settlement between banks, xVia is a payment interface that allows financial institutions to make payments through the Ripple network, and xRapid is now part of On-Demand Liquidity (ODL) for facilitating cross-border transactions.
In practice, only the ODL service truly requires the use of XRP; other services allow banks to use the Ripple network without holding the token. This means that the adoption of Ripple technology by banks does not always drive up the price of XRP.
Some of the world's largest banks have already utilized the xCurrent and xVia services, including American Express, Santander, Bank of America, and UBS Group. There is less data available regarding entities using the XRP-driven ODL service. Known adopters include Japan's major remittance service provider SBI Remit and Southeast Asia's leading remittance company Tranglo.
The Role of XRP in the Web3 Space
XRP is also used as a gas fee token. However, unlike the Ethereum network, where fees are paid to validators, XRP burns a small portion as a spam prevention mechanism.
XRP's role in the Web3 space is minimal. Unlike Ethereum, the Ripple network does not support complex smart contracts or decentralized applications (DApps). It only provides basic Web3 functionalities, such as a token issuance mechanism and support for native non-fungible tokens (NFTs) under the XLS-20 standard launched in 2022.
The Web3 ecosystem of the XRP Ledger is relatively small. According to DefiLlama, the total value locked (TVL) in its modest decentralized finance (DeFi) sector is $80 million. According to Xrpl.to, the total market capitalization of tokens on the XRP Ledger is $468 million. Most of these are decentralized exchange (DEX) tokens (SOLO) and meme coins (XRPM), along with wrapped Bitcoin and stablecoins.
So far, the Web3 space of the XRP Ledger remains a niche area, lagging behind true smart contract platforms like Ethereum and Solana.
Cryptocurrency Experts Scrutinize XRP's Role in Strategic Reserves
Representatives from Ripple Labs have long advocated for equal treatment of cryptocurrencies, with CEO Brad Garlinghouse reiterating this on January 27.
Garlinghouse stated, "We live in a multi-chain world, and I have always advocated for a level playing field rather than favoritism. If a government digital asset reserve is to be created, I believe it should represent the entire industry, not just one token (whether it's Bitcoin, XRP, or any other token)."
However, not all cryptocurrencies serve the same role. In the words of cryptocurrency analyst Willy Woo, Bitcoin's primary role is to be an asset that remains geopolitically neutral, like gold. The role of XRP remains less clear, but few in the cryptocurrency space would consider it a standalone currency.
This is mainly due to one of XRP's most unsettling characteristics—its permissioned nature. Unlike Bitcoin or Ethereum, the Ripple network does not rely on miners or staked tokens to secure the network. Instead, it uses a Unique Node List—a set of trusted validators responsible for approving transactions. While this optimizes speed and efficiency, it also raises concerns about censorship, corruption, and security risks.
Bitcoin supporter and co-founder of Casa, Jameson Lopp, was blunt when discussing XRP's potential: "There is Bitcoin, then there is cryptocurrency, and then there is XRP. The level of attack on Bitcoin by XRP can only be compared to the lawsuits from BSV. XRP clearly aims to power central bank digital currencies (CBDCs). They have always focused on serving banks. Few projects are as antithetical to Bitcoin as XRP."
Long-standing animosity exists between Bitcoin supporters and XRP supporters, especially after XRP co-founder Chris Larsen collaborated with Greenpeace to fund an anti-Bitcoin campaign.
However, given the permissioned nature of the XRP Ledger, Lopp's comparison to central bank digital currencies makes some sense. This reflects a common view in the cryptocurrency community that XRP is more of a banking tool than a truly independent cryptocurrency.
Despite the widespread use of the XRP Ledger blockchain in the banking sector, the actual utility of XRP remains a concerning issue. One fact that highlights this is that of the pre-mined 100 billion XRP, approximately 55% is still held by Ripple Labs. This concentration raises concerns about potential market manipulation and the long-term stability of the token.
This article is for general informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Related: SEC Delays Approval Decisions for XRP, Solana, Litecoin, and Dogecoin ETFs
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