Better Buy: Dogecoin vs. XRP

When it comes to the world of cryptocurrencies, without a doubt, Bitcoin gets most of the attention. This is totally justified, given its brand recognition, first-mover advantage, powerful network effects, and huge market cap of $2.2 trillion. But investors might be interested in seeing what other options exist.

Dogecoin (CRYPTO: DOGE) is a speculative meme coin that has soared in the past, although it has been extremely volatile. Another choice that perhaps has more real-world potential is XRP (CRYPTO: XRP). Between these two cryptocurrencies, which one is the better buy?

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This dog-inspired meme token depends on hype

It might be surprising to learn that Dogecoin was launched in 2013, making it one of the veterans in the digital asset market. It was built to simply be a funny alternative to Bitcoin. However, its market cap of $29.8 billion shows that it doesn't hold a candle to its competitor.

As a crypto with no true purpose, Dogecoin's price has been influenced mainly by various hype cycles. A public mention by a well-known businessperson or bullish fever might see the price rise quickly, only to come falling down again. Dogecoin has climbed 7,410% in the past five years (as of Oct. 16), but it trades 71% below its peak.

Dogecoin's adoption isn't really anything to write home about. It also has few developers working on its advancement, which isn't an encouraging sign.

Dogecoin's token economics also don't play to its advantage. Dogecoin's founders, who stopped working on the blockchain years ago, didn't want to put a cap on supply. There are currently 151 billion DOGE tokens in circulation, a massive sum that expands by 5 billion every year. Demand needs to outstrip this for the price to increase sustainably.

This crypto is nothing more than a tool for speculation. It's difficult for any long-term investor to consider owning it with a five- or 10-year time horizon.

XRP is trying to disrupt global payments

XRP stands out because it's actually trying to bring about a real-world use case. The main feature is the token's use as a way to send money across borders cheaply (costing fractions of a penny) and quickly (processing times in seconds). This works by converting the sender's fiat currency into XRP, sending it over the Ripple blockchain to the receiver, who then converts it to the home fiat currency.

Financial services is a massive market, so it's admirable that XRP wants to successfully carve out a niche and gain wider adoption. It's building a growing ecosystem of partners that can drive innovation as well.

However, it faces competitive threats that will get in the way. One obvious hurdle is the presence of huge financial institutions that have influence over how money moves around. This is a material money-making activity for them, so it makes sense that they won't stand idly by and let XRP encroach on their turf.

Another competitor is a newer phenomenon, which is the arrival of stablecoins. These are crypto assets that are backed by U.S. dollars or other assets. The total value of U.S. dollar-backed stablecoins is measured in the hundreds of billions of dollars. As the name suggests, they are stable because they're linked to liquid and widely accepted fiat currency. They also have the crypto-related capability of being transferred in stability. XRP did launch a stablecoin last year, but it's tiny.

And, of course, there's Bitcoin. To be fair, Bitcoin can only handle 5.5 transactions per second, and fees can sometimes be high. However, the biggest advantage is that it's decentralized and not controlled by a single entity. This neutral position is an incredibly valuable feature.

Despite lots of uncertainty, I still view XRP as the much better investment option than Dogecoin. Over the next decade, the former has more potential than the latter.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.