Better Crypto Buy: XRP vs. Dogecoin

XRP (CRYPTO: XRP) and Dogecoin (CRYPTO: DOGE) are both top 10 cryptocurrencies -- and that's where their similarities end. XRP is all business, with payments company Ripple developing it to make international money transfers faster and more affordable. Dogecoin is all amusement, created to poke fun at price speculation surrounding cryptocurrencies.

On that basis, XRP may seem like the better investment. However, the cryptocurrency market isn't known for behaving rationally, and meme coins have outperformed serious projects in the past. So, are you better off with XRP or Dogecoin in your crypto portfolio? Let's find out.

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The long-term outlook favors XRP

XRP is an interesting investment because of the role it serves on Ripple's blockchain payments network. Financial institutions can use XRP as a bridge currency in cross-border payments through the network's on-demand liquidity feature. Instead of needing accounts pre-funded with different currencies, they can simply convert payments to XRP, which can then be converted to the recipient's currency upon arrival.

The fact that XRP has real-world utility gives it a substantial advantage over Dogecoin as an investment. If enough banks decide to use XRP, it will create demand and drive up the value.

Dogecoin, on the other hand, doesn't have much of a use case. You can use it as a payment method, but the same is true with any other cryptocurrency. Without any unique source of value, Dogecoin is dependent on speculation and hype.

The case for Dogecoin

There are arguments to be made for holding Dogecoin over XRP, though. Even though they're both large cryptocurrencies, XRP is quite a bit larger -- it has a market cap of $135 billion, over five times higher than Dogecoin ($24 billion, both as of Nov. 14). It will take a lot more money to push XRP's price up than it will for Dogecoin to go on a run.

XRP also has centralization concerns. While it is technically decentralized, with independent validator nodes confirming transactions, Ripple has influence in selecting validators and in the protocol that those validators follow. It also holds over 35 billion XRP tokens in escrow out of a total supply of 100 billion tokens. Ripple releases 1 billion tokens monthly to fund operations, and then puts unused tokens back into escrow.

Which cryptocurrency is the better buy?

XRP seems more likely to grow in value over the next five to 10 years than Dogecoin. If you're deciding between the two of them, that's the one I'd pick.

That said, XRP is highly risky and largely unproven. While over 300 financial institutions reportedly use Ripple's services, most haven't tried XRP, because they don't need it. XRP has potential, but adoption will need to pick up significantly to justify the coin's market cap.

Cryptocurrency as a whole should only make up a small portion of your portfolio, since it's so volatile. You may also want to buy multiple types of cryptocurrency instead of going all-in on one, like XRP. A safer bet would be to invest in XRP and a few others, such as Bitcoin and Ethereum, to have some diversification.

Lyle Daly has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.