Better Buy: XRP vs. Ethereum
Key Points
Ethereum has built a strong user base and frequently generates over $10 million in daily app fees.
XRP's main purpose is to facilitate cross-border payments for banks, but it hasn't gained much adoption yet.
- 10 stocks we like better than Ethereum ›
XRP (CRYPTO: XRP) and Ethereum (CRYPTO: ETH) are two of the most popular altcoins -- a term for cryptocurrencies other than market leader Bitcoin. They're also both smart contract blockchains where developers can build decentralized apps (dApps), offering a vast range of potential uses.
ETH tokens are the native cryptocurrency of the Ethereum blockchain, and XRP tokens fill the same role on the XRP Ledger (XRPL). But which one is the better investment right now? While both have their merits, one has a significant advantage.
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Ethereum is far ahead in terms of usage
Despite launching three years after XRP, Ethereum has built the most widely used blockchain network. There's about $68 billion of total value locked (TVL) into smart contracts on Ethereum, based on DefiLlama data from Dec. 5. Ethereum also often generates over $10 million in app fees per day.
The XRPL introduced smart contract capabilities only last month, and it currently has about $68 million in TVL. Daily app fees often don't even crack $1,000.
In fairness, the XRPL is still in the early stages as a smart contract blockchain. Ethereum has been building its user base for a decade. XRP also has a different primary use case than Ethereum. The issuer, Ripple, operates a blockchain payments network that financial institutions can use for fast and cheap cross-border transactions. XRP serves as a bridge currency on the network that facilitates transfers when multiple currencies are involved.
Although over 300 banks utilize Ripple's payments network, most don't use XRP. That may change in the future, but for now, this remains another area where XRP hasn't gained significant adoption.
Ethereum doesn't have that problem. It's the network of choice for many of the most popular uses of blockchain technology, including stablecoins and decentralized finance (DeFi).
Based on the current positions of these cryptocurrencies, I'd invest in Ethereum if I could pick only one. That said, you could also add some of both to your crypto portfolio, as they each have the potential to be successful.
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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.
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