Can XRP Make You a Millionaire? Here's What Sets It Apart From Bitcoin

Many investors feel that cryptocurrencies are the future. MicroStrategy (MSTR -5.62%) chairman Michael Saylor sees Bitcoin (BTC -1.42%) as the only

Many investors are bullish on cryptocurrencies for the long haul. But when discussing the potential for astronomical gains, they usually focus on Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH). Could Ripple (CRYPTO:XRP) also make investors millionaires?

Let's compare XRP with Bitcoin and Ethereum. Then we'll examine the use case for XRP and how it could drive demand for the cryptocurrency. Finally, we'll assess the potential for XRP to make investors millionaires.

XRP vs. Bitcoin and Ethereum

XRP, Bitcoin, and Ether are all cryptocurrencies. They use publicly viewable transaction ledgers that are secured against unauthorized changes or fraud by multiple layers of strong encryption.

However, that's pretty much where the similarities between these three assets end. Bitcoin is designed to be a long-term store of monetary value. The whitepaper for Bitcoin compares the cryptocurrency to physical gold. The precious metal is scarce and expensive to mine from veins of ore in the earth. Bitcoin is a digital coin with a limited supply that's programmed into the underlying computer code. The total supply of Bitcoin will never exceed 21 million, and 94% of that supply is already circulating on the open market.

XRP also has a limited supply, but it was created with a completely different purpose in mind. XRP is the functional token for the RippleNet payments service, which is operated by Ripple Labs in partnership with dozens of local banks around the world. The goal of RippleNet is to facilitate fast, low-fee, and secure money transfers across international borders. Since the system was launched in 2012, XRP tokens have been used to transfer more than $2.8 trillion.

RippleNet's efficiency could revolutionize global payments

The question, then, isn't whether XRP can measure up to Bitcoin or Ethereum, but whether there's a long-term need for RippleNet's international money transfers. If you've ever sent money abroad or received a payment from overseas recently, you'll probably answer that question with a resounding "yes."

Payments that cross borders often take several days to clear, with multiple middlemen taking a cut along the way. Unfavorable exchange rates also tend to keep more money in the hands of payment processors. RippleNet currently charges 0.00001 XRP per transaction, even for very large money transfers. At today's XRP price, that works out to around 50 millionths of a dollar per transfer, or 5 thousandths of a cent. Each transaction is settled in three to six seconds.

So, there's a clear preference for Ripple and XRP over old-school banking methods for a good reason. This is already a successful service that will likely continue to grow as people integrate cryptocurrencies into their daily lives.

Where XRP could go after the SEC challenge

XRP has largely been battered by a legal challenge from the U.S. Securities and Exchange Commission (SEC), which alleged that Ripple Labs sold tokens to investors without first registering them as stock-like securities. However, the courts have ruled in favor of Ripple, and the SEC may choose not to appeal the verdict. The deadline for the Commission to file an appeal is October 7.

The cryptocurrency didn't soar when the legal dust settled. The coin price fell more than 50% when the SEC filed its lawsuit in December 2020, and XRP's chart has looked like a cross between Bitcoin and Ethereum ever since.

From a purely market mechanics perspective, XRP looks like a lower-priced version of Bitcoin. However, the two currencies are fundamentally different, so that may not be an accurate analysis.

It's tough to say with certainty how much further XRP could rise from its current price of around $0.56 per token. But I do expect the RippleNet payments service to gain traction over the years, and the XRP token should increase in value as a result. I wouldn't classify XRP as a get-rich-quick scheme, but patient investors are likely to reap substantial returns over the long term.