Key Points
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There are a few very superficial similarities between XRP and Dogecoin.
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XRP depends on financial businesses using it as a tool.
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Dogecoin depends on hype to succeed.
Some people have said that XRP (CRYPTO: XRP) is a meme coin of sorts, just like Dogecoin (CRYPTO: DOGE). While that’s a pretty big exaggeration, from one perspective it does have a granule of truth; both coins can see their prices move by quite a bit as a result of hype and market sentiment more generally.
But there’s a lot more to the story here. So, which of these two assets is a better purchase with $1,000, assuming you’re willing to hold it for at least three years?
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XRP has a real investment thesis
XRP is the native asset of the XRP Ledger (XRPL), a public blockchain originally built to move value quickly. Its transactions typically settle in three to five seconds, and transaction costs are usually a fraction of a penny, which makes it ideal for tasks that financial institutions need to perform often, like money transfers.
In terms of its appeal to institutions, the coin’s issuer, Ripple, is building a suite of financial services and ledger features that settle in XRP. These features and services include provisioning for on-chain asset management, strong regulatory compliance tooling, and, in the near future, the chain will also offer confidential transactions as well as native lending and borrowing.
Thus, for the coin to gain in value, it needs to continue to convince financial organizations to onboard their capital to the network and utilize Ripple’s offerings to accomplish their business tasks. There are some early signs that the process is working; on the seven-day period ending on Feb. 27, the chain’s decentralized exchanges (DEXes) reported $55 million in trading volume, up 24% week over week.
Dogecoin is a leaky car without an engine
Dogecoin is a meme coin, but it’s a bit more complicated than most of the younger assets in its class.
Its chain is secured by proof-of-work (PoW), meaning that miners do computational work to earn newly issued coins. Its supply policy is deliberately inflationary, with a fixed issuance of 5 billion new coins per year, and it currently has roughly 170 billion coins in circulation. So, that steady new issuance implies about 2.9% in annual dilution for holders, though that’ll decrease somewhat over time as the circulating supply gets larger.
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That wouldn’t be a problem if the coin had a way to drive demand, so its price grew faster than its supply inflation.
Alas, there is no such mechanism. There are no features or utility that would credibly encourage anyone to buy Dogecoin, and its price is solely reliant on hype cycles and market sentiment. It does not have an investment thesis, and you should not buy it.
Therefore, if you’re looking to invest $1,000 in crypto and hold it for three years, XRP is the only real choice between these two coins.
Should you buy stock in XRP right now?
Before you buy stock in XRP, consider this:
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.