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Krippenreiter, a crypto researcher, recently discussed the possibility of XRP becoming obsolete due to Ripple’s imminent launch of the USD-backed stablecoin.
For context, Ripple recently made waves with its announcement of introducing a new stablecoin pegged to the US dollar on the XRP Ledger (XRPL) and Ethereum networks later this year.
Concerns of XRP Doom
This decision has sparked speculations and concerns within the crypto community regarding the potential impact on XRP’s relevance and utility for cross-border transactions. Notably, the payments firm largely depends on XRP for some transactions involving its cross-border payments service.
Recall that an on-chain sleuth, Mr. Huber, asked last month why Ripple had not introduced a liquid stablecoin on the XRPL after over a decade of development on the network. He theorized that the firm possibly wishes to continue leveraging XRP for its cross-border settlement service.
Now that Ripple seeks to launch a stablecoin, apprehensions about XRP’s abandonment have taken the spotlight. In response, Krippenreiter noted that the development does not particularly spell the end for XRP.
In an attempt to provide a basic overview of stablecoins, he noted that stablecoins are digital representations of real-world assets aimed at maintaining a stable value pegged to these assets.
[1/🧵] @Ripple announced today that they will introduce a new stablecoin pegged 1:1 to the US dollar.
🔸 Does this imply that XRP is doomed? 🤨
Let's learn together to fully understand the bigger picture. 👇 pic.twitter.com/NjvkdYCPDK
— Krippenreiter (@krippenreiter) April 5, 2024
Differences between Stablecoins and XRP
The crypto researcher then highlighted major differences between stablecoins and XRP. This move shows that XRP boasts some unique features that are not inherent in stablecoins, making it difficult for the upcoming Ripple stablecoin to replace it.
Neutrality, Counterparty Risks and Transparency
Unlike stablecoins, which inherently depend on issuers, institutions, or specific jurisdictions, XRP is a globally neutral token on the XRPL. This neutrality further underscores XRP’s resilience against counterparty risks, a looming concern plaguing stablecoin ecosystems.
Another factor Krippenreiter spotlighted is transparency. While stablecoin issuers undergo audits and attestations to validate off-chain reserve assets, the XRPL’s transparent ledger enables stakeholders to monitor XRP’s supply dynamics in real time.
Fragmentation, Dedollarization, and Adaptability
In terms of fragmentation, there are lots of different stablecoins, each backed by different companies, and they operate on various chains and platforms. However, the XRP Ledger (XRPL) is different. It has its own unique currency, XRP, and a built-in DEX.
The researcher called attention to the growing de-dollarization scheme across the globe. For context, several nations, especially those in BRICS, are looking to cut off their reliance on the dollar. Last August, the President of Brazil, a member of BRICS, called on BRICS nations to launch a common currency in this regard.
Basically, every stablecoin tied to the US dollar is only as good as the real US dollars it represents. This means if people lose trust in the US dollar, it could affect the value of these stablecoins, especially with the nations looking to dump the dollar.
Krippenreiter also discussed adaptability as a key difference between XRP and stablecoins. Notably, stablecoins have rules set by their issuers, meaning those companies can create or destroy stablecoins without everyone knowing exactly what’s happening behind the scenes.
On the other hand, XRP works differently. Since it is not a stablecoin and doesn’t rely on any backing, everyone using the XRP Ledger, represented by the DUNL validators, has to agree upon any changes in supply.
Ripple Stablecoin Would not Replace XRP
Contrary to concerns about XRP’s obsolescence, Krippenreiter’s analysis emphasizes its enduring relevance. Despite the imminent launch of Ripple’s stablecoin, XRP’s unique attributes, including speed and independence, ensure its continued prominence in the scene.
Citing on-chain data, Krippenreiter stressed the massive nature of the stablecoin market, which boasts a $153.5 billion valuation per DeFiLlama data. Stablecoins also dominate 51% of the Ethereum network and command over $875 million in volume on Uniswap.
Given stablecoins’ growing dominance in the crypto space, Krippenreiter believes Ripple’s stablecoin project could record success. He believes the new XRPL AMM functionality would lead to the launch of AMM with currency pairs involving XRP and the Ripple stablecoin.