With the crypto sails gaining significant tailwinds from the Trump administration, investors and more-traditional companies no longer have to worry as much about regulatory concerns.
Now, the question boils down to which cryptocurrencies present the best risk-reward proposition. XRP (XRP 3.87%), the world’s third-largest cryptocurrency, has soared over 345% in the past year, while the lesser-known TRON (TRON -1.91%) has nearly doubled over the past year. It is now the 10th-largest cryptocurrency in the world, with a market cap of just under $30 billion. Which is the better buy?
If there’s one cryptocurrency to compare TRON to, it’s definitely Ethereum, the world’s second-largest crypto. In fact, TRON started as an ERC-20 token, meaning it was built on Ethereum’s network and had to meet a certain set of protocols.
But in 2018, developers moved TRON onto its own network, which has evolved into a place for developers to build decentralized applications (dApps) with smart-contract functionality.
Similar to Ethereum, TRON’s network uses a proof-of-stake (PoS) governing mechanism, in which investors stake their tokens to the network in order to have a chance to validate transactions and create new blocks. The more tokens investors hold, the better their chances to be chosen by the network and earn rewards. However, TRON uses a delegated PoS governing mechanism.
Delegated PoS solves an issue with traditional PoS that some view as a problem. Because traditional PoS elects those with a higher amount of tokens staked, there is more centralization in the network than some crypto investors would like to see in a decentralized network.
Delegated PoS solves this issue by having investors vote for delegates to validate transactions, choosing those they believe will act in the network’s best interest. This also allows transactions to be validated more quickly, saving energy and time and making the network more scalable.
TRON can process up to 2,000 transactions per second (TPS). While Ethereum wants to one day process 100,000 TPS, the network remains far away from this goal.
As mentioned above, the main use for TRON is in dApps, and it has very low transaction fees right now. There are now over 1,900 dApps on its network, according to crypto news site CoinLaw, and the token ranks in the top three when it comes to daily user count, along with Ethereum.
After finally seeing an end to a multiyear lawsuit between Ripple, the company behind XRP, and the U.S. Securities and Exchange Commission, XRP made up for lost time and saw its price soar. But the next leg higher will likely need to be driven by further progress in international payments, where some like Ripple CEO Brad Garlinghouse see lots of opportunity to create more demand for the token.
XRP’s governing consensus mechanism is different from PoS and the original proof-of-work consensus mechanism, relying on a unique list of nodes the network believes will not collude with one another to process transactions. Some investors believe this creates less of a decentralized network, but the positives are a faster network that can process up to 1,500 transactions per second and the ability to more easily change incorrect transactions, which may be more appealing to potential corporate customers.
Ripple is a company that has leveraged XRP’s fast network for international payments for more-traditional banks. Using Ripple’s payments solution, companies can send payments with stablecoins or in a local currency to businesses or individuals globally without needing to hold digital payments, and settle those payments instantly at any time of the day or week. XRP provides on-demand liquidity, so banks don’t need to pre-fund accounts, which gives them much more flexibility with their own liquidity and capital.
Garlinghouse believes this network will become more popular and could cut into the traditional way banks send payments globally using the payment messaging system SWIFT, or the Society for Worldwide Interbank Financial Telecommunications.
Both XRP and TRON show promise because their networks have real-world utility, which is the best way to evaluate cryptocurrencies for long-term investment, in my view. The downside is they both have competition from other networks that focus on dApps or that can process thousands of TPS and therefore potentially become players in international payments.
While I would still label both of these tokens as more speculative buys right now, I still favor XRP, largely because of its ties to Ripple, which is making progress in bridging the gap between traditional finance and crypto.
