At the end of December, Solana (Sol -3.46%) I turned over XRP (XRP -2.57%) To become the fifth most valuable cryptocurrency. This capped off an impressive run for Solana in 2023. At one point, Solana stock was up more than 1,000% for the year.
All this made me think that it was time to forget about XRP. The former cryptocurrency market darling remains embroiled in a lawsuit before the Securities and Exchange Commission (SEC). Until this regulatory issue is resolved, XRP shows no signs of breaching the $1 price level. Compare that with Solana, who now seems to have a very bright future ahead of him. Let's take a closer look.
Solana is on his way to taking down Ethereum
Solana's basic investment thesis is that it's new Ethereum (ETH -3.90%). Since 2020, cryptocurrency investors have been touting Solana as a potential “Ethereum killer,” and it appears that this scenario is finally starting to play out. While there are plenty of top-tier blockchain competitors, Solana seems to be the one with the best chance of replacing Ethereum.
Simply put, Solana is a faster, cheaper and more efficient version of Ethereum. While Ethereum had to undergo a very complex technical transformation (known as The Merge) to become an energy-efficient, proof-of-stake blockchain in 2022, Solana went live as a proof-of-stake blockchain. Whether it's transaction processing speed or overall transaction throughput, Solana seems to have the superior technology.
Of course, the “best technology” doesn't always win. There are plenty of other factors to take into consideration, including first-mover advantage and network effects. That's why it took Solana nearly four years to finally catch up with Ethereum. But it certainly seems that the investment narrative around Solana is starting to change. A number of very smart investors – including Cathie Wood of Ark Invest – now appear to be buying into the idea of Solana as a faster, more cost-effective version of Ethereum.
Solana has some big growth catalysts
While Ethereum has been around longer than Solana, Solana has one thing Ethereum does not: a mobile crypto strategy. First announced in the summer of 2022, the mobile crypto strategy has been steadily taking shape over the past 18 months.
Image source: Getty Images.
Last May, Solana finally launched the first ever encrypted mobile phone, the Saga. The goal of the Cryptophone was to usher in a new, mobile-first approach to encryption. Think about it – today's smartphones are not cryptocurrency-based. It is not designed for cryptocurrency users, cryptocurrency wallets, or for purchasing non-fungible tokens (NFTs) while waiting in line for a coffee from your favorite barista. So, Solana – led by a talented team of ex Qualcomm (kcom 0.84%) The engineers – they decided to change all that.
The mobile crypto strategy also includes a mobile payment component. In February 2022, Solana launched Solana Pay, a blockchain-based payment protocol for merchants who want to accept cryptocurrencies at the point of sale. Again, this is based on a very intuitive idea: some people want to pay with cryptocurrencies, and most merchants want to avoid high credit card processing fees. As a proof of concept, Solana announced integration with Shopify (Shop 0.12%) At the end of August.
Yes, of course, these mobile encryption initiatives may fail completely. But they represent major types of growth catalysts that XRP does not currently have. As long as the legal drama with the SEC continues (which may continue until the end of 2024), it is unlikely that XRP will be able to do anything in the US market.
At the same time, the company behind the XRP token (Ripple Labs) is hemorrhaging cash to pay lawyers. According to Ripple executives, these legal costs could reach more than $200 million.
Before you dump all your XRP tokens
Although I am very confident that Solana can be an unstoppable cryptocurrency in 2024, there is also a possibility that the price of XRP will rise this year. Last summer, when XRP scored a major legal win in its ongoing SEC lawsuit, the price of XRP nearly doubled overnight. Therefore, there is upside potential. If you currently own XRP tokens, it may be worth waiting to see what develops.
But in the long run, Solana looks like a much better investment. Once Solana flipped XRP at the end of the year, it should have been a wake-up call for XRP investors. It's finally time to look for a new crypto champion, and it now appears that champion is Solana.
Dominic Basulto has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum, Qualcomm, Shopify, Solana, and XRP. The Motley Fool has a disclosure policy.
