In November 2018, everyone’s attention turned to the Bitcoin Cash hard fork. However, in the background, something just as notable was happening: XRP overtook Ethereum to become the most valuable altcoin in the world. Initially, the gap was just a few hundred thousand dollars. A month later, the gap had grown to an impressive $4 billion.
The tables have turned again. Ethereum took its former position back after a sustained price rally. The currency gained 10 percent in 24 hours on 2nd January, adding $2.1 billion to its market capitalization. This hike was higher than XRP’s which gained 2.66 percent. The difference gave Ethereum a lead of $500,000. This has increased since then and currently, XRP’s market cap is $2.2 billion behind Ethereum’s.
What’s XRP’s Real Market Cap?
The race for the top altcoin should be as easy as looking at the numbers. However, the XRP community was quick to point out the inaccuracies in play. The market cap of most cryptos is calculated by getting the product of its circulating supply and the average price. This is the method used by CoinMarketCap, the leading market cap data website.
There are 40.7 billion XRP tokens in supply. These are the tokens that investors own and which they can trade. In the same way, there are 17.4 million bitcoins, 104 million ether, and 59.8 million litecoins. However, XRP is a bit unique.
With the aforementioned cryptos, new coins are generated through mining. With XRP, all the coins were pre-mined, up to a tune of 100 billion tokens. Ripple Labs decided to lock up the extra 55 billion tokens in an escrow to protect the integrity of the market.
The Ripple CEO, Brad Garlinghouse explained at the time:
By securing the lion’s share of our XRP, investors can now mathematically verify the maximum supply of XRP that can enter the market.
Ripple releases the escrowed tokens, one billion every month. The company then decides whether or not to sell them depending on the need for fiat currencies to fund projects. If the company decides against selling the released tokens, it places them in a new cryptographically-secured escrow account.
According to many XRP enthusiasts, this huge volume of tokens must be taken into account in calculating the total market cap. By accounting for these tokens, the total market cap for XRP would skyrocket and hit $36 billion. This is more than twice that of Ethereum.
The Supremacy Battle
In January last year, XRP hit its all-time-high price at $3.78. Had the 55 billion escrowed tokens been factored in, the market cap would have stood at an incredible $378 billion. At the time, Bitcoin’s market cap stood at $250 billion. This would have given XRP the throne by a very wide margin. Even at its highest, Bitcoin’s market cap only hit $338 billion.
And while the XRP community calls for the inclusion of the escrowed tokens, it’s not as simple. For one, the increased volume could drive down the price. In fact, this was one of the key reasons the Ripple team escrowed the tokens.
Garlinghouse explained:
Despite this four-year track record we have heard concerns in the market about uncertainty surrounding our ongoing XRP distribution. The root of this uncertainty is the notion that Ripple might one day sell its 61.68B XRP in the market at any time – a scenario that would be bad for Ripple
The debate about the most valuable altcoins will continue for the foreseeable future. In the meantime, Ethereum is being recognized by most crypto enthusiasts as the king of altcoins.
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