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XRP soars: Why has zero venture capital, no smart contracts, and low user numbers led to a market value of $180 billion?

XRP soars: Why has zero venture capital, no smart contracts, and low user numbers led to a market value of $180 billion?

Chaincatcher2024/12/02 10:33
By: Deep Tide TechFlow
BTC-0.10%SOL+1.53%XRP-1.76%
The logic of the market never makes mistakes.

Author: goodalexander

Compiled by: Deep Tide TechFlow

Why does XRP make people "short-circuit"?

In the cryptocurrency space, the existence of XRP has disrupted many traditional narratives, especially the mainstream views on venture capital (VC) and protocol value.

The initial viewpoint suggested that "VCs always tend to sell off, so choosing meme coins is a strategy against VCs." However, this perspective is gradually being overturned. It turns out that what can truly counter VCs are not meme coins, but protocols with stable cash flows and long-term agreements based in the U.S. (often referred to as "dino coins").

First, Hyperliquid demonstrated how cash flow-driven startups can achieve success through community distribution. Jeff initially supported the project with his own trading funds, proving that a community-focused distribution model can be established without relying on VC support.

Secondly, XRP further indicates that cryptocurrency whales are more concerned with the reliability of the protocol, which is closely related to the protocol's longevity. The case of XRP challenges the core assumptions of VCs, particularly the following points that are especially unacceptable to them:

  • No VC exposure: XRP has received almost no VC investment, so VCs cannot profit from it.

  • Lack of smart contract technology: XRP does not rely on smart contracts, which contradicts the technological logic of most VC investments.

  • Contradiction between user numbers and value: XRP has only 20,000 active sending wallets but boasts a market cap of up to $180 billion, which completely opposes the traditional view that "protocol value needs a large user base to support it."

  • Focus on transaction sending: The core function of XRP is to send transactions, and the efficiency of this single function makes other multifunctional protocols seem inferior.

The "Divine Candle" Incident of XRP/SOL and Regulatory Warnings

The "Divine Candle" incident of XRP/SOL (i.e., the sudden price surge) occurred simultaneously with events of human exploitation, human trafficking, and suicide attempts appearing on Pump.fun's live stream. These events prompted reflection: when a protocol has a large user base but lacks oversight mechanisms, it can lead to extremely negative consequences, including the proliferation of illegal activities and the worsening of social issues. Such situations will ultimately attract the attention of regulatory bodies or law enforcement.

This leads to another controversial feature of XRP: Trust Lines. Trust Lines require users to actively establish trust relationships before accepting a certain token. This means users cannot arbitrarily send "racist tokens" or other unwanted tokens to any address. Although this design has been criticized as a "high-friction" user experience (UX), it effectively prevents low-quality usage while meeting the needs of high-quality users (such as banks). As the market gradually recognizes the potential issues that could arise without these safeguards, this mechanism is increasingly being accepted.

Bitcoin (BTC) has almost no application in such scenarios, yet its performance still far exceeds that of Ethereum (ETH), even though the latter claims to be able to "drive Web3." This is the initial stage of market change, but the SOL live stream incident truly helped people understand what "mass adoption beyond just purchasing" looks like and the importance of compliance.

Another significant change is that since Trump's election, the aggressive enforcement regime has effectively ended. This has transformed U.S.-based protocols from facing existential risks to being in a "protected by the Navy" state. Any attempts to scrutinize Ripple Labs may face strong opposition from the U.S. government.

The greatest risk XRP once faced was that the U.S. government might accuse its Unique Node List (UNL) of being involved in money transmission and impose OFAC fines, while allowing the SEC to sue each validator to force compliance. However, with the changing regulatory environment, these risks have gradually turned into advantages for XRP.

Protocols with similar risks (such as Cardano and XLM) have also taken more proactive actions as a result. Nowadays, the U.S. regulatory environment is viewed as an important tool against censorship.

Moreover, the unique position of the U.S. in the global financial system has also influenced this trend. The U.S. is one of the centers for global anonymous cash, as other countries find it difficult to enforce reporting requirements on U.S. financial institutions. Tether can be seen as an on-chain extension of this logic—a semi-compliant cash reserve pool with a scale of up to $135 billion. As long as these assets are denominated in U.S. dollars, the U.S. government does not care about the reporting requirements of other countries. This is also the reason behind Tether's closure of operations in Europe.

The U.S. aims to strengthen the global dominance of the dollar through financial innovation in the cryptocurrency space. As a result, XRP's development activities have shifted from "marginalization" to becoming part of U.S. government policy.

Although the recent price fluctuations of XRP have been attributed by some to retail-driven movements, in reality, especially for long-established coins, the holdings are highly concentrated. Most whales in the network have not sold at the current price, even though market liquidity fully allows them to do so. This indicates that they still have confidence in the future of XRP, and this confidence stems from the multiple factors mentioned above.

The logic of the market never errs; our task is to understand it as much as possible and learn from it.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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