What is the impending change of power between ETH and XRP?
Since Ethereum’s merge update in 2022, the supply of Ether has been steadily decreasing due to the network’s transition to a deflationary model (Ethereum), increasing its scarcity and strengthening long-term investor confidence.
The dwindling supply has elevated ETH beyond just a utility token and positioned it as a potential store of value within the broader cryptocurrency ecosystem. In contrast, XRP (XRP) has established a clear role as a bridge asset, facilitating instant liquidity across borders for banks and global payment networks.
However, if ETH’s deflation rate slows, its scarcity advantage could weaken. In a scenario where XRP emerges as a leader in global liquidity flows, major changes are likely to follow. Such a reversal could reshape the dynamics of the cryptocurrency sector. It could impact institutional adoption, payment systems, market valuations, competitive positioning, and the broader future of blockchain-based finance.
Did you know? Ethereum introduction smart contract Paving the way in 2015 Decentralized applications (DApps)non-fungible tokens (NFTs), and the broader decentralized finance (DeFi) ecosystem.
How does ETH deflation occur and is it possible for it to turn into inflation?
The causes of ETH’s deflationary nature are as follows. Ethereum Improvement Proposal (EIP) 1559has been introduced. Paid combustion mechanism. In this system, a portion of the base fee for each transaction is permanently removed from circulation, rather than being distributed to miners or validators.
During periods of high network activity, the amount of ETH consumed can exceed the ETH issued as staking rewards, leading to net deflation. This trend intensified after the 2022 merger, and the total supply of ETH steadily decreased.
Transaction activity on the Ethereum mainnet has decreased as users increasingly adopt layer 2 solutions such as Arbitrum and Optimism. This lowered gas prices and reduced combustion rates. At the same time, validator rewards have also increased, encouraging the issuance of new ETH.
If staking rewards remain high and burn rates continue to fall, ETH could gradually become inflated again. Such changes could weaken the company’s scarcity-based value proposition. While that may help stabilize prices in the short term, it could undermine Ether’s long-term position as a store of deflationary value.
Did you know? In 2022, Ethereum will From proof of work to proof of stakereducing energy consumption by more than 99%.
Comparison of XRP and ETH
The benefit of XRP lies in its role as a liquidity bridge for banks, fintech companies, and global payment providers. Through RippleNet and its on-demand liquidity (ODL) services, XRP enables: Near-instant cross-border payments There is no need to deposit funds in advance.
While ETH’s value is primarily driven by deflation and staking rewards, XRP’s long-term stability depends on its trading utility and institutional adoption. Key liquidity metrics highlight XRP’s strengths in payment speed, transaction costs, and energy efficiency, while Ethereum maintains a broader ecosystem and more advanced on-chain activity.
In the context of global remittances, XRP’s interoperability and cost efficiency have given it a strong position. If ETH’s deflationary tendencies subside over the next few years, it could achieve a liquidity advantage.
Below is a table comparing XRP Ledger and Ethereum.
Market Scenario: If ETH loses to deflation, who wins?
As Ether’s deflationary model faces increasing pressure from lower burn rates and higher validator fees, capital flows between major cryptocurrencies may begin to shift. Three potential scenarios could play out.
Scenario 1: Ether becomes inflated and funds start going to XRP or stablecoins.
As the supply of ETH begins to expand, investors looking for stability could direct their funds to yield-producing stablecoins and utility-driven assets such as XRP. These assets offer consistent trading value.
Scenario 2: XRP strengthens its role in cross-border payments, leading to a change in liquidity leadership.
If XRP can secure widespread adoption through ODL and International Organization for Standardization (ISO) 20022-compliant networks, it has the potential to become a major channel for global payments. This change could potentially remove liquidity from Ethereum-based transactions.
Scenario 3: Both assets coexist with different roles, with ETH as DeFi collateral and XRP as payment infrastructure.
On balance, Ethereum will maintain its leadership in DeFi and smart contracts, while XRP will serve as the backbone of institutional liquidity. Together, these could form a complementary dual-asset framework that supports both the DeFi ecosystem and real-world payment systems.
Did you know? Approximately 70% of DeFi projects and NFTs are built on the Ethereum blockchain, with the Ethereum blockchain at its core. web 3.
Decreasing ETH scarcity and clarifying XRP regulations
For investors and institutions, changes in ETH supply patterns may prompt them to reconsider their portfolio strategies. If ETH loses its deflationary edge, capital could flow to assets that offer stronger liquidity and clearer regulatory foundations.
XRP is considered a non-security in certain jurisdictions, holding a clearer legal status and supporting its use by institutions in compliant cross-border payments. Meanwhile, ETH still faces regulatory uncertainty regarding staking and token classification. This contrast can influence institutions’ liquidity preferences.
As a result, investors are likely to adopt a more mature and risk-aware approach to their crypto allocations. This could mean increasing your XRP holdings for trading stability and regulatory clarity while holding ETH for exposure to DeFi and innovation.
