This AI Cryptocurrency Is Up 57% in 3 Months. Is It the Next XRP?

Calling a cryptocurrency the next XRP (CRYPTO: XRP) is practically shorthand for describing an asset that starts small, builds real utility within a tightly focused niche, and eventually vaults into the crypto big leagues. Bittensor (CRYPTO: TAO) has invited that comparison lately. Its price popped by 57% during the last three months alone (as of March 24), thanks to its increasingly successful ecosystem of projects, many of which pertain to training or testing artificial intelligence (AI) models.

But the comparison to XRP deserves some scrutiny. XRP and Bittensor sit at opposite ends of the cryptocurrency design spectrum, and understanding how they differ is essential for evaluating whether Bittensor can deliver comparable returns. Let's dig in and determine if it really could become the next XRP.

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This is a decentralized marketplace that took notes from Bitcoin

Bittensor is an open-source blockchain with many different stakeholders and moving parts.

There are the miners, who provide the network with their computing power, and who are granted new TAO -- the Bittensor chain's native token and the investment we're talking about here -- by the network itself as a reward for their service. Hosted on the network are more than 120 subnets, each of which automatically performs the specific computing task (or otherwise avails the computing resources) that users want by provisioning some of the computational power available on the network.

Some subnets charge users in TAO for their services, whereas others have different business models. To keep everyone honest, there are also validators, who, in an automated fashion, are responsible for checking the validity and quality of whatever the miners offer to the customers of the subnet, thereby directly influencing the reward the miners get. The validators themselves are paid in a token issued by the subnet.

Today, most of the chain's subnets compete with each other to provide AI services like raw compute rental, AI model training, data storage, or inference. So, there's likely to be plenty of demand right now and in the near future, assuming that the people who might need those services are willing to use cryptocurrency to procure them.

In terms of Bittensor's supply, it mirrors Bitcoin's almost exactly. Bittensor features a hard cap of 21 million TAO that can ever exist, and a four-year halving cycle that cuts the production of new tokens in half.

But the recent surge in TAO's price doesn't have much to do with its long-term supply tightening.

In March, Nvidia Chief Executive Officer Jensen Huang, speaking on a podcast, responded positively when informed about Bittensor's latest technical feat. That feat was to train a large language model (LLM) called Covenant-72B using an army of independent contributors, rather than the centralized resources of a data center, which are the standard default for such a task.

So the coin's burst of bullish price action is likely a result of real technical accomplishments, and a favorable response to those accomplishments by one of the most important thought leaders in AI.

But could it be the next XRP?

XRP grew into an asset valued at more than $80 billion because Ripple, the centralized company that issues the coin, spent years marketing it directly to banks and payment processors as a cheaper, faster alternative to legacy money transfer systems.

Today, Ripple is working to develop the XRP Ledger (XRPL) into a platform for financial institutions to accomplish several other tasks, including managing tokenized real-world assets (RWAs) and tapping liquidity for their trading activities. Ripple controls XRP's supply, and its business model depends on signing institutional partnerships that increase demand for the coin. The appeal of buying XRP itself is capturing the growth in its adoption as a financial tool, which is going to be driven by Ripple and its ability to compete against other players offering similar financial services.

Bittensor's structure is the opposite if XRP's. Although there is a subnet dedicated to the chain's governance activities, there's no centralized entity trying to match the offerings of specific subnets to the needs of any group of potential buyers. Subnets market themselves as independent projects; users buy TAO because they need it to access AI services. If Bittensor grows, it's because its subnets are producing useful outputs that people are willing to pay for.

So both XRP and TAO have value because of what people can use them to do. And, with a market cap of $3.5 billion, Bittensor probably has plenty of room to grow, which, when paired with its Bitcoin-like scarcity and the success of a few of its subnets during the next handful of years, could indeed give it an XRP-like trajectory. Just understand that if you buy it, you're probably taking on even more risk than you would if you bought an established competitor like XRP because Bittensor is at a much earlier stage.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Bittensor, Nvidia, and XRP. The Motley Fool has a disclosure policy.