Ripple
Ripple is a company that is the creator and a developer of the Ripple Payment Protocol and Exchange Network. It was originally named Opencoin in 2012, then changed their name to Ripple Labs in 2013, and then in 2015, rebranded to Ripple. Brad Garlinghouse is the current CEO, with Chris Larsen (co-founder) serving as Executive Chairman.
Ripple have 3 core products:
- xCurrent – process payments
- xRapid – source liquidity
- xVia – send payments
xCurrent is Ripple’s enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking. Using xCurrent, banks message each other in real-time to confirm payment details prior to initiating the transaction and to confirm delivery once it settles. It includes a Rulebook developed in partnership with the RippleNet Advisory Board that ensures operational consistency and legal clarity for every transaction.
xRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. Because payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. xRapid dramatically lowers the capital requirements for liquidity.
xVia is for corporates, payment providers and banks who want to send payments across various networks using a standard interface. xVia’s simple API requires no software installation and enables users to seamlessly send payments globally with transparency into the payment status and with rich information, like invoices, attached.
There are some very big name investors who see the value and vision in what Ripple the company has to offer. These include, but aren’t limited to:
- Accenture
- Andreessen Horowitz
- CME Ventures
- Core Innovation Capital
- Google Ventures
- Santander InnoVentures
- SBI Group
- Digital Ventures
- Seagate
- Standard Chartered
You don’t get a line up like that if what you’re offering isn’t a game changer.
XRP
XRP is the native digital asset that is part of xRapid, which runs on a decentralised distributed ledger. This statement of being decentralised is a source of many heated debates as there are those who say “no way is it decentralised” and those who argue that it is.
We should examine what the term decentralised means in order to really make the determination. The argument I hear the most is “how can it be decentralised when Ripple control all the coins” This is actually a myth.
There are approximately 100 Billion coins in existence, with 55 Billion locked up in rolling escrow accounts, 39 Billion distributed, and 6.9 Billion owned by Ripple. Technically, Ripple owns the 55 Billion in escrow, but, they’re locked away. So the amount of XRP that Ripple own AND control is less than 7% of the total coins that exist. Each month, 1 Billion XRP get released to Ripple for their use, and whatever they don’t use, gets put back into Escrow, in the back of the queue.
Then people will say “Ripple control the ledger” which is another myth.
Ripple and XRP are separate. If Ripple were to disappear tomorrow, the token XRP and the decentralised distributed ledger would live on. Ripple doesn’t control it, they absolutely cannot freeze transactions on it, and there are more entities becoming trusted validator nodes on the network.
What this means is that for each 2 verified validator nodes established, Ripple will remove one of theirs. By the end of 2018, there will be more non Ripple companies verifying transactions on the ledger than Ripple, hence, decentralised.
If one compares another leading coin, which is controlled by miners, the miners could shut down the entire block chain by simply stopping the confirmations required to validate the blocks. That’s a very unlikely scenario, but it’s one that does exist.
Banks
The list of banks signing up for xCurrent is growing and we hear almost on a weekly basis about a new bank getting on board. For Ripple the company, this is the best news ever, but some argue that it’s irrelevant for XRP. I personally categorically reject this notion, and I’ll explain why.
Banks are entities not known for moving with any kinds of speed. Central banks are monstrous in size and a lot of people are involved in the decision making process. Just the fact that a bank is trialing a Ripple product is huge news. By using xCurrent, the bank can save up to 30% of their payment process costs. xRapid is still in beta, but, once deployed, the banks online with xCurrent can simply flip a switch and use xRapid for on tap liquidity and save up to another 30% in settlement costs. Once that happens, the pool of 100 Billion coins won’t look so big anymore. We can think of xCurrent as the train tracks being laid, and xRapid as the high speed trains currently being built that will run on those tracks.
Payment Providers
Giant corporations like Western Union, Money Gram, IDT, and Mercury are testing xRapid, which is the best news ever for XRP volume and value. We’re not too sure yet about how long these testing periods are for, so we need to wait for that, but right now, the potential for exponential growth, adoption, and value increase for XRP is very much in the making.
When it comes to payment providers, this should strike the hearts of those who say that XRP is a bankers coin. I say this, because, payment providers are engaged in services for the unbankable. After living in Asia for over a decade, some of which was in South East Asia, there are families, whose other members are working in richer countries, sending money back to their families so they have the cash they need to survive. Most of these people don’t have bank accounts because they don’t fit the profile, so Western Union and Money Gram (just to mention 2) are like Gods there because they help the people. Sure, they make huge profits in doing so, but, in utilising XRP, these companies now have the opportunity to reduce their costs, and hopefully, pass that along to their customers.
Green Solution
To run an XRP validator node, the power requirement is basically the same as a mail server. This is because the tokens are pre-mined and don’t need vast amounts of energy to validate the transactions. It’s frightening to me that the current power requirement of a leading coin is currently equal to the energy needs of the whole of Argentina. By mid 2019 that power requirement will be equal to the needs of the United States, and, believe it or not, by the end of 2020, will be equal to the entire energy needs of the world. There is something fundamentally wrong with this scenario and frankly, should be a global concern.
Disclaimer: I personally own XRP digital assets and am a long-term investor/holder in the product. I am not a financial advisor and my reports are not intended as any kind of investment or financial advice. They are formed from my own opinions derived from my own research.
Author: Andrew French (Twitter @asiamtm)
