Analysis

Ripple And XRP: Why The Two Are Interdependent Yet Independent

Ripple’s price is rising every day.” This is one statement that we’ve heard every so often, from news blogs to TV shows and magazines. A sizable number of the cryptocurrency community still refers to XRP, the digital token as Ripple. This is expected since Ripple created XRP, but in the same breath, it can bring confusion to others. While Ripple is the company behind XRP, the two are not interchangeable and one can fall while the other one thrives.

In an interview with The Street, Ripple’s chief marketing strategist Cory Johnson explained it simply as:

Ripple is an enterprise software company, XRP is a digital asset that trades on its own and it’s owned by lots of people in lots of places….”

While the two are not interchangeable, their success is closely related and partially interdependent. First, Ripple’s value is dependent in part on the market value of XRP as it is the biggest owner of XRP tokens. Ripple’s consensus algorithm works with nodes and doesn’t require miners. This led to the XRP being pre-mined and 60 billion of the 100 billion is owned by Ripple. 55 billion of these XRP was placed in an escrow last year to assure the network participants that Ripple would not decide to sell them all one day and compromise the market. The higher the price of XRP, the more the money Ripple can raise from the sale of its XRP tokens.

XRP’s price and market value also depends on the company to a great extent. The crypto market is highly speculative and any development, no matter how minute, affects the price of a cryptocurrency greatly. In the past, announcements like the possible listing of XRP on Coinbase, the partnership with Western Union and MoneyGram, the launching of the blockchain payment app with Japanese banks and many other announcements have all pushed the price of XRP to astronomical heights. This makes anything the company does very crucial to people’s perception of XRP.

Even with the close interdependence, the two are distinct from each other. Ripple is an enterprise software company that would continue to exist even if XRP ceased to exist. Products like xCurrent and xVia don’t require the XRP token to function but still deliver breathtaking speed, improved efficiency and reduced costs to financial institutions. XRP is also independent of Ripple, despite Ripple holding the majority. Ripple also has many of the nodes that process transactions but as its efforts to decentralize continue to bear fruit, most of the nodes will become distributed to different participants globally.

As Ripple continues to partner with more banks and financial institutions, XRP will continue to be the beneficiary as its price will keep rising.

 

1 Comment

1 Comment

  1. RL

    April 16, 2018 at 3:57 am

    Ripple did not create XRP. It was “gifted” to the company.

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