06 Dec, 2018 at 22:36pm
Ripple came into the attention of the worldwide crypto community in 2017, when all of a sudden, it became the second most valuable digital coin out there. It reached a total market cap of $9 billion one morning, which made it extremely popular in the first place. However, people began to wonder more and more about this virtual coin, about its surroundings and specs. The truth is, people were more confused than anything about the coin.
The first thing you should know about Ripple is that it's a pretty much-sealed blockchain, above all else. With Bitcoin or Ethereum, their blockchains are open, meaning that people can mingle with the code and work upon it. Not with Ripple. Ripple has a more protective feeling, making it even harder for people to invest into it. It's not that Ripple is non-transferrable or completely centralised. It's just that Ripple is making it harder for the outside world to mingle with the internal structure of the coin, and the company itself, than most crypto companies do. Additionally, a minimum of 20 XRP is required to have a wallet.
Bitcoin and Ethereum, they were both designed with one scope in mind: they were supposed to be valuable digital coins you can keep and use at any time of need. With any transaction you'd do, you'd be able to send some value towards another account while paying for a service, physical or virtual good. This was possible because of miners, who created nodes that facilitated the transactional processes and made it easy for users to send and receive bitcoins while charging a small, almost insignificant fee from the end users.
Ripple doesn't work that way. The people behind Ripple mined every single XRP coin at once. They still hold the majority of the crypto asset. When you buy Ripple on the XRP network, you still pay a small fee, but it goes straight into the company's accounts, not back to the users, as other coins do. The truth is, XRP was created with the scope of holding value to some extent, and will then be destroyed if the company's predictions are met.
It's actually the currency Ripple has created and their idea of the virtual coin was for it to be spent. Not kept, not mined, not traded from one wallet to the next. Ripple was made with the sole intention of being spent at large. XRP is nothing but a way to make money for Ripple, the company behind it. They even said that the coin is not a great idea for investment, stating that "private exchanges may choose to hold additional XRP for trading, but Ripple (the company) does not promote XRP as a speculative investment."
Say you're actually going to invest into Ripple and you get your way. Everything goes well and you get your money's worth. The truth is, there are tens, if not hundreds of banks Ripple works with. These banks, they enjoy the idea of working on the blockchain, so they take chances in working with XRP through xRapid. The banks love xRapid, which determines them to load all of their trades through the program, including the ones worth millions upon millions of USD. In the ideal situation, SWIFT crashes, burns, and because of a lack of innovation, loses all of their customers, fire everybody and puts the "CLOSED" sign on their main headquarters door.
According to the statistics from Ripple, the cryptocurrency is worth more than $5.5 trillion in daily transactions. That is impressive, so the price of the coin should be at an all-time high, right? Not today. The only thing that drives the value of the coin up is the fact that people like you and me have decided to invest in the coin and, more importantly, hold on to the coin because they believe its value will one day go up and up and up. With banks, they never search for speculation when it comes to moving money around. Because of this, they are never encouraging you to hold on to your XRP, because of the natural volatility of the crypto asset.
This has a huge impact on the value of the coin. Banks are the most important users of the XRP coin, which means that if they don't like holding on to the coin for far too long, the market cap of the cryptocurrency will simply drop one day to an absolute minimum. It's actually estimated that the market cap, even at SWIFT levels, will come close to $250 million in the near future, a million miles away from the nowadays evaluation of $130 billion.
In fact, XRP turns out to be more centralised than one may think. Which is incredible, given the fact that Ripple is constantly presented as an innovative, private coin. Ripple is the main rights holder behind RippleNet, owning 62% of the entire XRP market cap currently in operation. Because this ownership of an extreme majority of the total coins worried some serious investors, including banks, Ripple found a simple solution, or so they say, with locking 55 billion XRP into an escrow account. This sounds a ton like a centralised money system, where investors simply have to take Ripple's word for it that they will keep the coins safe and secured. Ripple has been working on further decentralization.
Sure, the most likely scenario is that this will in fact happen and every coin will, in fact, be held safely for the investors. Ripple announced at the beginning of the year that they'll release 1 billion coins a month for a total of 55 big transactions, with the scope of earning a ton of money and also putting these 55 billion XRP coins on to the market, at the current price of the coin. Which is why most people go into this game with their best interests in mind.
Let's not forget about resilience. There's a reason why so many promising virtual currencies have failed in the last couple of years. It always had something to do with rules, regulation, laws and everything that actually kills a cryptocurrency. Because it's decentralised, Bitcoin has been able to make it out alive of the resilience vertigo and is now standing as proof that coins like Liberty or E-Gold took a bad turn when they gave up the main characteristics of a virtual coin. This is what happens to Ripple, unfortunately, for more than 2 years now. It's going on the same path as the previous failing coins, and that's concerning.
You'd think XRP are the only ones who try to revolutionise, or disrupt, the way banking works. That's surely wrong. There's another company, R3, that's on the same path Ripple is. R3 raised no less than 100 million USD from some of the best investors and are currently helping banks with international money transfers by using the famous blockchain. They operate with many of the top banks on the planet. How come you've never heard of R3? Well, they have no cryptocurrency of their own.
In order to get things right, Ripple would have to somehow take SWIFT under its belt and have all of its partners and also thousands of employers caught up with their services. But the main issue here is, with SWIFT being such a powerful company, there's no reason why they can't create their own virtual coin themselves. Because the blockchain is so hot at the moment and banks are looking more and more into it, SWIFT is naturally doing the same thing. The big guys at SWIFT are already looking into it and try to find ways to integrate the new technologies into the business.
Another example that XRP is not disruptive comes from XLM or Stellar Lumens. This coin was created by none other than Jed McCaleb, the very founder of Ripple, back in 2014. He created Stellar to simply solve over the problem he encountered when developing and later running Ripple. Since then, Stellar has managed to reach number 8 in the top of the market cap coins available. Stellar is famous within IBM and also does business in Australia for various payments services, as well as Indonesia and other countries. Because Stellar is one step ahead of Ripple, as with their involvement with IBM and so outside the world of banks, the potential of them overgrowing Ripple is huge. Also, there are smart contracts available in the protocol Stellar was built upon. Because of this, Kik, a famous $1 billion messaging app committed to moving their tokens from Ethereum to the Stellar blockchain this year.
That's a hard question to ask, which means the answer is going to be even harder to find. It basically depends on what you mean by "scam", as the word has a wider array of meanings than you might first think. Let's take everything into consideration, shall we? Firstly, it seems that most people, in general, excluding banks, don't use XRP for purchasing goods and whatnot. The fellows behind Ripple keep XRP in business somehow, by always keeping the price of the assets artificially higher than normal. How? By controlling the number of coins they release per month or year. They control the supply, which means they control the price, which means it can be controlled in an artificial way. See where this is going? Can you smell the scam? Next, this also implies that we might never ever know how much XRP is in circulation today.
There might be one million, or a few million, but the numbers are most likely well below those reported by the mother company, which again, by ruling supply, is the only one that knows what's actually happening and what is true or not. Also, for all intents and purposes, XRP is anything but an actual cryptocurrency. It's centralised and completely operated by the company, which makes it much more controllable than the USD. Why are people still investing in this if the whole thing smells like a scam? Because XRP is listed as the 2nd coin on the market. Who would want to have something that has the 2nd highest market cap out there, right? Who cares that everything might be a huge scam after all?
Ripple says they're the best company you can invest in right now. They want to raise the "internet of value", whatever that might mean. Yes, it's true that Ripple has more than 100 banks as partners right now, including big names like Bank of America, Bank of Canada, Bank of Abu Dhabi and plenty more. They have many flashy headquarters in New York, San Francisco and even Sydney, Australia. They've raised over $100 million in venture capital funding from big players in both the crypto world and the business spectrum.
Yet, there's a lot of unreliable buzz and uncertainty when you start talking about Ripple, which means there's something fishy with the currency itself, not just the company behind it. There should be no doubt about a currency that has the 2nd largest market cap out there, right? Which is why you should be very careful and consider everything that you've read here and on other publications before turning up to buy some XRP.
Disclaimer: All opinions and views expressed in this article are that of the writer and not Altpocket.
Photo Credits - Elevenews, Finder.com and Newconomy.