Ripple (XRP) Joins the Crypto Offer

Posted | 24/10/2017 / Views | 8330
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Today we add Ripple (XRP) to the crypto offerings alongside Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC).  These four (along with Bitcoin Cash which we don’t trade) make up the top 5 of market capitalisation in the crypto currencies.  Ripple is one of the oldest and is the 3rd largest with a market cap of $7.52 billion at the time of writing, still only a fraction of Bitcoin’s $98.6b and Ethereum’s $27.1b.

Ripple is quite different to the other crypto’s for a number of reasons.  It is most ‘famous’ for being the crypto vehicle adopted by the big banks.  Ripple claim “It’s the fastest and most scalable digital asset, enabling real-time global payments anywhere in the world.”

Ripple can polarise a little because it is the ‘banks’crypto’ and everyone hates the banks… so emotion not common sense can sometimes prevail.  Banks have been around (and doing rather nicely thankyou) for a long long time so betting against them seems a little ‘brave’…

Some other misconceptions are that the banks won’t actually use it, that it is ‘centralised’ because Ripple Labs ‘control’ it, and there is unlimited supply.   Well HuffPost interviewed their Chief Technology Office, Stefan Thomas, and all those claims appear false:

  • “Ripple isn’t creating any other cryptocurrencies or proprietary coins for banks. XRP is it. That means that Ripple success directly equals XRP success.
  • XRP will soon be more decentralized than even Bitcoin. Thomas recently wrote a blog post explaining how.
  • Not only is there a finite amount of XRP — just as with Bitcoin — XRP is actually a deflationary cryptocurrency, which means that a tiny amount of XRP is permanently shredded after each transaction. It’s the opposite of unlimited supply. As time goes on, the supply of Bitcoin remains the same while the supply of XRP will actually shrink, making it even more valuable with each passing day. [and most definitely the opposite of fiat currency!!]
  • What about the fact Ripple owns about 60 billion of the 100 billion available XRP tokens? Ripple just announced they are putting 88% of those tokens they own into escrow smart contracts for a period of at least four-and-a-half years. The structure of it means no one has to worry about Ripple flooding the market by selling their own XRP holdings. The fact that they are putting them into smart contracts means they can’t renege on that later even if they wanted to.”

Want to learn more?  We’ve scoured the net and think the following from BoxMining is a pretty good balance of keeping it simple but (necessarily) ‘talking tech’:

“Protocol vs. Currency

So lets start off with one confusing factors. So I must make a distinction between Ripple the transaction protocol (which is used between banks and other businesses) and the ripple issued currency, XRP. When you see Ripple making gains its actually the XRP, the currency that is issued by Ripple, that is gaining. And this is actually quite different from the network protocol or Ripple protocol. Both share the same name and I’m sure this has definitely confused a lot of investors.

Ripple Protocol

So lets start off with the transaction network known as Ripple. So the Ripple protocol is based on technology that’s similar to blockchain but not completely the same. It doesn’t require any mining and its based on a consensus network instead of being consumer-facing which is what Bitcoin is. Basically, it’s for the everyday person.

Ripple is exclusively used by big institutions such as banks. The whole idea of Ripple is to allow banks to transfer any sort of asset, be it currency, USD, Euro, gold, or any other asset such as airmiles. You can transfer that between other institutions near instantaneously. This rivals systems such as swift. So if you ever bought Bitcoin with bank transfer you will know how painful that is. You have to contact your bank and send the transaction to a swift bank code account and this might take up to two to three days and theres a lot of transaction fees involved for both the sender and the receiver. Ripple is set to revolutionise this by providing near instantaneous, sub-second transactions for institutions such as banks. It’s already been adopted by quite a few big banks and

XRP – Currency of the Ripple Network

So now that I explained what is the Ripple transaction protocol, let’s move on to Ripple XRP. XRP is actually issued by Ripple Labs and is a form of cryptocurrency that can be traded and it’s not “mined”. So there is a finite number of ripples and that amount is actually issued by the company behind Ripple called Ripple Labs. Currently, it is freely tradable on numerous exchanges such as Poloniex.

XRP by itself has no underlying related assets or values eg. Its not tied to USD or gold. Rather, it can be used to act as an intermediate currency in institutions. It has one huge advantage in that transaction costs are very, very low (unlike Bitcoin, which is now reaching 1.5 usd in transaction fees).

Concerns about Ripple  [note these are largely addressed above]

So moving on, XRP is currently only issued out at less than 40% of its total. The remaining amount (minus the 20% retained by the creators of Ripple) is held by Ripple Labs to distribute whenever and however they so wish. This is actually kind of interesting because unlike a lot of decentralized currencies, Ripple Labs plays a huge part in distributing XRP. Ripple Labs is actually a company and this is very different from Bitcoin, where Bitcoin is fully decentralized and doesn’t have a central controlling authority. Ripple Labs is registered in many countries and it could be sued and held under police custody. This is again very different from other technologies.”