All you need to know about Ripple
Linas Beliūnas
Reinventing Finance 1% at a Time ?? | Scaling Digital Asset Infrastructure ?? | The only newsletter you need for Finance & Tech at ??linas.substack.com?? | Financial Technology | FinTech | Artificial Intelligence | AI
If you are at least to some extent following what is happening in the crypto and FinTech space, I am pretty sure you have heard about Ripple, one of the most widely discussed cryptocurrencies as of today.
Ripple is not really a cryptocurrency.
In fact, it is not really a cryptocurrency, but let’s leave this aside for a moment. To put it in perspective, at the point of writing XRP (the underlying token of Ripple) is trading at circa $0.50, with a market cap equal to $19.6 billion.
So what is this Ripple thing?
In very simple terms, Ripple is both a platform and a (crypto)currency (?). Originally released in 2012 as a following iteration of Ripplepay, Ripple is meant to be a real-time gross settlement system (RTGS), currency exchange and a remittance network.
Using a common ledger that is managed by a network of independently validating servers that constantly compare transaction records, Ripple does not rely on the energy and computing intensive proof-of-work (PoW) mechanism used by Bitcoin or any other similar cryptocurrency by design.
Ripple is based on a shared public database that makes use of a consensus process between those validating servers to ensure integrity. One can stress that those validating servers can belong to anyone, from individuals to banks.
Thus, the Ripple platform is an open source protocol which is designed to allow fast and cheap transactions.
How is it different from Bitcoin?
It is important to note that while it is consensus oriented, Ripple is not a blockchain. Ripple uses a HashTree to summarize the data into a single value that is compared across its validating servers to provide consensus. The named algorithm ensures the agreement between all the nodes in the network.
What is the Ripple protocol consensus algorithm (RPCA)?
As stated earlier, unlike Bitcoin or Ethereum, Ripple does not have a blockchain at the core. Although a crypto without a blockchain might sound strange, to verify transactions and ensure legitimacy Ripple has its own patented technology, which is called the Ripple protocol consensus algorithm (RPCA).
What is RippleNet?
RippleNet is a network of institutional payment-providers such as banks and other financial institutions that use (?) solutions developed by Ripple to facilitate monetary transactions globally.
The platform claims to allow one to make payments in any currency including Bitcoin and have a minimal internal transaction commission of $0.00001. The only reason it has such a small commission and is not free is to prevent DDos attacks.
What is XRP?
In short, XRP is a token used for representing the transfer of value across the Ripple Network.
Yet, while the Ripple platform may have real value and real history, the XRP token itself seems to have insignificant, if no at all use cases.
XRP is virtually useless.
At this moment, there are 100 billion XRP tokens that were issued by the Ripple company. Although the company claims and promises that this is the total number of XRP that there will ever be, there is nothing to stop them from issuing more and more tokens in the near future.
Further and most importantly, the use of XRP is totally independent of the Ripple network in general. This means that banks or other financial institutions do not actually need XRP to transfer dollars, euros or any other fiat money and use the RippleNet.
Hence, apart from speculation, there is no purpose and value in holding the XRP.
So why Ripple? Or what’s the value proposition?
As noted earlier, the value lies in the Ripple network itself (not in the XRP token, which is virtually useless) and its ability to move assets around the world quickly.
As Ripple’s main focus is to be used by banks, this is probably its key value proposition. Using Ripple, banks or other financial institutions potentially are able to shift money between different currencies and move it quickly and globally.
The picture below is not the most up to date, but good for a perspective nevertheless.
The criticism behind Ripple
One of the most criticized aspects of Ripple is that it is highly centralized, and this is a completely opposite idea of any traditional cryptocurrency. Further, as the underlying tokens are already mined, the developers behind Ripple can decide when and how much of them to release, or maybe do not release at all.
Ripple is highly centralized, and this is the exact opposite of any crypto.
Another important thing is that Ripple is controlled by a monopoly, as Ripple Labs owns 61% of all the coins. And as outlined earlier, the founders can issue more and more coins, or effectively increase the supply whenever they feel it necessary.
Finally, although there were lots of marketing and announcements of partnerships with big banks, I failed to find any information actually proving that banks are using Ripple’s protocol to facilitate payments. All you can find is that they are doing testing. That’s it.
How Ripple is pushing the XRP
To foster adoption and push the use of virtually useless XRP token, Ripple is literally paying people to use it.
As one way to get people to use a new currency is to make sure they have a lot of it, Ripple is aggressively doing that by giving a lot of XRP away. Here are a few examples.
In March, Ripple donated $29 million worth of XRP to a charity to buy classroom supplies for U.S. schools. During an appearance on Ellen in May, actor and Ripple investor Ashton Kutcher presented $4 million worth of XRP to The Ellen DeGeneres Wildlife Fund on behalf of Ripple.
Moreover, Ripple is not just donating XRP to charities. Rather it is also rewarding people who use XRP. In October 2017, the company put $300 million in XRP into the RippleNet Accelerator Program, which is a program designed to reward financial institutions that use XRP. Then, in May, Ripple created Xpring, an initiative that helps fund the development of XRP-focused start-ups.
Bringing it all together
Along with IOTA & Tether (see the links to the articles below), Ripple is another (payment) protocol I find really interesting and questionable. To keep it really simple, I can fairly say that the core idea of Ripple (not XRP!) is probably worthwhile.
Yet, as with many other solutions in this hot new area of FinTech, execution is the key. Apart from marketing and fancy announcements, there’s virtually no real world examples of how Ripple is being utilized by financial institutions.
If you find one, please share it in the comment section below. As of now, let us follow this closely and see where it all goes.
P.S. You might enjoy these as well:
??All you need to know about IOTA
??All you Need to Know about Tether
?? FinTech Predictions for 2018
?? Blockchain Predictions for 2018
?? Demystifying Bitcoin and its Meteoric Rise
?? Bitcoin is NOT a Currency, and Never Will Be
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About: I am a business developer, sales professional, FinTech strategist, as well as cryptocurrency and blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at one of the leading alternative banking and payments providers in EEA, I'm an active member of FinTech community and a TechFin evangelist.
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Reinventing Finance 1% at a Time ?? | Scaling Digital Asset Infrastructure ?? | The only newsletter you need for Finance & Tech at ??linas.substack.com?? | Financial Technology | FinTech | Artificial Intelligence | AI
5 年New article from the same author. All you need to know about STOs??https://www.dhirubhai.net/pulse/all-you-need-know-stos-linas-beliūnas/
Cut the flurry of Conversations into Bitesize Web3 Posts. Motivational Storyteller. Web3 Ambassador. Went against the 99%. In Crypto Since | 2017.
6 年A well-written article. But this not?all true. Actually, XRP is solving a worldwide cross-border payment problem worth trillions of dollars, as XRP can do it faster, cheaper and utilize the space more with its solid team than any other institution. Its a direct threat to SWIFT which takes a lot of time to complete an average transaction. Usually, this is 3-4 days for SWIFT and for XRP is instant. From the time of the writing of your article, you also say it has no partnerships well it has partnered with 3 other banks, using X Rapid. Its the only real project that has real-world utility to solve a problem and that is what needed not the hype we see with other coins as XRP has that. When more banks jump in and see the real use case of XRP with X Rapid which was never covered in the article, you will see how the XRP token will become liquid for its purpose solving cross-border worldwide transaction instantly, better cheaper and faster than SWIFT. Swift has trillions under its systems, and perhaps sooner or later SWIFT will have to work with RIPPLE/XRP to solve this issue. I can't think of any other project right now that has real utility. Apart from it being centralized a little XRP is actually solving a trillion dollar problem.?
Senior Blockchain developer @ Ringtail Lemur | Smart contract security auditor | Founder @ Arabs in Blockchain | Co-Founder @NoonDAO & @ABW| Chainlink developer expert | TechWomen22 Fellow| Devcon 5 Scholar Alumni
6 年Bravo Linas , very informative and clear , but as far as I know some banks here in MENA region are working in implementing? ?ripple?
I demystify human behavior | Explorer | Technical Architect @Cognizant | Ex TCSer
6 年Thanks for such an well explained article. Adding to this, I would like to know your view on permissioned Distributed Ledger Technologies like Corda, Hyperledger. Will it really solve the purpose to build enterprise applications full of trust?
Blockchain( Ag & Renewable energy) Crypto - Health/Wellness - Domains
6 年Linas, is this really an article you wrote?