There is a lot of confusion about Ripple (the company), XRP (the token or the digital asset) and the XRP Ledger (the network on the blockchain which enables XRP based transactions). That’s why InvestingHaven’s research team decided to collect these 10 must know facts about Ripple and XRP primarily for investors. Note that this deep-dive into the world of Ripple and XRP is not meant to be a Ripple Forecast for 2019 but strongly underpins our Ripple fundamental analysis and our thinking that Ripple’s XRP is on its way to become the largest cryptocurrency overtaking Bitcoin at a certain point.
This article is based on a deep analysis of Wikipedia’s page of Ripple’s protocol, a recent interview with Brad Garlinghouse who is the CEO at Ripple, Asheesh Birla who is the Vice President Product Management at Ripple, and David Schwartz who is the Chief Technology Officer at Ripple.
We have spent quite some time and effort to turn a rather complex matter in a simple overview of 10 must know facts about Ripple and XRP.
#1 Must Know Fact about Ripple and XRP: An heroic year amid a crypto winter
Brad Garlinghouse looks at 2018, and considers it to be an heroic year for Ripple amid the crypto winter which is painful for the whole blockchain industry. He looks at measuring 2018 in 3 ways:
- In employee terms Ripple is employing 300 employees today with a strong growth in 2018.
- In terms of customer growth Ripple has seen a growth of 2 new production customers per week. Note that in no way did Ripple expect a year ago to sign up 100 new customer contracts in 2018 also knowing that Q1 was slow.
- There are now customers in 40 countries across 6 continents with steadily rising transaction volume. For instance Catalyst Corporate Federal Credit Union came online recently, and its serves 1400 credit unions settling payments from the U.S. to Mexico. This is huge. Also, Ripple signed up 4 digital asset exchanges working with xRapid, including Bittrex.
Ripple deploys technologies to solve real life problems, i.e. cross border payments fast, reliable and cheap. In such a tough crypto year 2018 Ripple having an heroic year is quite exceptional!
#2 Must Know Fact about Ripple and XRP: B2B First, Then Consumer Adoption
According to David Schwartz when it comes to consumer adoption of cryptocurrencies we are far way from the point of adoption. He compares the current stage of the evolution in the crypto market with the dial-up stage of the internet. Back then to connect to the internet you had to write down your settings like TCP/IP settings on a piece of paper and then insert in your PC configuration. It took many years for the internet to reach mass adoption which happened when it was easy to use without understanding the technology in great detail.
There are a lot of companies working on simplifying cryptocurrencies for consumers but consumer mass adoption seems to be still far way.
The B2B applications like payments will create mass adoption first.
#3 Must Know Fact about Ripple and XRP: XRP price volatility concerning?
Asheesh Birla says that Ripple does not think about the XRP price day-to-day.
Back in 2013, when most digital assets were nearly worthless, we didn’t really factor price into it, he says. We don’t factor it in all that much right now either; we take a longer-term view of the entire market.
I think our founders have done a good job of laying out a vision and making clear that if you’re here for a one- or two-year blip, this is not the place to be. Your [crypto]project has to be tuned into the long-term instead of the day-to-day volatility.
Moreover, he (rightfully) points out that each crash [in the crypto market]takes out all the folks who are not focused on solving real problems and real use cases. “I think you are going to see some really interesting companies come out of this next downturn.”
#1 Must Know Fact about Ripple and XRP: Where are institutional investors?
A year ago Brad Garlinghouse, CEO at Ripple, made a prediction that 2018 would be the year of institutional involvement in the digital asset space. We really have not seen this happening, he says. There is really only very small amounts of institutional participation. That is largely because the industry has not matured yet to allow institutional involvement.
“I believe though that institutional participation will start in 2019“, Garlinghouse says.
#4 Must Know Fact about Ripple and XRP: Ripple’s history started 14 years ago
It is worth going back to the roots of Ripple for 2 reasons. First, it indicates how long it takes to develop a globally disruptive payment technology and roll it out successfully. This puts timing, as well as day-to-day XRP price into perspective. Second, it also shows how much of the initial vision is incorporated in the current startup and technology.
RipplePay was developed in 2004 by Ryan Fugger but he did not have the piece that Bitcoin had. He did not have the ability to create a single decentralized currency. He had this idea that as the did not have a single decentralized currency what if he created a lot of centralized currencies, and as long as those currencies all inter-operate and you have your choice of which currencies to interact with then that’s almost as good as a decentralized currency. The interesting thing about this concept is that he envisioned currencies almost ‘rippling’ across these relationships: if A trusts B, and B trusts C, then a transaction can ‘ripple’ from A to C. That’s where the name Ripple came from.
This capability still exists in the XRP ledger today. Starting in 2011 the modern XRP Ripple story started where the idea of Bitcoin of a single decentralized digital asset was integrated with multiple assets.
#5 Must Know Fact about Ripple and XRP: The 10x more value factor
What is going to drive volume and liquidity through a digital app? If you have volume and liquidity, then it remains a prominent digital app. But, it is solving real-world problems. It has to be a product, in Silicon Valley, we call that a 10x better experience.
This implies that if you can’t deliver a 10x better experience using blockchain, then don’t use blockchain.
According to Asheesh Birla, Vice President of Product Management at Ripple, a lot of products came out in recent years that are sort of like blockchain tourism. They sound like something you should use Google Sheets for, not a sophisticated decentralized blockchain database. However, the underpinning of XRP related technology is that without friction, without permission, I can move value from one blockchain to another.
Today, if you want to money across borders, you are essentially trusting Citi Bank, JPMorgan, or HSBC.
Those three banks control most of the cross-border flow. Either directly or indirectly, you are going to trust those three companies to move money on your behalf and they charge whatever fees they want. If they don’t care about the emerging market or the other firms then expense just goes up and up and up. So what a digital app allows you to do is, instead of trusting those three companies, you can now start moving value internationally using digital assets.
That’s what Ripple has with xRapid.
#6 Must Know Fact about Ripple and XRP: A real business and strategy
Ripple as a startup has a vision, a mission and customers. It is innovating in the payment space, it brings them payment solutions faster cheaper settle with a digital asset. One of the things that is surprising is how ancient the payment technology space is. If you look at websites and mobile apps of the banks they may look good, but if you go 2 levels deeper it really is an environment from the 70ies as far as performance goes. So if you require a digital asset that allows to transact quickly and cheaply, which is part of a global payment system, it really cannot be built on technology that is that ancient.
What Ripple as a company is doing is building a network which is RippleNet for banks and financial institutions that is built on these modern principles, and that is capable of using a digital asset because all the parameters of the payment are known in advance.
Asheesh Birla sees an analogy between the digital app with the combustion engine. You really can’t do anything alone with the digital asset. You need to build something around it. You need the rest of the car. Public digital assets like XRP and Bitcoin hold a lot of value, but they’re one piece of the puzzle. Ripple has learned in the past five years is that you have to build around that technology to make it useful.
#7 Must Know Fact about Ripple and XRP: How XRP works?
XRP is pre-mined, is not mined at all today. When Ripple built the initial Ledger was the idea to get rid of Proof of Work which is what mining is all about. It is not an adversarial system like the Bitcoin Ledger. When mining participants are competing for a fixed pool of resources, which creates adversarial interests which makes the security model difficult. The XRP Ledger is cooperative, everyone is helping to improve the system. This means that the system cannot give out the digital asset. When the XRP Ledger was created in July 2012 all the 100 billion XRP’s were created in that Genesis period.
According to David Schwartz proof of work systems like Bitcoin have to secure miners to be secure. That means that if you want to change the rules in Bitcoin you have to drag along enough miners to make your change secure. The XRP Ledger does not have this attribute, there is no need to incentivize mining, which makes it faster (confirmation in 5 or 6 seconds) with higher throughput over a 1000 transactions per second.
XRP is a pure digital asset that is not linked to any jurisdiction. It is a native asset on the XRP Ledger with rules enforced by everyone who participates. It is in a fundamental way equally accessible to everyone.
When you want to make a payment you can easily move XRP between different regions. XRP can serve the trustless connections between regions using different currencies. You cannot do this with the US Dollar even not as the world reserve currency because the US Dollar that you are using for a transaction has to be “somewhere”. XRP can equally be everywhere: in the US system or any other system in the world in a couple of seconds.
Asheesh Birla: What we’ve done with xRapid is to use a digital asset and this new infrastructure, using digital exchanges like Bittrex and so forth, and convert from US dollars into XRP, move that XRP instantly into let’s say Mexico and then have it traded again for Mexican pesos and paid out. That all happens in minutes, for far cheaper than I can today, and I don’t have to set up accounts in the destination countries.
#8 Must Know Fact about Ripple and XRP: Is XRP really decentralized?
XRP Ledger continues to exist even if Ripple as a company goes away. So it is decentralized. There are no permissions to do anything on the XRP Ledger, anybody who wants to can download and run the software. There are about a 150 servers on the Ledger that operate as validators, Ripple runs about 9 validators.
When it comes to Bitcoin, as a comparison it is unclear who is providing the mining power, there seems to be one company in China doing a lot of this but we don’t really know.
The XRP Ledger is a cooperative process. Nobody competes for resources (like for instance by mining as XRP was mined in July 2012) against each other, everyone has a stake in working together. The XRP Ledger is entirely open source, every server enforces all of the system’s rules, Ripple could go away and the XRP Ledger will continue to operate.
#9 Must Know Fact about Ripple and XRP: Signs of traction?
We are seeing a lot of activity in Southeast Asia, says Asheesh Birla, where regulators are realizing that this technology can help boost their economies even further. Just like they did with cell phones and mobile devices, they want to leapfrog the west in terms of modern financial inclusion.
There are a couple of trends behind this. One, the regulators are really friendly. Two, these economies’ GDP is growing at 7-8 percent a year, and number three, they are going from cash to digital via mobile payment at a crazy clip. So those countries are now saying we’re going build a modern day financial product. We are not going to use the 1950s wire technology or SWIFT technology; we’re going to use blockchain.
#10 Must Know Fact about Ripple and XRP: The differentiator
A lot of the larger banks have some sort of what I call “blockchain tourism” says Asheesh Birla. There’s always a side team or collection of innovation labs working on a blokchain product. But at the end of the day, even if a country like the United States created a centrally backed coin, the reason Ripple works for cross-border payments is because there is no central bank for the world. It’s unlikely that the US central bank would trust the Argentina central bank. That’s why it’s useful to have a digital asset that both entiities could essentially trust.
But for that level of cross-border trust, central banks would have to give up some control which doesn’t seem likely. All the central banks would have to come together, probably somewhere like Davos. But can you imagine the US government saying ‘”Wait, hold up, my credit is way up here, and you want me to trust the Argentine peso?”
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