The global crypto market is currently very small compared to almost every other established financial market. The market capitalization of all digital assets is thought to be somewhere in the neighborhood of $221 billion at present, give or take. 1
This number represents the value of every cryptocurrency on the market, including XRP, Bitcoin, and others; this size is due to the fact that, for the most part, cryptocurrencies up to this point have built their value based solely on speculative investment, mostly by those traders that sometimes don't have the technical knowledge to judge underlying utility.
This is why XRP will take over where Bitcoin left off; it's taken years to educate the business world about the facts that are purposefully obscured by those stakeholders that are financially motivated to keep advocating the use of the old, wasteful proof-of-work cryptocurrency networks. But those of us that are a part of the XRP Community have kept at it. That hard work is now paying off at the end of 2018, with the crypto market and other new investors recognizing where the inevitable direction of adoption will lead.
This didn't happen by accident.
Look at the largest company using XRP. Ripple studied banks and even piloted the use of XRP with twelve of them (more on that later), and used the lessons learned to create new software offerings. This is how a successful business operates; by doing the hard work required to provide real-world value. Ripple's solutions solve the pervasive problems faced by banks and remittance processors.
Coil, another company founded by some of the original team from Ripple, is building a platform for web monetization that uses XRP to pay content creators. This use case - streaming micropayments - activated interest from all corners of web. The only question now is how soon Coil can deploy the next portion of their service.
The final component - smart contracts via Codius - was carefully designed to be independent of a specific crypto network, and is reflective of its creators' emphasis on interoperability rather than on promoting a specific digital asset. But which digital asset does it use out-of-the-box? That's right - XRP.
As 2018 finishes, and the world starts to recognize what's happening with XRP, it's wise to remember that its success is built on real utility that solves intractable problems and creates entirely new asset classes and business models.
In the UK, regulation of cryptocurrency and its underlying blockchain technology is proceeding at a slower pace than some of the countries that have issued clear guidance. The UK has acted in 2018, however, holding a series of hearings about the topic, and now issuing a formal report to the House of Commons from its Treasury Committee. 2
The Treasury Committee is an body appointed by the House of Commons to examine issues relating to the "expenditure, administration, and policy of Treasury, Revenue, and Customs." It is comprised of eleven Members of Parliament (MPs). To arrive at the report, the Committee used three oral evidence hearings and fifty-three written submissions of evidence.
Most notably, however, the Committee heard from Ryan Zagone, Ripple's Director of Regulatory Relations, in its first hearing on May 1st, 2018. 3
Like the G20, the UK Treasury Committee didn't see much of a risk to the current global financial system from digital assets:
"The total stock of crypto-assets is small relative to the global financial system. Even at their recent peak, the combined global market capitalisation of crypto-assets was less than 0.3 per cent of global financial assets ... the total value of crypto-assets worldwide was less than 1 per cent of global GDP, at $830 billion ... by comparison, at the peak of the dot-com bubble in March 2000, the combined market capitalisation of US technology stocks was close to a third of world GDP. Prior to the global financial crisis, the notional value of credit default swaps was 100 per cent of world GDP."
This statement is factual and reflects the current very low market capitalization of cryptocurrency compared to traditional financial markets. While we've seen this information communicated informally in industry blogs such as mine, it's encouraging for this information to be validated in a formal document from a legislative body.
The report also included a direct quote attributed to Ryan Zagone:
"Blockchain, as a technology, allows us to validate, store and synchronise information across many different parties more securely and more efficiently than we have been before. We are looking at reviewing information for its accuracy and authenticity. We are storing it in a way that cannot be tampered with. We are synchronising it across many different parties, even globally. Validating, storing and synchronising information has many different use cases.
There is a lot of hype around the technology right now. People recognise that this type of capability allows us to be much more efficient in how businesses or commerce can be conducted. There are lots of use cases for that. It is very general tech."
Despite Ryan Zagone's attempt to balance the topics with a potential discussion of blockchain technology's use cases, the Committee's report quickly dismissed the utility of crypto-assets with a broad brush in its very first conclusion:
"Functioning currencies are generally understood to serve as a store of value, a medium of exchange and a unit of account. As yet, there are no so-called 'cryptocurrencies' that serve all these functions. Well-functioning cryptocurrencies currently exist only as a theoretical concept..."
After this general dismissal of all current digital assets with one sentence, the report then listed no less than thirty conclusions relating to how regulatory action should be conducted in the UK, with the final conclusion giving what I'd term a polite nod to international efforts at regulation standardization:
"The Committee recognises the importance of international cooperation on the regulation of crypto-assets and associated activities. The Committee encourages UK regulators to continue engaging with international bodies to ensure best practice from other regulators is learned and applied to the UK context."
I like the fact that the report was very specific in some of its conclusions and recommendations about the direction for regulation, however, it skipped over the recommendation from David Geal, Director of Policy at the FCA, that the UK needs to:
"think about things like the taxonomy so we are talking about the same things at the same time, and to think about the risks that are emerging and the most appropriate ways to deal with those."
David Geal's comment is consistent with the work that other international bodies - such as the OECD - have done recently. 4 5 The point is this: all crypto-assets are not the same.
While this point is clear to most people reading my blog, it is evident that this message needs to be emphasized when it comes to regulators and bodies like the House of Commons Treasury Committee.
Hopefully, this report will be the first of a timely series of steps that the UK takes regarding to clarification of regulation for crypto-assets.
PNC Bank Joins RippleNet
"PNC" is short for "Pittsburgh National Corporation," although some like to point out that the merger in 1982 with "Provident National Corporation" would result in the same acronym. Regardless of which bank the new name refers to, PNC is one of the largest in the United States. Here's some headline statistics to bear in mind: 6
- Operates in 19 states (in the US)
- 2,459 branch offices
- 9,051 ATMs
- 9th largest bank in the US by assets
- 4th largest bank in the US by number of ATMs
PNC also was one bank that has historically taken steps to act on new financial trends, protecting and growing its market share based on new technology. They created a mobile application known as 'Virtual Wallet' that was targeted towards younger bankers, and in 2012 the application was used by over one million customers.
On September 19th, Ripple announced that PNC had become a member of its RippleNet banking network. In its formal announcement on its Insights web page, Ripple noted: 7
"With more than 8 million customers and retail branches in 19 states, PNC has a diverse set of customers, including consumers, small businesses and large corporates. Ripple’s technology will have an immediate impact on each of those groups, enabling PNC’s commercial clients to receive payments from overseas banks in real time.
Now, a commercial client in Pennsylvania receiving a payment from a UK buyer will be able to receive payments against their invoices instantly, transforming the way they manage their accounts receivable and allowing them to better manage their working capital."
Specifically, Ripple pointed out the implied use of xCurrent or xVia in its description, depending on which solution that PNC chose to immediately implement. This win is notable for a variety of reasons, one of which is the massive size of the bank involved. The other interesting note is that PNC is a US bank with ties to various high-tech banking services and mobile applications. It provides a substantial advantage to PNC as it looks to compete with other US banks that suffer from much slower international transfers due to their continued reliance on the SWIFT correspondence banking network.
SAP and Canada-to-Germany Payments
In an article published by AMB Crypto, it was reported that SAP had teamed up with Ripple and Alberta Treasury Branches (ATB) to create a new mobile application as a proof-of-concept. AMB Crypto told the story of how SAP and ATB approached Ripple to help create a real-time settlement platform on SAP, quoting SAP's Global Head of Industry Falk Rieker: 8
“So what we were able to achieve in that proof of concept was that normally it takes the banks around 3 days; could be two; could be six; but on an average, 3 days to send this transaction through multiple intermediaries.”
He then noted that their proof-of-concept was able to process the entire transaction end-to-end in 20 seconds. He went on to emphasize that Ripple's innovative technology benefited SAP in three ways: A savings of cost and time, and also an improved customer experience.
This realization by SAP that Ripple technology could supercharge their cross-border payments is an echo of many other banks and organizations that have confirmed Ripple's cost savings. In the end, these three characteristics of xCurrent, xVia, and xRapid will be what propels them forward through mainstream adoption.
Origins of xRapid Revealed
In case you missed it, Sagar Sarbhai provided some great commentary in an interview recorded and released as part of the "Fintech Abu Dhabi 2018" conference that took place on September 17th. 9 The interview was by CNBC, and the questions included a few that pertained to regulation of XRP:
I really appreciate Sagar Sarbhai's sharp talking points and in-depth, on-the-spot knowledge of Ripple's solutions and products. His confidence is on display, and seems to be transported electronically in a natural way that conveys complex concepts in an intuitive fashion. Here are a couple notable quotes:
Question: "Has, so far, the reluctance from financial institutions to adopt xRapid been about regulation...?"
Answer: "...I think that was the case maybe a year ago, but things are changing now. For example, countries like Thailand: They have come up with really sophisticated frameworks to help trigger this innovation, where banks and financial institutions, payment providers, can then leverage the power of digital assets - for payments, for example.
We are standing here in Abu Dhabi. ADGM (Abu Dhabi Global Market) came up with a very sophisticated framework to boost institutional participation, where financial institutions and payment providers can use digital assets like XRP for their liquidity needs. So, I think that narrative is now changing. Of course, there are countries which are sitting on the fence and looking at how things are going, but I think it's all positive, and we'll see more and more banks and payment providers start to use digital assets."
This emphasis on regulatory clarification is something we've been hearing consistently from almost every Ripple executive that's been speaking on the topic of digital asset adoption by banks and financial institutions. Where a country has a consistent and clear taxonomy and regulatory framework in place, innovation tends to thrive; but where there is risk and uncertainty, entrepreneurs and conservative businesses like banks tend to become timid about taking any compliance risks.
The interview with CNBC was great to watch, but even more interesting was what Sagar Sarbhai said while giving a speech during the conference; he revealed that the origins of xRapid were based on findings documented as a result of a proof-of-concept that took place with twelve different (unnamed) banks: 10
“In 2016 ... we ... piloted with 12 banks. These 12 banks were based across regions across the globe and they did not have pre-funded relationships with each other. and ... we ... gave these banks some XRP and asked them to settle within themselves and it worked beautifully.”
(The banks said) we would love to adopt it but we cannot, because there are capital requirements and regulatory uncertainty. So they said that, it's volatile; there are no set of regulations, so we cannot hold those assets in our books.”
Ripple then subsequently designed and created xRapid, ostensibly to help overcome the issues identified during the piloting of XRP's use. xRapid can be deployed in a variety of ways, and Ripple indicated that one of those ways is to source liquidity dynamically using exchanges, instead of requiring institutions to hold it. It was fascinating background information, and clearly demonstrated how Ripple conducted in-depth research prior to creating its software solutions in their current incarnation.
Internet content creators - authors, vloggers, and artists of every variety - are rushing to Coil-enable their various websites. In addition, they can check if they've successfully enabled Coil by using the Coil checker that WietseWind recently published here: Coil Checker
In the meantime, however, the Coil team has taken it upon themselves to assist larger well-known content providers such as Wikipedia and the Internet Archive to accept Coil donations via an ILP Payment Pointer that they will manage on behalf of those organizations:
To further quick adoption of its service, Coil is taking on the role of 'payment forwarder' for these organizations and is stating that until these sites implement web monetization on their own, they will handle it for them. It's a smart move by Coil, since there are many of us that would love to support these sites that seem to provide a common public good.
Coil-Enabled Site Listing
WietseWind has configured his Coil Checker to broadcast and display a full list of all sites that the Coil Checker verifies as 'Coil-enabled.' This list is, by default, the first centralized directory of Coil businesses and sites, so that users, readers, and down-loaders will know and be able to consciously choose monetized sites to support.
To view the current list, just visit the Coil Checker here: Coil Checker
Recently, WietseWind took on a new pet project: To build a smart outlet (light bulb socket in his example) that is ILP-enabled. 11
In what I can only surmise required him to overcome multiple frustrating - or what would ordinarily be frustrating for a 'mere human' - challenges, he managed to hook up a Raspberry Pi, a 3.3V Relay board, and a few wires together, all with the required software:
The end result? ILP running on a Raspberry Pi, which now controls the on/off switch for an electrical circuit inside his home.
WietseWind indicated that this opens the door for future, strange-but-interesting potential applications based on the ability to send money so your device will power on. What devices, revenue models, or other creative financial innovations could result from this? Time will tell the story, but WietseWind has once again blazed a trail with a new way to run ILP and accept payments.
He indicated at the end of his blog that there were several to-do items in addition to his 15-step guide:
• Sending money, so your device will power on • Running the ILP receiver in the background • Running the Payment Pointer on your own (persistent) hostname, instead of a random localtunnel.me hostname • Additional GPIO connectivity (inputs / outputs) • Determine power usage and adjust ILP payments
Will another community developer pick up these items and solve one or more of them, or will an entrepreneur decide upon a new way to leverage this capability? The future awaits.
Coinfield, a Canadian crypto exchange, launched in February of this year with support for XRP and a wide variety of other cryptocurrencies. 12 They were noteworthy for their fiat CAD-XRP pairing (Canadian Dollar).
And on September 21st, hours after one of the largest XRP rallies in 2018, they announced via Twitter:
It's not surprising that another exchange is considering the usage of XRP as the primary base currency; it's the fastest - and one of the most liquid - cryptocurrencies, and will allow traders to quickly fund their account during times of intense volume. XRP transactions settle in under four seconds, making it ideal for a default liquidity pipeline.
Hopefully Coinfield proceeds in this direction as well; traders in Canada would appreciate an option that supports a robust number of XRP pairings.
St. Jude Donations
One of the first community-driven donation drives was led by an XRP Community member named KingBlue. Since it was the first donation drive to utilize the social media influence of the XRP Tip Bot, he ended up having to overcome some early adoption difficulties, including potential security issues, withdrawal limitations, and other obstacles.
Despite these challenges, he worked with WietseWind and others to identify ways around these problems, and continued to champion using the XRP Tip Bot for St Jude. To view his donation page, refer here: KingBlue's St Jude Donation Page
In addition to continuing to champion donations for St Jude via XRP contributions, KingBlue also published some tips and pointers for others that may wish to use the XRP Tip Bot or a donation page for similar purposes. Please contact him directly if you're interested in hearing some of his advice on what problems to avoid, and how to go about championing a charity before you proceed.
From a logistics perspective, keep in mind that the charity in question will be subject to the withdrawal limits on the XRP Tip Bot unless they contact WietseWind directly as indicated on the XRP Tip Bot website. WietseWind also indicated that he doesn't (and won't) endorse any specific charity; however, he can help with a donation page in some circumstances.
Logistical challenges aside, there was a mysterious donor to St Jude recently that gave 6,513 XRP to the charity. They asked not to be identified, and KingBlue would not reveal who the mystery donor was, other than to indicate his gratitude for the sizable donation:
Although it's still a mystery, some independent researchers think they may have identified the wallet's owner. Does it really matter? The important thing is that the XRP Community has shown its support of St Jude and has rallied around KingBlue's continued campaign to raise money for that organization.
Thank you to KingBlue for helping St.Jude Children's Hospital.
Solid Foundations Build Sustainable Value
Speculation will carry blockchain - and its associated trove of digital assets - only so far.
XRP benefits from the fact that it was created for one purpose: Payments. Whether they be international, cross-border, or high-volume domestic payments, XRP is the one digital asset that can scale immediately to meet these needs.
XRP's value rests on a solid foundation: Its utility is championed by companies that are building software solutions on its network, and it boasts the strongest and most resilient community of investors, supporters, and developers in crypto.
We didn't get here by accident. It took planning, dedication, and the herculean accomplishments of many visionaries that were a part of the effort - and some of the best minds are now independent operators and developers that comprise valued members of the community. Whether it's Ripple's careful design of the new global payments infrastructure, or Coil's cutting-edge payment streaming with ILP, it is the utility of XRP that will win the day.
For those in the XRP Community, we've seen what success can bring, and we also know that XRP's future rests on a solid foundation.
Sources and Credits:
Cover Art: Thank you to Javier Garcia