Paper Tigers and Real Bears

Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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When fear grips the market, beware of the buyers that lurk below.   The market vultures are there, ready to scoop up your zerps at low prices if you succumb to panic selling.

I've been around since 2013 trading cryptocurrency, and I'm more of a buy-and-hold type of investor;  I've seen serious crashes on no less than three or four occasions, and I've grown accustomed to the cycles driven by market psychology.

Yes, the bears are definitely doing some damage to the entire market, but if you look closely as an XRP holder, you will notice two critical points:  First of all, we've taken the second spot in the crypto rankings.   It's no surprise to me, and in actuality, I'm in the group of people that believe that when XRP's utility-driven demand makes itself known, we will take the top spot in cryptocurrency with ease.

Even before that point, the market is signaling its maturity and turning away from the old, energy-wasteful proof-of-work tokens and turning its attention to those crypto-assets with real utility and use cases;  the primary one is XRP, with its trillion-dollar use case for cross-border value transfer.

In addition to capturing the second spot, and with it, the high-profile recognition by mainstream press, XRP is also grabbing additional market share by capitalization.   Between early July of this year and now, XRP's share of the overall market has increased by 57 percent.  1  2

Regardless of these encouraging developments, the overall price movement has been in the wrong direction in the past few days, causing some XRP owners to express concern about the power of the overall market to negatively impact prices.

Here's something for those people to keep in mind:  The fundamentals behind XRP and its ecosystem have not soured.   In fact, they've only gotten stronger since SWELL, and with each passing day we edge closer to measurable levels of xRapid volume.   Ironically, an XRP Community member believes that the first measurable volume levels attributable to xRapid may have been detected a few days ago at the start of the market downturn.  3 

The fundamentals of XRP's utility are only increasing in value, despite recent price action.  

I would classify any concern over its utility as a 'paper tiger' - a Chinese phrase implying a false concern.   While competing blockchain projects may sometimes try to cast shade on market leaders, you can easily fact-check any questions you have with others on social media.  

The fundamentals of XRP are sound, and its long-term potential remains unhindered: But the overall market is definitely in the grips of change - and that type of change is being accompanied by many in the crypto space abandoning their proof-of-work cryptocurrencies and seeking better alternatives;  and in some cases market participants are simply leaving temporarily, waiting for a signal that it's safe to return.

Make no mistake about it;  people are losing money, and many proof-of-work developers and ecosystem participants have seen their livelihoods erased.   I would have preferred that the market make this switch to new consensus models during 'green' market days, but that's not how it seems to be happening.  

Should the crypto market have seen these problems in advance?

Yes.   Proof-of-work miners need the prices of cryptocurrency to remain at certain threshold levels, otherwise it ceases to be profitable for them to continue to secure the network.   This is a very real problem that some in the Bitcoin community are worried about, and in a recent interview, Barry Silbert (DCG Investments) didn't have a convincing answer when asked about this directly by an analyst on CNBC.  5  His company is very heavily invested in proof-of-work cryptocurrencies like Bitcoin.  

And when Breakermag and other news outlets covered the story about how ConsenSys, the largest company developing on the Ethereum network, was planning on laying off a major portion of its workforce, Brad Garlinghouse voiced his disdain remotely, noting how the company had spread itself too thin and had relied on a business model that seemed based on experimentation rather than real-world business use.  6   7

Brad Garlinghouse Tweet

It was a predictable frustration voiced by the author of the Peanut Butter Manifesto, and he is absolutely correct in hindsight;  all the signs of trouble were there, and now in late 2018 it's obvious that real business has not been fooled by the claims of those continuing to try and market proof-of-work technology.  

This dramatic market change is happening in front of us, and it is necessary;  but it is also painful for those affected.  

This is why the entire cryptomarket needs to focus on moving forward and placing the full weight of its support behind XRP;  Its ecosystem participants like Ripple, Coil, and others are committed to overcoming the few remaining obstructions for the use of crypto-assets in everyday life.   The organizations championing XRP have also led the charge for seeking out regulatory clarity and interoperability.  

And that is what is needed right now:  leadership.  

Ripple News

Following the settlement of the lawsuit between R3 and Ripple on September 12th, there has been a quick succession of developments and announcements coming from R3.  8

With all possible speed, R3 updated its Corda platform to include the "Corda Settler" on December 5th, which will allow the use of digital assets for payment settlement within the Corda platform.  9   It was a move that was greeted with enthusiasm by the XRP Community;  and now on December 6th, Yoshitaka Kitao, SBI's CEO, announced via Twitter that SBI would be forming a joint company with R3:

Tweet from Yoshitaka Kitao

The news article that Yoshitaka Kitao shared in the tweet indicated that the new company would be formed starting in January of 2019, and its goal would be to:  10

"...  promote the spread of the "Corda" distributed ledger technology for financial institutions in Asian countries including Japan."

It was an interesting move, and the natural question for many is "how does this work within the context of the Japanese Banking Consortium (JBC) using RippleNet to process cross-border transactions?"  The article hinted at how the two different platforms may play more of a complementary role, and highlighted a few slides from SBI.   It also emphasized that the Corda software was viewed by SBI as being particularly strong for:

"Simplified written communication between various parties such as exporters, importers, transportation companies, insurance companies, port related persons, and financial institutions."

My impression is that SBI sees the big picture of how these banking applications and networks may develop over time, with possibly more than one platform used to target different markets.  

With XRP potentially being used for settlement in both networks, the new joint company will be important to watch in early 2019.  

PC Mag Interviews Asheesh Birla

On December 7th, PC Mag, an online news site, published a comprehensive interview with Asheesh Birla, Ripple's Senior Vice President of Product.  11

The interview was conducted by Rob Marvin, PC Mag's Associate Features Editor, and spanned topics like the recent market price action for XRP and other crypto-assets, financial industry trends impacting blockchain technology, regulatory trends, and how mega-trends such as mobile banking will affect Ripple's go-to-market strategy.   If you own XRP, or are merely interested in learning more about the biggest company 'building on the XRP Ledger,' I recommend this piece as valuable insight.  

Here are two of my favorite questions and their answers:

Question (Rob Marvin):  "Going back to this evolution of blockchain technology in 2019 and beyond, aside from payments, where do you fall on the debate over the types of blockchain apps and distributions that will lead the charge?  Public vs.  private blockchains, cryptocurrency vs.  blockchain apps and services, etc."

Answer (Asheesh Birla):  "On the digital app part of it, you should think of it like the combustion engine.  You really can't do anything alone with a 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.  What I think Ripple has learned in the past five years is that you have to build around that technology to make it useful.

On private blockchains, my opinion is that I just don't see the point.  I think it's another word for a database.  If you're building your entire product on a private blockchain, you're a great marketing company."

Question (Rob Marvin):  "Specifically in serving the under-banked populations of the world, are there particular markets that you guys are focusing on and that need the most help and that Ripple really thinks you can provide some tools to the people there?"

Answer (Asheesh Birla):  "Mexico is our first xRapid corridor.  We're seeing a lot of traction there because it is an under-served population.  In these markets, the larger correspondents don't want that business anymore.  They're folding and restricting on it so that the largest banks now only take up eight percent of their market.  It's just too expensive to operate.  So I think that is a perfect insertion point for us to come in with something that is far cheaper than anything else they've been seeing, that we can get up and running in a couple weeks."

I really enjoyed Asheesh Birla's no-nonsense answer about private blockchains, because it's something that, for those of us that have followed the innovation of decentralized networks, have often wondered;  is the use of blockchain technology in this case more about marketing?   In many cases, an organization's use of a 'private blockchain' would probably be better served by a centralized database.  

His comment about the Mexican corridor was shocking, and demonstrated why Ripple is making quick work of taking over where SWIFT left off;  if the traditional cross-border payments model is failing these specific areas of the world, then no wonder there is such a significant portion of the world that continues to be un-banked.  

The world needs Ripple technology to help wean itself off of the old correspondence banking model and move to modern payment rails that can truly supercharge global commerce.  

Coil News

The recognition that interoperability is sorely needed in both banking and blockchain technology started a few years ago, with Ripple's creation of the Interledger Protocol.   This protocol was geared to be an international standard for transmitting value between different ledgers.

Up to 2015, most new blockchain technology projects were focused on one aspect that captured young entrepreneurs' imaginations - usually a new coin of some kind.   The promise of quick fortunes motivated many technologists to enter the space, but this original focus was too narrow, and resulted in thousands of encapsulated projects that can't communicate with one another.   Thus began the quest for standardization of ledger interoperability so that value could be transmitted from one network to another.  

In 2015, Ripple took the lead on this effort, but several other companies were also pioneering the technology necessary to realize ILP's potential.  

One such company is Tendermint.  

Tendermint was founded in 2014 by Jae Kwon to commercialize his new consensus algorithm, which operates with what he terms a "Bonded Proof of Stake."   It allows new blockchains to avoid reliance on proof-of-work, which the team describes bluntly:

"Proof-of-Work protocols are slow, expensive, unscalable, and environmentally harmful."

It's hard to disagree with this point;  and it serves as an introduction to the blockchain that the Tendermint team recently built, called Cosmos.   Cosmos's focus is on building new blockchains and solving interoperability, and the project emphasizes how it is able to scale much more easily than POW networks.

The team is focused on interoperability.   They were one of the first projects to investigate using ILP, and recently announced that they'd partnered with Kava Labs to provide a way for new blockchains built using Cosmos tech to support cross-ledger payments.  12

Zaki Manian, the Director of Tendermint Labs, recently penned a blog about the effort, which was then tweeted by David Schwartz, Ripple's Chief Technology Officer:

Joel Katz Tweet about Cosmos

The tweet included an intuitive summation of why he was excited about the recent progress, essentially saying that new blockchains based on Cosmos would now be ILP-compatible by default.  

When another Twitter user asked how this development affects XRP, David Schwartz took the time to explain in layman's terms.   He started out with noting that, before this development, any Dapp (decentralized application) built on Ethereum had to use Ether for payment, with all of the scalability and performance limitations that go along with it.   With the ILP capabilities that Kava released, however:

"ILP allows XRP (and all other assets) to be used for payment and held for settlement wherever they work best.  This levels the playing field and improves the usability of cryptos for everyone.  

So ILP being available on more platforms is good for XRP because it enables more applications to have the choice to use XRP if it works best for them.  And it's good for XRP because it grows the space by allowing projects to choose an asset that's a better fit even if not XRP.  

One other point is that ILP, unlike many other blockchain interoperability protocols, can easily bridge crytpocurrencies to non-blockchain payment systems.  Connecting cryptocurrencies directly to the trillions of dollars in "legacy fiat assets" is very good for cryptocurrencies."

This emphasis on big-picture thinking is what we need more of in the cryptomarket.  

To move forward and support real-world business, blockchain technology needs to scale and inter-operate, not continue to build 'new coins.'  The Interledger Protocol is a shining example of how blockchain technology can truly solve this interoperability and scaling issue - all in one.  

XRP News

Does XRP represent the fastest, most scalable technology when it comes to decentralized processing?

There are a number of indications that XRP will be improved upon through code updates to bring it to a record-setting level of speed, scalability, and resilience;  one hint about these updates was provided via a formal paper submitted for review by Ethan MacBrough, known as 'Cobalt.'  13

The Cobalt paper described certain updates that could be made to XRP's consensus that would enable it to be more fault-tolerant, and would, in theory, allow it to support multiple, default 'UNL' lists created by different groups within the list of validators on the network.   In addition, some have speculated that Cobalt would also allow the XRP Ledger to reach record-setting, on-chain processing speeds, although it's unclear what these improvements would imply with regards to hard numbers of 'transactions per second.'

Completely independent of the Cobalt paper, another hint at Ripple's goals for upgrading the XRP Ledger was provided by Brad Garlinghouse at a conference, and the quote was captured and communicated in a tweet from @DiepSanh (Twitter handle):

Tweet containing Brad Garlinghouse Quote

The context for the quote was a panel discussion at the Singapore Fintech Festival in 2017, but the larger point that Brad Garlinghouse made - and this is sometimes lost in translation - is that, no matter the impressive on-chain speed, the true scaling to global levels happens via off-chain processing, either using XRP's native 'payment channels' capability or through use of both 'payment channels' and the Interledger Protocol.  

Perhaps it's this concept behind Stefan Thomas's comment about being able to scale payments processing into astronomical numbers:   14

"With the technologies we’ve helped build at Ripple - XRP and Interledger - we can process trillions of transactions per second without any central authority."

It's an impressive claim by the former CTO of Ripple, and keep in mind that his company - Coil - now plays a critical role in developing the technologies that he mentioned, including ILP.  

What about innovations that other projects have made - or at least claimed?   Some fintech teams are experimenting with cutting-edge technology that may be able to scale on-chain processing to these types of impressive numbers as well, but it's not clear if these claims have actually borne any fruit yet or been independently verified.  

Upper Limits

While various new projects have re-positioned decentralized processing components involved in transaction validation in an effort to reduce latency, there are some aspects to cryptography that currently act as upper boundaries on the velocity of processing.   One is the time it takes to 'sign' transactions using cryptographic proofs.

These current methods require a certain amount of processing time and effort, which act as speed anchors to any new innovative validation scheme.   However, several projects are under way at the moment that promise to offer new ways of transaction signing that are said to also be 'quantum resistant'.

While these innovations are currently under development, my guess is that Ripple's David Schwartz is keeping tabs on their progress, and may opt to upgrade the XRPL when a new standard is available.

Ripple has a sizable contingent of C++ programmers;  this doesn't directly indicate an imminent intention to upgrade XRP, as it could also indicate the development of separate proprietary tools by Ripple, but it's a reminder that the possibility exists that Ripple may indeed have something impressive planned for "XRP 2.0"   15

Until an implementation schedule for either Cobalt - or a more comprehensive upgrade - is announced, we can only surmise about Ripple's plans for contributing code that will allow XRP to remain the fastest and most reliable decentralized network in existence.  16

XRP Community API

The XRP Community API developer announced that he'd be releasing an update to his site on Wednesday, December 12th:

XRP Community API Tweet

The new version of the site will allow users to access real-time market data for nearly forty XRP pairings on twenty-seven exchanges!   He is still working on the site and will not formally release the new version until this Wednesday;  In advance of that milestone, he provided a preview for me to share with readers.   Here is what the user interface might look like for casual site browsers:

XRP Community API Website Screenshot

He has invited any other XRP Community developers to utilize his site as well, and provides an overview of some of the public API limitations here:  XRP Community API FAQ

Like other talented developers building on the XRP Ledger, he has stated that he's ready to interact and work with others that wish to use his API for loads beyond that of the published limits;  there is also a SOAP version of the API.   For developers that would like more information or would like to ask him follow-up questions, he's posted contact information on the API website here:   XRP Community API Contact Info.

Crypto-Assets and the International Monetary Fund

One Twitter account that has been a consistent voice of rational, fact-based reminders of the progress surrounding the XRP ecosystem and its major business participants, is @DiepSanh.   He manages to uncover some of the most interesting points of evidence of progress for XRP, whether it's a video interview of a Ripple client, or some amazing quotes about the burgeoning Internet of Value.  

Recently, he created a video that was entertaining and educational all in one;  it was a collage of clips of various IMF thought leaders about the use of crypto-assets:

Tweet containing IMF clips

At first I didn't know why the voices were so high, and then it occurred to me that he'd intentionally sped up the dialogue for the effect, which was at times both hilarious and exciting, as the concepts being communicated in real-time suffer from (naturally) slower delivery associated with thoughtful communication.  

If you haven't seen it yet, I recommend it for both the actual content and for the humorous 'helium' voices of some people you will probably recognize.  

XRP The Standard

I've been through previous market downturns in crypto;  those that have followed the market since 2013 know exactly what I'm talking about.  

Cryptocurrency is an amazing innovation in the democratization of finance, but it also represents a completely unregulated market of exchanges that do not have the safeguards afforded regional stock markets.   When irrational panic overwhelms a regulated exchange, there is an automatic stoppage of trade that provides market participants a chance to slow down and reflect on the fundamentals of the underlying assets.  

The cryptomarket has no such safeguards.  

It follows the absolute rules of market dynamics and psychology, and is currently driven by what I'd term "speculation in search of a use case."   And when traditional business investors look for real value underneath the usual crypto hype, they will find XRP.   This is what we've seen even during the market downturn, and it's a signal that the entire cryptomarket - and its new, conservative participants seeking real business value - are turning their attention to XRP.  

XRP is championed by several major participants and a myriad of small businesses and individuals.   The focus for XRP has always been on its real utility and suitability for supporting cross-border transactions, along with several other innovative use cases such as micropayments and sharing economy finance.   The cryptomarket is in sore need of leadership, and in this vacuum has stepped one particular crypto-asset that seems to have all the necessary pillars:  security, scalability, and decentralization.

It's been an obvious preference of crypto buyers even during the red days of a market crash, so do not underestimate what will happen when XRP's use cases are activated and scaled to support global commerce:  It will lead from the front, and is prepared to point the cryptomarket to a much more promising tomorrow.
xrp symbol
Sources and Credits:
Cover Art: Thank you to Jeffrey Eisen and Jessica Weiller

  1. https://coinmarketcap.com/historical/20180701/
  2. https://coinmarketcap.com/
  3. https://twitter.com/TeholBeddictXRP/status/1070496076468273152
  4. https://twitter.com/TeholBeddictXRP/status/1070496076468273152
  5. https://www.cnbc.com/video/2018/11/27/the-ic-market-is-dead-says-digital-currency-groups-silbert.html (at 4:15)
  6. https://breakermag.com/exclusive-consensys-letter-to-staff-details-major-strategy-shift/
  7. https://twitter.com/bgarlinghouse/status/1070385135613165568
  8. https://www.pymnts.com/news/b2b-payments/2018/ripple-r3-xrp-blockchain-lawsuit/
  9. https://medium.com/inside-r3/announcing-corda-settler-2287ca620f68
  10. https://coinpost.jp/?p=59042
  11. https://www.pcmag.com/news/365150/ripple-exec-talks-xrp-global-payments-and-blockchains-fut
  12. https://medium.com/tendermint/kava-partners-with-tendermint-to-bring-interledger-to-cosmos-d9e098c82b8a
  13. https://arxiv.org/pdf/1802.07240.pdf
  14. https://medium.com/coil/coil-building-a-new-business-model-for-the-web-d33124358b6
  15. https://twitter.com/nbougalis/status/1070553045556051968
  16. https://www.quora.com/Bitcoin-What-is-the-fastest-blockchain

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Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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