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Puzzle Pieces Fitting Together: Ripple & XRP

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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Board puzzles are surprisingly fun - even for those of us that tend to gravitate towards more cerebral entertainment.  There's something cathartic about seeing an entire picture created from various individual parts.

Whatever the case may be - or your perspective on the matter - you've got to admit one thing about the latest news around the XRP ecosystem; the puzzle pieces are coming together surprisingly well!

Ripple's timing of their latest major release of Rippled (the validator software) was during - and directly after - Blockchain Week in New York City.  Four of the eight major companies piloting xRapid have released their results confirming the cost savings.  SBI Virtual Currencies is about to open its doors.  Liquidity - and the general crypto market - is slowly finding its footing once again as prices start to nudge higher across the crypto spectrum.

And of course let's not forget the big news: xCurrent looks like it is quickly gaining momentum across all corners of the globe in its effort to replace SWIFT's aging messaging system.

Each of these items individually is big news, but consider how each of the parts inter-relates with one another, and how the entire RippleNet network is growing to a size miguel_viaswhich is orders of magnitude above the levels we observed just one year ago.  2018 still has many months left; it's wise to keep in mind the words of Miguel Vias when he first heard about IDT and Mercury FX piloting xRapid: 1

"I believe the right word for this is traction. 2018 is going to be our year." 

General Crypto News

On Monday, May 28th, hackers contacted two Canadian banks and demand that a ransom be paid to them.

It turns out they were able to gain access to the bank accounts and personal information for approximately 90,000 different individuals at both the Bank of Montreal (BMO) and Simplii Financial, which is an online bank subsidiary to CIBC (Canadian Imperial Bank of Commerce). 2 3 4

The hackers exploited an account recovery mechanism whereby they were able to reset the access to accounts after answering some cursory information that they were first able to obtain without any credentials.

The hackers contacted the banks and demanded that $1 million dollars’ worth of XRP be deposited in a specific address; the deadline passed without payment, however, and it’s not clear if the hackers have actually released the personal information or not. 5   BMO released a statement akin to the familiar “we do not negotiate…” theme: 6

"Our practice is not to make payments to fraudsters; we are focused on protecting and helping our customers."

Volcker Rule

The “Volcker Rule” basically prevents banks from making what are considered to be unsafe bets with depositors' money.  According to some stakeholders in Washington – and in banking – the rule is too complex and is onerous especially for small-and-medium-size banks to comply with.  The changes would simplify conformance with the law at the same time streamlining enforcement, thereby reducing the amount of overhead associated with the rule.

Keep in mind that the rule was enacted after the banking crisis in 2008.

Paul Volcker himself, the original author of the legislation, and a former federal reserve Chairman, had this to say about the recent effort to change the law:

“What is critical is that simplification not undermine the core principle at stake — that taxpayer-supported banking groups, of any size, not participate in proprietary trading at odds with the basic public and customers’ interests.”
I think we can all agree that this is a worthy goal.

So what effect will this have on banks’ ability to use and/or invest in digital assets?  It’s unknown at this time, but I will point out that one Federal Reserve Governor, Lael Brainard, has gone on record in the past in support of the notion of using digital assets in cross-border value transfer. 7 Lael Brainard was quoted in this article.  Here is what she had to say: 8

“The requirement of C.E.O. attestation is critical for this to work, in my view,”
What is CEO attestation?  It’s a requirement that banks' CEOs attest (provide a signed statement) that their bank is adhering to any restrictions on speculative betting.  Now, on the surface, most crypto networks will not be jumping for joy at this.  When banks' CEOs are required to personally attest that the bank is not taking undue risks, it definitely pours cold water on the notion of any speculative investment in digital assets by banks.

However, it leaves an open door to the possibility of investment in crypto-assets for the purpose of cross-border value transfer – i.e. utility tokens that could be acquired by the bank.  And it also provides a way for banking CEOs to color their speculative investment as well; in other words, perhaps XRP may be considered a speculative investment in its own right, but if banks are holding it and managing the risk as they would with other fiat currency, and it serves a purpose such as cross-border value transfer, then it provides both in reality: A speculative investment and a utility token for bridging fiat currency.

This could be a significant win-win situation for banks, as their XRP assets could climb in value as well as be used for settlement of cross-border payments.

Ripple News

In a previous blog, I covered the fact that Ripple reached a code nomenclature milestone with their release candidate of “Rippled 1.0.0 r.c.”  While Ripple emphasized that it viewed the release as it does other ones, it also emphasized that this particular release would be considered the first “major” release into production.  The nomenclature involved is defined this way:

MAJOR.MINOR.PATCH

So far, we’ve seen five years of production-ready XRP, but Ripple (the company) always considered the code to involve a series of minor releases.  The timing of the latest major release is interesting; there are a couple other events and developments within the XRP ecosystem at the same time, including the transition to production for SBI Virtual Currencies (SBI VC).  In addition, four of the eight known xRapid pilots have now completed with positive confirmation of XRP’s cost savings.

And now we see that Ripple views their latest Rippled release as the first major release of XRP software.  Their own perspective was communicated on the internal location that the company uses to communicate information to those that run Ripple validators: 9

“The rippled v1.0.0 release includes incremental improvements to several previously released features. v1.0.0 also symbolizes the growing maturity of the software and the increased stability of the decentralized, growing network of nodes that are running the software all around the world.”
If you haven’t viewed what Ripple communicates as part of their standard procedure, you should take a look and see for yourself, especially since this release serves as a significant milestone in the code-base history: change_log_1-0

Brad Garlinghouse Hits the Airwaves

He’s no stranger to the spotlight; and it’s something that we absolutely need in a skilled CEO – the ability to spar with interviewers about tough subjects.  In addition, Brad Garlinghouse uses the spotlight to position the company and communicate key points and positions about topics, including regulation and banking trends.

Recently, we’ve seen Brad Garlinghouse kick it up a notch, sitting for various interviews and panel discussions in a variety of venues.  In the latest panel discussion at the Recode conference, he criticized what he called “religious zealotry” among some in the blockchain technology space.  Watching the thirty-minute video, I agreed with all of his points:

https://www.youtube.com/watch?v=ZLsq0F0QXGw

Here is Brad’s comment that received so much attention from both the crypto press and mainstream media: 10

“We may come to find that Bitcoin is kind of the Napster of digital assets. This is transformative technology, but Spotify and iTunes and Pandora rule the day because they engaged with regulators to solve a real problem.”
It’s my belief that this comparison is spot on.  In the early days of crypto, some proponents were under the impression that, to effect change, they needed to completely circumvent all laws and create a technology that supported the destruction of the current financial system.

This immature view – that the entire current establishment must be destroyed – is not new.  It’s the clarion call of so many religions and political movements throughout history that this blog would easily run into pages if we listed them all.  Instead, Brad Garlinghouse wisely predicts a maturation phase to the technology, its proponents, and also its development community.  Yes, the Satoshi Nakamoto whitepaper was revolutionary; but technology is just that – a bit of ones and zeros that doesn’t care about your politics.

Unchain 2018

According to their own description, Unchain is: 11
“… a 2 day conference, featuring some of the world’s leading Cryptocurrency and Blockchain experts and entrepreneurs.”
The 2018 version of Unchain took place in Hamburg, Germany from May 31st to June 1st.  It featured a number of panels and speakers, including David Schwartz:

https://twitter.com/andreaskoop/status/1002543543880208385

It’s yet one more example of Ripple’s increasing presence at industry gatherings and events where blockchain technology leaders interface with interested parties, including entrepreneurs and businesses investigating the latest fintech innovations.

OnePay App

Remember Santander’s OnePay app?  In April, Santander formally announced that they were moving forward with production usage of OnePay, a mobile application that allows end-users to make payments in any currency across borders. 12 It’s a revolutionary app, and it supports real-time payments across borders using Ripple’s xCurrent solution.  xCurrent gives banks the ability to message each other in real-time to confirm payment details before and after payment delivery.

Currently, Santander indicated that the application is available to a subset of their customers in Spain, the U.K., Brazil and Poland; but they also indicated that they plan on rolling it out to larger groups of their customers once additional countries are supported.

Key Facts to Consider

Here’s a couple factoids to keep in mind regarding the Santander OnePay app:
  • Santander is the 16th largest bank in the world 13
  • Santander has 14 million (active) customers 14
  • Roughly 50% of Santander’s international payments are done using xCurrent 15 16
These numbers are striking; it’s clear from these implied large volume levels that the ILP connectors and processors are scaling horizontally just as predicted, and Santander is able to successfully scale using xCurrent.  It’s a reminder of Ripple technology’s growing reach in banking – despite whether or not banks are comfortable at the moment using XRP for liquidity.

Ripple’s Video

Ripple emphasized how Santander’s application doesn’t compromise on the smooth end-user experience:
“It’s about the fluid, easy customer experience for mobile users. It’s what consumers require and expect in today’s market — whether it’s sending a secure message to a friend, hailing a rideshare or sending money across borders.”
In addition to the acknowledgement of the app on their Insights page, Ripple released a video of the app being used to process a payment:

https://www.youtube.com/watch?v=oEIf9W3GOYA

Now let's shift gears and talk about something equally exciting: SBI Virtual Currencies.

SBI Virtual Currencies

As expected, the beginning of June has brought some changes to the SBI Virtual Currencies site.

The public opening of of SBI VC – which uses XRP as a primary base currency –  is an event that is anticipated by XRP fans.  SBI Virtual Currencies is currently serving a very limited number of customers, but it is nearing its release date.  The launch date for SBI VC was postponed due to concerns that security for the exchange be airtight, especially in light of the NEM theft that happened at Coincheck.

What was the time frame mentioned for the formal launch?  When a reporter asked SBI_CEOYoshitaka Kitao, the CEO of SBI Group, if the launch date for SBI VC would be late spring or early summer, Mr. Kitao had a three-word response: 17

“It is so.”
Of course, during that same interview, the following quote also made headlines:
“When we do it, it will be number one in the blink of an eye…”
The first comment about the timing of SBI VC’s production release was somewhat overshadowed by his comments on how SBI VC might be eagerly anticipated by the market.  Given the comment about the timing of the formal release, however, many XRP fans were keeping watch on the SBI VC site as time marched forward into June.  They were rewarded with some visible changes to the SBI site, and it has prompted a new round of speculation about the SBI VC launch date.  One fan on Reddit wrote: 18
“Although it is not live, the site has been updated and it looks customer ready. They now have many sub-pages, including a service overview, a guide on how to deposit/withdraw money, a Q&A about Cryptocurrency Virtual Currency, the risks associated with CryptoCurrencies and how to secure your CryptoCurrencies.”
However, the formal launch has not yet been communicated; we’ll have to wait for further news from SBI as we progress into June.

XRP News

Voting on the new symbol that will represent XRP started on June 1st.  It will proceed until midnight on June 7th (EST), at which point the top three choices will then make it to the final voting round.  The final voting round has yet to be scheduled by @xrpsymbol.

The voting process and overall community selection is being administered by @xrpsymbol (Twitter handle).

The voting site is here:  https://xrpsymbol.com/

XRP_symbol2

For weeks prior to June 1st, @xrpsymbol oversaw the submission of many suggestions for the new XRP Symbol, and was responsible for the (very) unpopular task of narrowing the selection to those choices that met certain criteria.  The criteria he used to narrow the available choices included the following: 19

  • You agree that you are submitting your original work, and that the work you submit is licensed under a Creative Commons 0 license.
  • Images may not contain defamatory, controversial or graphic imagery.
  • Submissions may not contain trademarked components. Submissions that impinge on existing marks will be removed prior to voting.
  • Images must be easy to write by hand, and need to scale well (think 8 point font).
  • A brief, written description of the symbolism must accompany each submission.
I've blogged about the submissions previously; many incredibly creative and artistic representations of XRP were put forward.  Everybody's taste is personal, and I had four favorites that I really liked.  Recently, I logged into the website and voted and was able to see which selections were the most popular.  Every selection seemed to have a subset of fans, however, so it's up to those participating in the voting process to champion the ones they prefer and make a case for them.

My advice?  Set aside a few minutes to log in and make your preference known.

Exchange News

Coincorner is a small exchange that reports its volume to coinmarketcap.com. 20 Although the volume on their exchange is relatively small, they recently added XRP support to their pairings, announcing the move on Reddit through their corporate account: coincorner_XRP

Even though it’s currently a small exchange, moves like adding XRP support indicate that the owners of the exchange have their eye on increased volume.  It will be fascinating to circle back in three months to compare the overall volume of the exchange.

GMO Mobile App

GMO is a very large Japanese crypto exchange.  The exchange added XRP in November of last year, and recently, they announced the creation of a new mobile application. 21 22

The current trend in cryptocurrency trading – and in many other financial sectors – is to place customer-facing functions on mobile applications.  We’ve seen enormous growth specifically in crypto trading on these mobile applications, and it makes sense from a convenience standpoint; traders can focus on their regular nine-to-five jobs if they can also have easy access to making real-time decisions about investment directions.  Sometimes traders need to make split-second decisions, and having access to a mobile trading platform supports that need.

GMO calls its new application “GMO Coin Virtual Currency Wallet” and it is said to support both crypto choices and fiat – notably the Japanese Yen.

Liquidity

In May, history was made when Bitbank became the number one exchange by volume bitbankfor XRP. 23

It’s a Japanese exchange, and it signals a more balanced volume distribution originating from Asia; historically, South Korea has been the steady leader in XRP volume.  This trend is starting to fade, however, as the volume from South Korea is starting to plateau, and Japan’s appetite for crypto trading is now starting to challenge South Korean dominance. 24

The Puzzle is Almost Complete

What are the components necessary for the entire apparatus to quickly scale?  What does xRapid need?

If we look at all the facts and progress, along with the business deals and mechanisms that Ripple has carefully put into place, each one may seem meaningful in itself; however, it's wise to look at the situation from a holistic point of view.  The question you should ask is "Does Ripple have everything it needs to make xRapid work at scale?"

xRapid, to support truly global levels of commerce, will need to have high-volume exchanges where pairings of various crypto-to-fiat trading takes place.  Or perhaps there is some technique where additional software can overlay individual exchanges and create liquidity pools?  There has been much speculation about such an endeavor, but Ripple has been silent on that topic.

Do banks have adequate custody solutions for safely handling (and storing) crypto?  We know that Ripple has talked about this factor independently of the overall topic of xRapid adoption, but think about it in context; banks are usually not keen on building software themselves.  They are also new to handling digital assets.  These are real obstacles that must be overcome, and Ripple was the first organization to not only spot these obstacles, but actively plan for them.

We are quickly approaching the point where the puzzle will reveal the entire picture; I am prepared - and anticipating - what will happen to XRP liquidity and volume when that happens.  Are you? XRP_new1

Sources:

  1. https://twitter.com/miguelvias/status/956181062668840961
  2. https://en.wikipedia.org/wiki/Canadian_Imperial_Bank_of_Commerce
  3. https://en.wikipedia.org/wiki/Bank_of_Montreal
  4. http://www.cbc.ca/news/business/bank-hack-tuesday-1.4682018
  5. https://www.ccn.com/hackers-demand-1-million-in-xrp-after-breaching-two-canadian-banks/
  6. http://www.cbc.ca/news/business/bank-hack-tuesday-1.4682018
  7. https://www.federalreserve.gov/newsevents/speech/brainard20180515a.htm
  8. https://www.nytimes.com/2018/05/30/business/volcker-rule-banks-federal-reserve.html
  9. https://ripple.com/dev-blog/rippled-version-1-0-0/
  10. http://www.livebitcoinnews.com/ripple-ceo-we-may-come-to-find-that-bitcoin-is-the-napster-of-digital-assets/
  11. https://twitter.com/UNCHAIN_Con
  12. https://finance.yahoo.com/news/santander-launches-international-payment-built-152849526.html
  13. https://en.wikipedia.org/wiki/List_of_largest_banks
  14. https://en.wikipedia.org/wiki/Santander_UK
  15. https://www.ft.com/content/87c97744-fd4e-4f14-9740-7f487ce5b460
  16. https://ripple.com/insights/live-transaction-santanders-onepay-fx/
  17. https://www.businessinsider.jp/post-166536
  18. https://www.reddit.com/r/Ripple/comments/8nr30y/sbi_virtual_currency_site_has_been_updated/
  19. https://xrpsymbol.com/
  20. https://coinmarketcap.com/exchanges/coincorner/
  21. https://www.financemagnates.com/cryptocurrency/exchange/japanese-cryptocurrency-exchange-gmo-coin-add-ripple/
  22. https://www.financemagnates.com/cryptocurrency/news/gmo-internet-offers-four-new-cryptos-trade-introduces-new-wallet-app/
  23. https://www.cryptoninjas.net/2018/05/31/japans-bitbank-achieves-number-one-in-30-day-ripple-xrp-volume/
  24. https://xrpcharts.ripple.com/#/xrp-markets

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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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