XRP: By the Numbers

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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Sports fans love statistics.  

It's how they differentiate and brag about their favorite stars - whether they are in cricket, soccer, basketball, or any sport, for that matter.   Can you rattle off how many runs Sachin Tendulkar scored in his best test match?   Or perhaps you're able to pridefully remember that LeBron James is the only player to average a triple-double in the NBA Finals?

For ten years, I played 'fantasy football' and agonized over my college basketball 'final four' bracket selections.   It was enjoyable - it provided endless debates at work that were (relatively) good-natured, and allowed me, a self-described computer nerd, to engage with others that displayed a more natural interest in sports.  

Taking a page from those that constantly compare statistics from sports, we can also look at some key metrics for XRP.  

After all, just like in sports, there are many different 'teams' in cryptocurrency, and I am definitely proud of the team I support and follow;  team XRP.  

What sort of numbers should we look at?

To determine what type of statistics pertain to XRP, let's focus on some sample characteristics that crypto researchers examine when looking at a potential cryptographic network, whether for purposes of investing, or for purposes of using:

  • Adoption
  • Use Case Statistics
  • Network Financial Statistics
  • Performance Statistics
  • Decentralization Statistics
  • Validator Code Governance
  • Supply & Distribution Statistics

Each one of these categories will provide insight into critical weaknesses or strengths of a cryptocurrency, and facilitate a comparison with others.

Adoption
Use Case Statistics
XRP Network Financial Statistics
XRP Performance Statistics
XRP Decentralization Statistics
XRP Validator Code Governance
XRP Supply & Distribution Statistics

 
Supply

Wallet Statistics

  • Minimum XRP Amount to be in "Top 1%" of holders:  73,000 XRP

XRP Ledger Fees

These numbers are impressive, and they indicate a growing chorus of XRP advocates that are now challenging Bitcoin for the spot as market leader.  

Strengths and Weaknesses

When the topic shifts from the raw numbers to subjective judgments of strengths and weaknesses, the question to ask is "from what perspective?"

Most of us are interested in the potential for price appreciation of XRP, the decentralized cryptocurrency that is the centerpiece of the XRP ecosystem of businesses and software tools.  

The numbers quoted need to be compared to other cryptographic networks, along with the potential size of the use cases involved for the cryptocurrency.   The next step is to draw out some conclusions from these numbers, and compare the data to what we know about other networks.  

Weaknesses

The one weakness that has been a consistent obstacle to quick banking adoption of XRP as a medium of exchange has been the regulatory uncertainty around usage of digital assets.  

For some corridors and countries, this question is not an issue.  

However, the United States - and the U.K.  to a lesser extent - have been foot-dragging when it comes to establishing clear 'rules of the road' for how to classify cryptocurrencies.   The United States, until some members of Congress introduced new legislation, has been using something called the "Howey test" to determine if a cryptocurrency is considered a security. 1

Even then, the Securities and Exchange Commission (SEC) has shown a preference for letting courts make the decisions when there is a legal case pending, rather than stating its own opinion.

This inaction has stifled adoption of digital assets by banks and other financial institutions that are fearful of making costly miss-steps and then having to adjust later on, with all the associated intangible costs.  

Thus, regulatory uncertainty continues to be the major weakness for XRP, since its largest use case, while slowly gaining traction, seems to be encountering resistance by the original target customer group:  banks.  

In the meantime, however, Ripple has shown a determination to continue adoption with small-and-medium-size companies that wish to use XRP to handle remittances for specific corridors between countries.   These remittance processors have more flexibility than banks, traditionally, due to a slimmer set of regulations governing money transmission.  

But make no mistake:  Regulatory uncertainty is an issue, and one that will take time to resolve at the 'speed of legislation' or the 'speed of judicial decisions,' both of which can be slower than we'd prefer.  

Strengths

It should be obvious that I believe the strengths of XRP far outweigh the weaknesses.  

XRP comprises approximately 95% of my own crypto holdings, precisely because of its fundamental characteristics.   The strongest attributes of XRP consist of its use cases, performance metrics, and its sponsoring organizations.  

Use Cases

For XRP, the use cases are astoundingly large:  This includes the main use case of XRP for cross-border payments and currency exchange, which could eliminate the need for nostro-vostro accounts for banks and international businesses.   This use case is measured in the trillions of dollars.  2

In addition to replacing the need for nostro accounts, XRP also can be used to cheaply transfer money to and from various countries that are traditionally-high money transmitter corridors.   According to the World Bank, approximately $180 billion is transferred annually to the top three remittance recipient countries, including India, China, and the Philippines, respectively.  

If we step back and include all of the top ten countries in the world receiving money from immigrants abroad, the number rises to $350 billion annually.  

Note that this is a narrow cross-section of cross-border activity, and doesn't focus on corporate and vendor payments, or inter-bank transfers.   If you include the entire market of cross-border payments that SWIFT handles, the numbers quickly balloon into the stratosphere;  a Fincen analysis estimated that SWIFT messaging accounted for nearly $5 trillion in money transfers each day.  

The other use cases represented by Web Monetization & Micropayments (Coil's specialty) and smart contracts (Codius is the XRP smart contract hosting platform) can only be estimated based on assumption-laden analysis.  

One comment from Ripple Board Member Susan Athey provided an illuminating perspective on smart contracts:  In a video from 2015, she noted that traditional contracts are typically not drawn up for small transactions, due to the fact that the logistics around contract management would quickly make the endeavor unprofitable.

Smart contracts hosted by Codius could change that.   She also hinted at the potential creation of more complex derivatives that could be automated via smart contracts:

If Codius-hosted smart contracts could automate some of these agreements and derivative instruments and lower the cost enough, it may open entire new markets for contract-oriented business models that would ordinarily be unprofitable.  

One example of a smart contract is a micropayment for a low-cost service such as the repair of a wheelchair ramp.   The release of payment may be conditional upon acceptance of the finished work.   And for the service provider, the repair work may not have otherwise been a profitable endeavor if the contract negotiation and payment were done by lawyers or accountants;  a Codius-hosted smart contract could streamline the process, making it profitable.

In addition to the digitization of traditional contracts, the area of smart contract-enabled derivatives is something that has not yet been exploited by financial companies.  

The potential for creating derivative instruments and then paying out in cryptocurrency is something that we may see much more of in the coming months;  it will happen eventually, but the advent of these instruments will require greater regulatory certainty than we currently have for digital assets.  

The use of XRP in viral Internet applications has already happened.  

While currently restricted to a few social media platforms, WietseWind's hobby project - the XRP Tip Bot - could easily double or triple in size if more social platforms incorporate its use.   Currently, the XRP Tip Bot can be used on Reddit, Discord, and of course, Twitter.   If other platforms such as Quora or Stackoverflow choose to include tipping at some point, it could boost the demand for XRP by social users.  

BeOmni recognized the potential for easy payments for its renters, and incorporated a cash-out option for them to accept XRP in addition to fiat currency.  

This core strength of all cryptocurrencies - to serve as a store of value no matter where you're at - will ultimately drive digital assets to be a favored mechanism to directly pay customers and vendors internationally.  

All innovations take time, but even now, I'd rather accept a cryptocurrency that is not issued by any central authority;  and the younger generation is already growing accustomed to this concept.  

Performance Metrics

The performance metrics of XRP outclass the competition by such an order of magnitude that it's almost not fair to the other networks:

eTotor message

In addition to superb on-chain performance, the XRP Ledger also boasts the native ability to process Payment Channels using horizontal scaling.   "Horizontal scaling" means that as you add more computing power, the performance is extended in a directly-correlated relationship.   When this feature is initiated by a user, the XRP network opens a connection (channel) to the ledger, and then awaits a summary transaction that can potentially include unlimited numbers of off-chain transactions or claims.  

This feature was tested by Ripple after its initial roll-out, and exceeded 50,000 transactions per second.   To put that number in perspective, VISA, a centralized credit card processor, has been known to support loads of up to 24,000 transactions per second.  3

Energy Usage

A controversial topic for Bitcoin that's been gaining attention lately has been its growing carbon footprint.  

Because Bitcoin relies on proof-of-work to secure its network instead of proof-of-stake or byzantine consensus, it is dependent on 'miners' that actively compete with one another for the right to add to the chain and receive a block reward.  

As the 'difficulty' with mining increases for Bitcoin, the energy consumption has skyrocketed, and currently, worldwide Bitcoin mining requires more energy than the nation of Austria.  

XRP, the challenger to Bitcoin, requires only a fraction of that energy:

Annual Energy Consumption Graphic

This is a critical difference between the two networks, and one that will end up pointing the way to a growing amount of support for XRP to replace Bitcoin as the dominant global cryptocurrency.  

The world's citizens - and their governments - have very little patience for technology that unnecessarily utilizes electric energy on that scale.   Global warming is a very real problem that affects all of us, and our collective choice of cryptocurrencies will eventually reflect this priority.  

Sponsoring Organizations

Ripple is arguably the most powerful sponsoring organization of any of the cryptocurrency networks.   The other networks typically include a non-profit organization to guide their sponsorship, but this approach has so far yielded only mixed results for Bitcoin.  

While Bitcoin's code governance has been chaotic and negative, with bad publicity surrounding forks and conflicts regarding various improvement proposals, XRP has been quiet and effective, with additional features being seamlessly voted on and added to the XRP Ledger with no disruption in service.  

Code governance is something that real-world businesses will look at when considering adoption of a new technology, and it cannot be minimized.   This is one of XRP's core strengths.  

Ripple also has a massive treasury supply of XRP, although most of this supply is currently locked away in time-release escrows on the XRP Ledger.  

This supply, while being a source of criticism from a subset of crypto-anarchists and anti-capitalists, is a source of strength when viewed from a different perspective:  one of adoption sponsorship.  

The resources that Ripple commands because of its XRP holdings are enormous.   These holdings have enabled Ripple to launch philanthropic endeavors and to fund external, third-party ventures that promise to supercharge XRP adoption.   These ventures include the University Blockchain Research Initiative (UBRI) as well as the Xpring series of investments, which are ongoing.  4   5

Ripple is actively distributing XRP where it helps, and has become adept at recognizing businesses and projects that may have a direct impact on usage and adoption of XRP for various use cases external to its main one as a bridge currency.  

This means that XRP's largest sponsoring organization has the ability and the resources to bootstrap network liquidity from a variety of standpoints - and that's exactly what Ripple is doing with its Xpring investments.  

I have no doubt that 2019 will include some surprises in this respect, not the least of which is Coil's goal of Web Monetization.   In addition, I predict that many smaller projects will receive targeted funding from Ripple, with the short-term effect of boosting demand for XRP and raising its profile at the same time.  

Now with their 300-person-strong team, Ripple has the opportunity and the resources to make 2019 the most memorable year for XRP adoption.  

The Numbers Point to XRP

In case you're wondering, I did not forget about the most important number to most of those investing in XRP:   Its market price.

As early investors in the cryptomarket, it's important for us to look beyond the short-term price levels during a bear market, and examine the statistics and numbers that can quickly be used to judge the fundamentals of a digital asset, and use them to compare it to other choices in the market.  

In the case of XRP, its advocates welcome this rational, logical comparison of technology.   Most of us have already done our own research and comparisons, and are eager to spread the word about XRP and what it can do for the global economy.  

If you are reading this article, you can rest assured that you are still an 'early adopter' of cryptocurrency.  

The market, while experiencing occasional spikes in interest and demand, has not approached its eventual size.   The shift in economic thinking is generational in some cases;  while the younger generations will come of age with cryptocurrencies as a valid investment option, the older generations are still growing accustomed to the idea of a decentralized, no-counter-party asset.  

Both of these groups approach cryptocurrency differently, but both will look for the specific characteristics that XRP has in abundance:  decentralization, censorship-resistance, security, speed, scalability, and excellent code governance.  

Those that are knowledgeable about cryptocurrency have observed that XRP has solved all the problems that still plague Bitcoin;  and the numbers, network statistics, adoption counts, and performance criteria certainly bear this out with striking contrast.  

It's true that facts can speak for themselves, but in the sometimes-confrontational cryptomarket, we must always be armed with the weapons of rational discourse:  Statistics, facts, and well-sourced information are the hallmarks of those that advocate for XRP.  
xrp symbol
Sources and Credits:
Cover Art: Thank you to Tom Grimbert

  1. https://consumer.findlaw.com/securities-law/what-is-the-howey-test.html
  2. https://ripple.com/insights/liquidity-explained/
  3. https://ethereumworldnews.com/ripple-for-the-future-xrp-outclasses-visa-transaction-speed/
  4. https://ripple.com/ripple-for-good/
  5. https://xpring.co/

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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.

Read More