XRP is currently the third-biggest cryptocurrency and has a market capitalization of nearly $25 billion. It is currently listed on Bitstamp, Kraken, Coinone, Bitso and 56 other exchanges across the globe.
The creation of XRP is one of the results of the vision of “internet of value”. Today we are sharing information across the globe instantaneously. Emails are sent from United Kingdom to Australia in mere seconds. With XRP, two parties can exchange money in the same way we share information online, within seconds.
This is what makes XRP unique. It is basically the only cryptocurrency that has a proper institutional use – offering an easy, faster and cheapest means to make payments internationally via internet transfer.
Consider the fact that in the United States, a single international payment will take between 3 to 5 days to be processed, and can cost up to $42. It is estimated that on an annual basis, around $180 trillion is exchanged in cross border payments.
Ripple (the team behind the cryptocurrency XRP) aims to disrupt this and has already become a worthy adversary to conventional modes of transferring payments like PayPal, SWIFT and Western Union.
XRP Vs SWIFT
Founded back in 1973, SWIFT was established to help its members in international finance and commerce activities. While it is a nonprofit organization, it is controlled by members which are mostly banks.
Though SWIFT is still considered a global brand, it is terribly antiquated. Comparing SWIFT to RippleNet and its loads of benefits is like comparing an old van to a private jet.
Here’s a comparison between the two:
SWIFT is quite behind when it comes to the mechanism of international money transfer. From all indications, even an effort by SWIFT to upgrade is likely going to be hampered by their choice of technology.
SWIFT has done POC of blockchain but backed out with the excuse that it doesn’t suit their current setup.
Banks, on the other hand, are not bound to use SWIFT- they pay fees to use its services. Considering the changing dynamics of banking and the advancement of technology, banks are looking for alternatives and this can lead to SWIFT losing out to Ripple and other modernized modes of international payments.
So is XRP a security?
We absolutely are not a security. We don't meet the standards for what a security is based on the history of court law," said Ripple's chief market strategist, Cory Johnson,
There is no doubt that when it comes to securities, things can get pretty complicated on the legal side. This is so, even for those that know the laws surrounding them. Hence, coming out directly about whether XRP is a security or not wouldn’t be wise. However, there is a way we qualify or define securities – the Howey Test.
Investopedia describes Howey Test as a process where one can find out whether the value of a financial transaction for one of the party is dependent on another party’s actions. Howey Test has been used for more than 50 years by authorities and we can be used as a reliable tool to establish if XRP can be deemed a security.
The criteria set by Howey Test rely on four things:
- If there is an investment of money being made?
- Parties involved expect a profit from the investment.
- Money has been invested in a common enterprise
- Profit will come from the work of a third party.
“Common enterprise” hasn’t really been specifically defined and courts have applied variety of interpretations in different circumstances. Often, it is described as an enterprise where different investors pool their assets together for a particular project. But this is only one of many definitions.
So for XRP to be called security it will need to fulfill all four things and in its case, the third point is the most important.
XRP was mined long before Ripple Labs (now Ripple) came to be. Ripple has announced that it owns 60 billion out of the 100 billion XRP tokens that have been created. The tokens are used to carry out the financial transactions- the base function of Ripple.
This indicates that the goal of the XRP was not to get investment monies but to facilitate international value exchange. It simply didn’t seek to be listed as a security.
Coinbase and its reluctance to add XRP
Coinbase has always been conservative when it comes to adding new tokens to its popular exchange.
So in March when speculation increased that XRP will also be listed on Coinbase, the 1.6 billion dollar startup simply reiterated what it said in January 2018, that it will not be adding any more tokens on both Coinbase and GDAX.
Coinbase isn’t alone since Gemini also has shown reluctance in adding XRP. And there seems to be a very plausible reason why they are avoiding XRP.
Both Coinbase and Gemini have been backing Bitcoin and Ethereum from the onset. The Winklevoss brothers have officially been backing Bitcoin since the very beginning and added Ether later on.
Now when the rumors started to fly that XRP will be added to Coinbase, its price increased. Being the third biggest cryptocurrency on the market, an actual listing on any of these two will certainly be equivalent to a tsunami since it will easily surpass both Bitcoin and Ether.
For Coinbase and Gemini this would be a dire situation since they hold considerable inventory of both Ether and Bitcoin and certainly wouldn’t want them to lose value. They simply cannot let this happen unless they carry out the necessary hedging to protect themselves.
Though the team behind XRP would certainly like to be on Coinbase as it would help the token to become more liquid for XRP-fiat pairing, it is obvious that they can live without the listing as well.
Fake news and how it is hurting XRP
Ever since the crypto mania hit the mainstream news, there have been a plethora of bloggers and pseudo journalists that have started covering cryptocurrency and blockchain developments. The problem is that most of the content generated by these new bloggers are biased and untrue.
Being pro-Bitcoin and having strong affinity towards the “original” crypto, a lot of contents are being created with malicious agenda to ensure investors and enthusiasts can be discouraged from investing in alternative high value digital coins like XRP. They aim to protect Bitcoin’s price by maligning any competitor that comes near like XRP and even Ethereum.
Some of their cruel tactics is putting up a quote from a crypto luminary and then adding a misleading one immediately after that one to confuse the readers. This creates misinformation, and in an internet age where fake news has excelled the art of click baiting, false statements are now used as headlines and this messes up the situation further.
In spite of all these, some in XRP community have taken a stand and the culmination of their efforts is “XRP FUD Bingo”, a website that offers to debunk myths, disputes false claims, and stands tall among all the garbage being spewed at XRP.
Will regulations affect XRP?
Right now everyone is scrambling across the board to regulate cryptocurrencies and blockchain. The decentralized nature of cryptos has made many authorities nervous about the impact it may have in their economies and the applications that can be developed in its ecosystem.
Central banks of various countries have worked with tech consultants and blockchain experts to properly regulate cryptocurrencies.
In the United States, for instance, the Central bank is in constant communication with Securities and Exchange Commission (SEC) and other regulatory bodies to draft a plan. What’s interesting here is that the XRP’s team has been in these communications and meetings as consultants, and with people like Benjamin Lawsky, one of the foremost securities laws and regulations experts, they have added real value and expertise.
Is XRP decentralized?
There is an ongoing debate about the centralized or decentralized nature of XRP. While some are certain that it is decentralized, others are arguing that it is a centralized cryptocurrency.
The fact, however, is that XRP is a decentralized cryptocurrency.
David Shwartz, the Chief Cryptographer at Ripple, has cleared the FUD (fear, uncertainty and doubt) regarding this very topic in an official video.
To begin with, centralization is basically a system where only one party or authority gets to determine what the rules are, and equally, calls all the shots. This central authority can easily stop the system, penalize its users, and even control it as it wills.
XRP is an open source software where anyone can run their server, validator and people are doing it. According to David Schwartz , the Ripple team back in 2012 has provided a decentralized exchange called the XRP ledger with the following properties:
- A new assets can be introduced into the exchange easily. The newly introduced asset can be held by others that have agreed to hold it and only the issuer of the new asset can issue it.
- XRP can be denominated with fiat currency.
- All transactions taking place are determined by the rules of the XRP ledger.
- XRP ledger can be used to make payments that can be converted into currencies whenever needed.
- Transactions take less than ten seconds.
- Transaction with XRP cost less than a penny.
Another facet to this discussion is that Ripple didn’t create XRP.
Contrary to the popular belief, XRP was actually created in the open source XRP ledger as part of the genesis ledger. And just like Ethereum, the XRP ledger can be used to create additional digital tokens.
Allvor is a recent example of a digital token that was made on XRP ledger. Cleyton Domingues and his team which are behind Allvor have no relationship with Ripple, whatsoever. And in the future, chances are that they are going to be more tokens using XRP ledger for different use cases.
Lastly, one of the foremost complains against Ripple is that it holds 60% of all the XRPs that are going to be issued. What critics don’t understand here is that Ripple has done this to create a layer of predictability to the XRP supply in the market. 55 billion XRP in escrow and will be releasing one billion XRP per month to ensure a control release.
Following the discussion, let’s ask a question: Is XRP a token? The simple answer is yes, it is! It was also designed to be used as the bridge currency for xRapid along with being an anti-spam mechanism on the XRP ledger. While the foremost use case of XRP is to assist in cross border payments, there are going to be other uses as stated by Dilip Rao - Global Head, Infrastructure Innovation at Ripple.
Is XRP destined to become successful?
To some extent, XRP is already a huge success. Despite that, there are more reasons why you need to be excited about the XRP cryptocurrency. Here is a selection of the most significant ones:
- Ripple has grown by over 36,000% from last year. Ripples impressive payment network and protocol is behind this achievement. It had announced several partnerships throughout the year, all of which has contributed significantly to the price reaching its ATH (all-time-high) of $3.84. What does it mean? Nothing but the high interest toward the product, because it is focused on solving real-time problems.
- It’s team: The team behind XRP is filled with the right stuff – clear and bold vision, strong communication skills, and passion for technology. The excellent leadership has considerable knowledge and experience. . The crew supporting the leadership is also made up of brilliant minds that have the technical experience and are aware that they have first mover advantage and are leveraging on it to the fullest.
- It is attracting the big guns: The fact that it offers faster and more reliable remedies to international payments has not gone unnoticed the world of finance. By the end of 2017, Ripple had attracted 100 big names to its RippleNet which included some of the most prominent names in the financial markets. This is just the beginning, actually, as Ripple plans to conquer the Financial world by offering cutting-edge solutions and modernizing global financial services infrastructure with blockchain technology.
- Ripple Released First Pilot Results for xRapid, and they were impressive. Financial institutions using xRapid witnessed savings of 40-70 percent compared to what they normally pay foreign exchange brokers. "An average xRapid payment took just over two minutes, compared to today’s average of two to three days when sending cross-border payments", says Ripple . This is a revolution, an unstoppable progress knocking on the doors of financial institutions.
The XRP community
No cryptocurrency can survive without having a loyal online community and XRP has one of the best communities out there. The XRP community, which is strong on Social Media and other platforms, has worked together in a determined bid to stop the misinformation and malicious spread of false information against XRP.
Almost everyone in XRP community play their parts to promote and advocate XRP and help in providing impartial information about some of its most complicated and controversial topics.
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