First of all, I do not give any investment advice in this article, but I do provide some deep research. Because not long ago, the market value of Ripple Coin (XRP) exceeded that of Ethereum. So, I think it is necessary to write down the research experience.
From the blockchain industry perspective, cryptocurrency projects represented by Ripple are an alternative, that is reflected in the following aspects:
1. They never build a community or spread ideas
2. They don’t talk about consensus and don’t talk about faith. Other cryptocurrencies agree that the greater the consensus, the higher the value. Ripple is not entirely this logic.
3. They rarely attend cryptocurrency conferences for publicity, so Ripple is very mysterious. They generally only attend traditional financial conferences.
4. They are purely company operations. The ultimate goal of many public chains is “retiring”. Ripple has no signs of “retreating” and they will continue to operate for a long time.
5. Their Token distribution design is unique, no foundation, no investors, no community, no ecology, only founders and companies.
6. They did not mine at all and issued 100 billion XRPs at the beginning.
7. XRP is a deflation model, less and less, other cryptocurrencies are either capped or have inflation, with little deflation.
Because of these characteristics of Ripple, many cryptocurrency buyers think that Ripple is not reliable, and even many people say that Ripple is a big scam. But is this really the case?
So I carefully analyzed the Ripple Coin (XRP). Let me first talk about the general conclusion that XRP does not rely on consensus and belief to support value, but relies on commercial scenarios to support value. Now is the winter of cryptocurrency, Ripple seems to give new ideas, community consensus and belief is not the only way, business scenario application is also a way out.
Now let me talk about how Ripple landed in a commercial scene.
The first thing is to distinguish between Ripple Net and Ripple Coin (XRP).
Ripple Net is one frictionless experience for global payments that values seamless global experience, realTime, complete certainty, and cost-effectiveness. Ripple Net is basic infrastructure for the payment system. Ripple itself is not a payment system. Ripple Net has a ledgering and funds — exchange technology for clearing and settlement. Ripple payment protocol is also a neutral transaction protocol for global connectivity
XRP is a cryptocurrency issued by Ripple, and its purpose is to make cross-border transactions easier, as I will describe in detail later.
Let us look at the history of Ripple
- Ryan Fugger founded a company he called RipplePay in 2004. The core idea behind the protocol was a peer-to-peer trust network of financial relations that would replace banks.
- McCaleb had founded the Mt. Gox Bitcoin exchange in 2010, which he sold to Mark Karpeles in March 2011. Shortly after this, Ryan Fugger handed the reins of the Ripple project to McCaleb.
- McCaleb hired Chris Larsen and they start the OpenCoin era: September 2012 to September 2014
- Ripple released its XRP coin in January 2013.
- Received $1.5 million in funding from Google Ventures, Andreessen Horowitz in April 2013
- In September 2013, OpenCoin became Ripple Labs.
- In October 2015, the company simplified its name to Ripple.
- In September 2016, Ripple raised $55 million in funding in a round lead by Japan’s leading online retail stock-brokering company, SBI Holdings (8473 JP). SBI acquired a 10.5% stake in Ripple.
- 100+ institutional clients such as JPMorgan and Bank of America
Jed McCaleb (left) joined Ripple in 2011. Chris Larsen (right) joined the company in 2012. (Source: BitMEX Research)
In recent years, with the growth of the overall cryptocurrency market, the price of XRP has also skyrocketed. At the end of 2018, with the burst of a new round of digital currency bubble, XRP’s market value surpassed Ethereum and became the world’s second-largest cryptocurrency.
Ripple has always been doing cross-border transactions.
What is the problem of international cross-border settlement?
Anyone who has used international remittances knows that international remittances are very slow. Why is it slow? Please see the picture below.
There are too many correspondent banking arrangements and costly settlement process. In addition, if the information is incorrect, it cannot be discovered immediately. It takes two days to discover that the remittance failed. This experience is very poor.
Just like the official Ripple video. “In a world where three billion people are connected online, cars drive themselves and appliances can communicate, global payments are still stuck in the disco era. Why? The payment infrastructure was built before the Internet with few updates.”
The result of that is
- Slow, 3–5 days to settle
- Expensive, $1.6 trillion in annual costs
- Unreliable, high failure raises
- Unacceptable, People demand seamless and elegant experience
Let me talk about Ripple Net first.
Ripple connects banks and payment providers via RippleNet to provide one frictionless experience for sending and receiving money globally. So it can be done quickly, accurately, and cheaply.
- xCurrent — Process real-time payments
- xRapid — Source on-demand liquidty
- xVia — Send global payments
xCurrent — Real-time settlement with bidirectional messaging.
It’s efficient processing and payment certainty is achieved with the pre-validation of transactions, pre-disclosure of information, atomic settlements, and rich data attachments.
xRapid — Access on-demand liquidly through digital assets that value source liquidity.
It achieves lower liquidity costs through on-demand liquidity sourcing and reduced usage of Nostro accounts
xVia — One standard API to access RippleNet，it can be used to send payments.
On-demand, real-time access across networks with rich data attachments and end-to-end visibility provides global payments with certainty.
Ripple Net is a coin-free blockchain system that makes cross-border payments smoother. Note that Ripple Net is a coinless blockchain. That is to say, when Ripple is designed, it considers both the scene without coins and the scene with coins. The scene with coins is the Ripple XRP I will introduce below. According to Ripple’s data, it is recommended that between countries with relatively stable foreign exchange or between large institutions, Ripple recommends the use of the coin-free system Ripple Net between countries with relatively stable foreign exchange or between large institutions. Ripple recommends the use of XRP bBetween countries with unstable foreign exchange or between small and microbanks, XRP is recommended.
I simply understand that even more credit is needed blockchain with coins.
Let’s talk about XRP（Ripple Coin）
There are so many things here, what is XRP used for?
XRP is built for enterprise use. XRP offers banks and payment providers a reliable, on-demand option to source liquidity for cross-border payments. If Banks are using XRP, banks can source liquidity on demand in real time without having to pre-fund Nostro accounts. Payment Providers can use XRP to expand reach into new markets, lower foreign exchange costs and provide faster payment settlement.
How is XRP suitable for use scenarios?
- The transaction cost is not paid to any party: the XRP is irrevocably destroyed.”
- To protect the XRP Ledger from being disrupted by spam and denial-of-service attacks, each transaction must destroy a small amount of XRP.
- Gateways may charge fees for trading their IOUs on the XRP Ledger. This is a standard revenue model for gateways on the XRP Ledger.
Unlike Bitcoin and Ethereum which needs to be released gradually through mining. XRP is equivalent to one-time casting, a total of 100 billion.
Of the 100 billion, 80 billion are for Ripple and 20 billion for three founders (Chris Larsen is 9.5 billion, Jet McCaleb is 9.5 billion, and Arthur Britto is 1 billion). Ripple Company used 80% of XRP for company operation and gradually sold it to large institutions and market makers. After purchasing XRP from Ripple Company, large organizations and market makers used it in the cross-border settlement.
Ordinary users cannot buy XRP directly from Ripple. Ripple official website has a clear description, if ordinary users want to buy Ripple coins, they can onlymust go to the global cryptocurrency market to buy.
Since 2013，Ripple has methodically sold XRP and used it to incentivize market maker activity to increase XRP liquidity and strengthen the overall health of XRP markets. To alleviate concerns surrounding XRP supply, Ripple has placed 55 billion XRP into a cryptographically-secured escrow account. By securing the lion’s share of XRP, people can mathematically verify the maximum supply of XRP that can enter the market.
As of December 9th, 2018.
- Total XRP held by Ripple 6,729,378,834. This part is used for the daily operation of the company.
- Total XRP distributed 40,762,365,544. This part has been sold before.
- Total XRP places in escrow 52,500,000,013. The unsold parts of the three founders are also inside.
Note that these three numbers add up to 99,991,744,391, less than 100 billion issued by XRP at the beginning. This is because XRP will burn out in cross-border settlements, and a total of 8,255,609 have been burned. It can be considered that the consumption of XRP is also very slow.
Ripple official website also explained the escrow account:
“We use Escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use. You can expect us to continue to use XRP for incentives to market makers who offer tighter spreads for payments and selling XRP to institutional purchasers
We’ll then return whatever is unused at the end of each month to the back of the escrow rotation. For example, if 500M XRP remain unspent at the end of the first month, those 500M XRP will be placed into a new escrow account set to expire in month 55. For comparison, Ripple has sold on average 300M XRP per month for the past 18 months”.
XRP is valuable
Unlike other digital assets purely driven by unexplained speculation, real institutional customers are already using and finding value in XRP, and governments, regulators and central banks are increasingly recognizing the role it could play in the global system.
XRP goes beyond what Bitcoin does well — a store of value — It’s no surprise that institutions are looking to XRP to provide much-needed on-demand liquidity for cross-border payments.
What did you learn from Ripple?
After a deep understanding of Ripple, I found out that the following things about Ripple are worth learning:
- XRP has already had a landing scene. XRP has been used in many banks and many market makers in many countries, and it has indeed produced value.
- To achieve cross-border settlement, you can use both XRP-free and XRP, and using XRP can make the process threshold lower.
- Do your own thing according to your own thinking, and don’t care what others say.
I wrote an article that analyzed the Nasdaq-listed QTT. QTT also used a Token economic model to motivate users. QTT issued a non-blockchain centralization points for stimulating ecology, but QTT The points rules often change, and each time the rules are changed, the users are dissatisfied’s dissatisfaction is caused. In contrast, Ripple is also a strong corporate operation, but Ripple Coin (XRP) is implemented using blockchain technology, and blockchain technology is used to ensure that XRP rules remain unchanged, which is worth learning throughout the industry.
I believe that creating value and creating useful products is the future of cryptocurrency. In the winter of cryptocurrency, the Ripple model, which may focus on actual value, is worth learning.
I designed the PPIO project (https://pp.io ), a distributed storage project based on blockchain. When I was designing, I made it clear that I wanted to produce real value. The ultimate goal of PPIO is not blockchain, not decentralization, not to pursue the highest difficulty proof algorithm and consensus algorithm; the ultimate goal of PPIO design is to implement a storage and distribution network, making PPIO better than cloud storage and CDN. It will be affordable, faster, and more private.