Tuesday, July 17, 2018 11:09:25 PM
The company’s cryptocurrency has also seen an incredible run-up in value, but investors may have gotten the wrong idea.
by Mike Orcutt
Not all cryptocurrencies are created equal. Don’t tell that to investors in XRP, though. In the last month the currency owned by Ripple, a company that bills itself as using blockchain technology to build the payment system of the future, soared in price by a whopping 700 percent. XRP’s overall value pushed up to nearly $150 billion and briefly made Chris Larsen, Ripple’s cofounder, one of the richest people on the planet.
This piece first appeared in our new twice-weekly newsletter, Chain Letter, which covers the world of blockchain and cryptocurrencies. Sign up here – it’s free!
The exuberance was fueled, at least in part, by a belief that anyone buying up XRP was getting in on the next Bitcoin. But for some it could end up as a very expensive lesson that what they bought into is a different animal altogether.
To begin with, Bitcoin relies on a network of “miners” running code that validates transactions and keeps the currency secure. Bitcoins are released as rewards for this mining and act as an incentive to keep the network running (see "What Bitcoin Is, and Why It Matters"). In Ripple’s setup there are no miners; all 100 billion coins of XRP that exist were created when the network launched in 2012. Its creators kept 20 billion and gave the rest to the company. Since then, Ripple has been “methodically” distributing tokens to clients, but it still holds nearly 50 billion in an escrow account.
That’s not all. Ripple uses a novel consensus algorithm (PDF) to validate transactions, and it recommends that clients use a list of identified, trusted participants to validate their transactions. This stands in stark contrast to Bitcoin, where anyone can become a miner.
This gives Ripple a large measure of control over XRP’s inner workings, which has led many to argue that it’s not truly decentralized. In that sense at least, XRP is a “really bad” cryptocurrency, entrepreneur and cryptocurrency analyst Ryan Selkis wrote last week in a lengthy analysis.
But XRP was never meant to be another Bitcoin. Ripple’s big bet is that XRP will become a “bridge currency” that many financial institutions use to settle cross-border payments faster and more cheaply than they do now using global payment networks, which can be slow and involve multiple middlemen. Bitcoin could be used to do this too, but Ripple can settle 1,000 transactions per second, compared with Bitcoin’s seven, and its transaction fees are much lower. The idea is that this will in turn will make the currency more valuable. The company says that more than 100 financial institutions are using its technology, and XRP’s recent spike has been linked to the newsthat that 61 banks in Japan and two in South Korea have formed a coalition to launch a new Ripple pilot.
Here’s the catch, though: Ripple’s blockchain-based payment network doesn’t need a bridge currency to work, and nearly everyone using the network has so far chosen to exchange digital IOUs instead. They settle the transactions later, using fiat currency. (UPDATE: As many have pointed out in the comments, MoneyGram, a leading money transfer company, today announced that it would test XRP. The announcement does not guarantee adoption, however.)
Last week, Brad Garlinghouse, the company’s CEO, tweeted that banks and payment providers are “indeed planning to use (XRP) in a serious way.”
Nonetheless, people speculating on the token right now probably ought to be aware that widespread adoption is far from a reality, and may not ever be one. And perhaps some folks are starting to realize that: as of this writing, XRP’s total value had fallen back to earth in a big way, losing nearly $100 billion of market capitalization in the process.
MIT Technology Review © 2018
Recent XRPUSD News
- XRP Price Remains in Range: Can It Escape the Consolidation? • NEWSBTC • 09/25/2024 07:00:07 AM
- Ethereum ETFs See Largest Outflows Since July: Is Waning Institutional Demand Hurting ETH? • NEWSBTC • 09/25/2024 03:30:35 AM
- XRP Poised For ‘Massive Mega Pump’ After 540 Days of Consolidation, Predicts Crypto Analysts • ZyCrypto • 09/24/2024 09:37:50 PM
- XRP Remains Bullish: Crypto Experts Unveil Predictions For The Price • NEWSBTC • 09/24/2024 05:00:49 PM
- Massive XRP Rally Incoming? Analyst Predicts 220% Price Jump – Details • NEWSBTC • 09/24/2024 03:30:41 PM
- XRP Price Defends Support: Will Bulls Take Over? • NEWSBTC • 09/24/2024 04:18:39 AM
- XRP $0.60 Triangle Breakout Could Ignite Parabolic Rally – Key Levels To Watch • NEWSBTC • 09/23/2024 06:30:00 PM
- XRP Price Could Soon Surge: Can Bulls Fuel the Rally? • NEWSBTC • 09/23/2024 04:28:47 AM
- Ripple CTO Denies XRP Price Suppression Accusations, Claims He Would Raise Price If He Could • ZyCrypto • 09/22/2024 05:19:13 PM
- Avalanche (AVAX) Could Rise 50% If It Breaks $28 Resistance – Crypto Analyst • NEWSBTC • 09/22/2024 02:00:17 PM
- Tether (USDT) Surges With Massive Inflows, Closing In On Historic $120 Billion Market Cap Milestone • NEWSBTC • 09/22/2024 12:00:42 PM
- Ripple’s XRP Whales Scoop 380 Million Coins As Community Banks On Gargantuan ‘$27 XRP Price’ • ZyCrypto • 09/21/2024 04:04:54 PM
- Bitcoin Indicator Signals ‘Shift To Bullish Territory’ – Can BTC Break Past $65,000? • NEWSBTC • 09/21/2024 04:00:16 PM
- Crypto Whales Buy $228 Million In XRP Following $5 Price Prediction • NEWSBTC • 09/21/2024 02:00:06 PM
- Indian Supreme Court recovers YouTube account from XRP scammers • Cointelegraph • 09/21/2024 01:24:00 PM
- Bittensor (TAO) Unstoppable Uptrend: Soars 40% As Experts Forecast Future Price Gains • NEWSBTC • 09/21/2024 08:30:41 AM
- Kamala Harris Allegedly Working On Crypto Policies With Industry Advocates – Scaramucci • NEWSBTC • 09/21/2024 05:30:27 AM
- Grayscale XRP Trust Surges 11.44% One Week After Launch, Here’s The Catalyst • NEWSBTC • 09/20/2024 11:30:50 PM
- Bitcoin ETFs Attract $158 Million Inflows; MicroStrategy Expands Holdings by 7,420 BTC Purchase; PancakeSwap Unveils v4 • IH Market News • 09/20/2024 08:10:09 PM
- Price analysis 9/20: BTC, ETH, BNB, SOL, XRP, DOGE, TON, ADA, AVAX, SHIB • Cointelegraph • 09/20/2024 05:42:14 PM
- Indian Supreme Court’s YouTube Channel Hijacked To Promote Ripple’s XRP • ZyCrypto • 09/20/2024 05:31:45 PM
- Ripple Whales Accumulate Over 380 Million XRP in Just 10 Days: Is A Breakout Near? • NEWSBTC • 09/20/2024 04:00:08 PM
- XRP Price Surge Could Hit 9,470% — Analyst Predicts $27 Target In Bold Forecast • NEWSBTC • 09/20/2024 01:00:04 PM
- Supreme Court of India YouTube channel hijacked to shill XRP • Cointelegraph • 09/20/2024 07:45:03 AM
- US ‘far behind’ on crypto, election no quick fix: Ripple APAC boss • Cointelegraph • 09/20/2024 05:58:47 AM
North Bay Resources Commences Operations at Bishop Gold Mill, Inyo County, California; Engages Sabean Group Management Consulting • NBRI • Sep 25, 2024 9:15 AM
CEO David B. Dorwart Anticipates a Bright Future at Good Gaming Inc. Through His Most Recent Shareholder Update • GMER • Sep 25, 2024 8:30 AM
Cannabix Technologies and Omega Laboratories Inc. Advance Marijuana Breathalyzer Technology - Dr. Bruce Goldberger to Present at Society of Forensic Toxicologists Conference • BLOZF • Sep 24, 2024 8:50 AM
Integrated Ventures, Inc Announces Strategic Partnership For GLP-1 (Semaglutide) Procurement Through MedWell USA, LLC. • INTV • Sep 24, 2024 8:45 AM
Avant Technologies Accelerates Creation of AI-Powered Platform to Revolutionize Patient Care • AVAI • Sep 24, 2024 8:00 AM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM