XRPXRP to USD
The company behind the Ripple network, originally called RipplePay, was founded in 2004, predating Bitcoin. The important insight of Ripple’s founders was that eliminating the middlemen in financial transactions would save a lot of cost and time, and create a much more efficient global payments system.
Ripple, a private company, succeeded in creating great technology for global remittances and payments. They had, however, not solved the problem that users in their system had to trust each other. After the launch of Bitcoin, Ripple changed their approach. On the one hand they introduced trusted gateways to their system that customers could interact with (basically a hybrid of the traditional and the new peer-to-peer systems), and at the same time launched the cryptocurrency XRP in 2012.
The XRP Ledger targets transaction speed and cost, while sacrificing decentralisation to achieve it. The protocol is one of the fastest, and significantly faster than Bitcoin or Ethereum 1.0. The transaction costs are also extremely low, a very small fraction of a cent.
This was achieved through using a semi permissioned network of validators to confirm transactions. Although anyone can run a validator node, Ripple maintains a list of trusted nodes. Each validator can set its trusted nodes but those curated by Ripple dominate. There are only a few dozen on Ripple’s list, and Ripple itself runs about a fifth of these. Consensus requires over 80% agreement.
The XRP protocol was developed and is maintained by Ripple. At the end of 2019, a software suite was launched for developers to support applications building on the protocol.
The developer behind the legacy company from which Ripple evolved was Ryan Fugger. He sold the project to technology entrepreneur Chris Larsen (currently Chairman of Ripple) and Jed McCaleb, who had founded (and sold) Mt Gox prior to his involvement with Ripple, and later went on to launch Stellar.
The developers of the XRP Ledger were Arthur Britto and David Schwartz (current Ripple CTO).
Some notable investors (Roger Ver, Jesse Powell) and venture capital firms (Andreessen Horowitz, Google Ventures, Pantera) have funded Ripple.
Ripple has been funding the development of the XRP Ledger through the sale of XRP tokens. It is a point of contention that the proceeds from selling XRP tokens in the open market are also funding for profit activities of Ripple. Indeed, according to Ripple’s CEO, XRP sales form a significant portion of the company’s profitability.
All of the XRP supply of 100 billion units were minted ahead of the network’s launch. Since then Ripple has been selling XRP regularly, and continues to hold approximately 50-55 percent of the remaining minted tokens. There is a quarterly cap on how many tokens Ripple can sell, although the reporting on this has been vague. Ripple founders also have significant token holdings, also with selling restrictions.
XRP validators are not compensated for their efforts which raises questions about long term sustainability as a decentralised platform.
The tokens used to pay transaction fees are burnt (destroyed). But as the transaction fees are so negligibly small (one of the network’s attractions), this token burn makes no real difference to the supply/demand dynamics of XRP. To date less than 10 million tokens have been burnt (since the network’s 2012 launch), or less than 0.0001 percent of the total supply.
Key value drivers
The outcome of the lawsuits filed against Ripple in connection with the sales of XRP tokens (class action suits since 2018, as well as the enforcement action filed by the SEC in December 2020) remains a significant uncertainty. A favourable outcome would be a significant positive for the token price, as would a relisting of the token by major exchanges or success attracting a critical mass of applications.
XRP lacks strong store-of-value characteristics due to some of the protocol features and the control over a large portion of the supply by a private company and this is likely to limit the upside.
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