If you are new to the cryptocurrency space then you have likely been reading and watching the meteoric rise of Ripple. If you are not new to the crypto space then you are likely cursing Ripple’s name as you review your portfolio (more on that later). On Dec. 10, the company had a market capitalization of just over $9 billion. As of today, 29 Dec, Ripple has a marketcap of $84 billion. Second to only baby jesus himself, Bitcoin. As the great Patrick Swayze said “Nobody puts baby in a corner”. So what’s the deal with Ripple?

Let’s start with the basics

Ripple_flowchart.png

Ripple is a real time gross settlement system (RTGS), currency exchange and remittance network. Quite a mouthful eh? Released in 2012 Ripple is built on a distributed open source protocol, consensus ledger and currency called XRP. Do not confuse the cryptocurrency with the network! The network is referred to as Ripple, and the currency known as XRP or ripples. The whole idea behind Ripple is to provide “secure, instant and nearly free global financial transactions of any size with no chargebacks”. Sound familiar?

Fast and Cheap

Ripple XRP is the currency used in the payment network for all transactions. This provides for reduced time and money associated with cross-border payments. Each transaction through the system is processed in only four seconds.

No mining involved

Here is where things get tricky. There are 100 billion ripple already in existence. However only 38 billion are actively in circulation. What does this mean? Well it’s simple: Ripple the company controls a lot of XRP in the market. Ripple claims this is done to avoid “flooding” the market. Others argue it is Ripple the company manipulating supply and prices. Beefy right?! 🙂

Institutional acceptance

Here is where Ripple differs from other crypto projects: They have a long list of established banks joining RippleNet to process cross-border payments in real time with end-to-end tracking and certainty. Large institutions like RAKBANK (UAE), Santander, Standard Chartered and BBVA are partners. You can find use cases here. This makes ivestors very happy, and why wouldn’t it?

So why is the price flying?

For starters the Ripple name and brand is known inside and outside of the crypto community. Second Ripple has institutional acceptance. And third it has a very very attractive price (before it broke 1USD) which made it easy for new users to get in the mix. Many people also do not realize that you can buy fractions of a cryptocurrency which leads new users to think BTC or ETH are too expensive. It is much more satisfying to own 100 xrp than 1/342 btc. Now imagine all the new users joining cryptocurrency exchanges over the past month (some estimates have it at 100k new users per day) and combine it with the above and you will have a rocket ship ready for lift off.

In addition to the above in the trading industry you have something called Fear of Missing Out (FOMO). Humans are emotional by design and if you add a cryptocurrency that is exploding in price people are going to want to get in on that action. One final ascpect is that Ripple is so widely avaiable. By last count it can be bought and traded on 92 exchanges…Which is insane!

So why the beef with Ripple in the crypto community?

Two main issues have the crypto space up in arms: Privacy and centralization.

  • Centralization: The brilliance of the Bitcoin and the blockchain is that is is completely decentralized. In other words no one single person or entity controls the chain. Ripple is the exact opposite. Ripple owns the vast majority of the coins available on the platform meaning they could control the price. Every time the XRP coins are released they first go to Ripple to do with them as it pleases.
  • Privacy: Cryptocurrency is the poster child of privacy and anonymity. Ripple’s decision to market their platform exclusively to banks has been a cause of concern for some users who worry about big brother keeping an eye on their transactions.
  • Token Utility: The ripple currency is unnecessary for companies that want to use the Ripple software. The coin does not reflect any of the success the company may or may not have…kind of a problem if you’re investing in ripple don’t you think.
  • Coin supply distribution: The company owns over half the total supply which means they can dump on new investors any time. HUGE issue. They’ve escrowed some of their funds.

Regarding the XRP “escrow” Ripple has released an official statement here. An execerpt below:

To provide additional predictability to the XRP supply, Ripple has locked 55 billion XRP (55% of the total possible supply) into a series of escrows. These escrows are on the ledger itself and the ledger mechanics, enforced by consensus, control the release of the XRP.

The escrow consists of independent on ledger escrows that release a total of one billion XRP each month over the next 55 months.

 

Where can I buy ripple?

As our friend Julio stated in his article on the Bitcoin scaling debate: By now you may be wondering which side of the debate to pick. The answer is: Don’t. Smart investors don’t pick sides. They pick winners, sell losers, and hedge their bets.

Ripple is on many of the major exchanges and has pairs with many difference currencies (XRP/USD; XRP/YEN; XRP/EUR, etc). This makes it very easy for new users to cryptocurrency to get in and purchase XRP. If you have questions about which exchange to use have a look at our guide “Cryptocurrency Exchanges for Beginners“. Make sure to DYOR (do your own research) before buying any cryptocurrency.

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