Game Theory Group

The Blockchain Brief

Ripple Is Not XRP

An attempt at simplifying blockchain concepts, companies, and coins.
Boris Revsin

Ripple, Ripple, Ripple. There is much to be said about the surging cryptocurrency that so quickly took the world by storm. A final upward swing in the past 72 hours has rocketed the Ripple proprietary token $XRP past stalwart Ethereum and into 2nd place.

Ripple, under the leadership of Brad Garlinghouse, has made a series of savvy moves. The "RippleNet" technology has been endorsed by dozens of financial institutions, including enormous banks like Santander, to help them increase the speed of cross-border transactions. As a use-case, RippleNet is a strong contender for longevity in the blockchain space. With so many blue chip partners, a true use-case, and a strong community, why is Ripple under attack by the OG's of the cryptocurrency world? 

Ripple2.png

Well, it's not actually.

XRP is.

For many, the difference between RippleNet and the token XRP is academic. They are presumably managed by one company - Ripple - and on the outside seem to be hardwired together. But RippleNet and XRP are two entirely different projects, and the connection is tenuous at best.

All of the organizations that sign up for RippleNet technology solutions are not requiredto use XRP as the token to enable them to use the RippleNet solution. That's right, they can even create their own token currency to use for settling these transactions. While Ripple the company hopes to encourage these partners to use XRP (and drive up the price), it is clear this a long-term strategic initiative with little current progress.

So how does XRP stack up against Bitcoin as a pure currency? Bitcoin doesn't have any fancy bank solutions and it's doing just fine as a currency. Why can't XRP have the same longevity and stability?

Well, it could, but the savvy investor should be aware of the following:

  • $BTC has 21M total possible tokens. The remaining few million are being mined over the next 100+ years.
     
  • $XRP has 100B (B!) total possible tokens. And they are all pre-mined, and owned by the Ripple founders and company. Let me repeat that -- there is NO mining of XRP. It's all owned already, with about 38B out in the market today. A large portion of the rest is held in escrow.
     
  • This is why you have this comparably low price. $2 vs $14,000 can seem like a steal, until you consider that if XRP was priced at $14,000 it would be worth orders of magnitude more than the entire market cap of currency, equity, bonds and gold... combined.
     
  • $XRP is not decentralized. It's managed by one central entity, Ripple, and is therefore outside the original vision behind the blockchain revolution. This is not dogma -- buyers are free to purchase centralized currencies -- but it's important to know what you're getting into.

Be a savvy investor and learn everything you can before launching an overweight position on surging coins. XRP can be a $10 coin. It can be a $0.10 coin. Ripple is not your enemy, but it's not your friend. 

Build your own thesis and good luck to your 2018 positions! Happy New Year!

Boris

PS: A former founder of Ripple launched Stellar Lumens ($XLM) with the same use-case as Ripple, but decentralized. Check it out -- big upside potential.

Disclaimer: I am not a Financial Advisor and I do hold a small $XRP position as part of my big cap basket. 

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Boris Revsin