What’s XRP?

Compared to Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB) and other currencies, XRP seems to be special. First of all, although Ripple is well-known and its total market capitalization is always in the top ten, there seem to be no multiple DeFi applications on the blockchain, nor are there any well-known NFT projects (though creator fund is provided). Secondly, there is no thriving external developer community contributing to the ecosystem development. Finally, different from Bitcoin BTC, and Litecoin LTC, which are community-controlled cryptocurrencies, XRP is almost solely controlled by its.

Being so unique, why does XRP have such a high market cap, and why does it perform well in the market?

About XRP

The XRPL was developed in 2011 when three engineers — David Schwartz, Jed McCaleb and Arthur Britto — fascinated by Bitcoin, set out to create a more sustainable digital network to be used for payments and global transactions.Subsequently, the XRPL was born and shortly after, in June 2012, the network was launched.

Ripple is the provider of digital asset infrastructure for financial institutions. Ripple’s solutions leverage the XRP Ledger and its native digital asset, XRP, which enables fast, low-cost, highly scalable transactions across developer and financial use cases. With a proven track record working with regulators and policymakers around the world, Ripple’s payments, custody and stablecoin solutions are simple, compliant, reliable —building credibility and trust in enterprise blockchain.

As the native token on the blockchain, XRP can be used for cross-border payment and cross-currency transactions, and it can also be freely traded in the market.

As of September 2022, XRP is the seventh largest cryptocurrency by market cap (source: Coinmarketcap).

What’s the value of XRP？

Although almost all cryptocurrencies support global cross-border payment, XRP, which can be traded in the market, has more advantages.

License-free cross-border payment

Financial institutions can use XRP as a bridge between different currencies and conduct payments worldwide in a faster and lower-cost way. Individuals can also take advantage of XRP and enjoy faster, cheaper, and permissionless transactions around the world.

Fast settlement and low-cost

Traditional financial remittances are time-consuming and labor-intensive, and it often takes days for funds to reach the recipient’s bank account. In addition, due to the need to change hands through many intermediaries, the remittance fees are very high. XRP allows users to enjoy a safe and fast way to transfer funds at a very low cost.

Favored by large financial institutions

XRP has successfully reduced the cost and time of remittance, which has attracted not only ordinary individuals but also large multinational financial institutions. In 2019, XRP announced that more than 300 financial institutions in more than 45 countries are using its payment network, including American Express, HSBC, Barclays, Western Union, Bank of America, Royal Bank of Scotland, Japan’s SBI Holdings, etc.

Ultra-low-cost, environmental friendly and energy-saving

Comparison of XRP and Bitcoin:

(Source: https://xrpl.org/xrp-overview.html)

Controversies of XRP

Pre-minted large amounts of XRP

XRP is pre-mined, and all coins are minted before they’re launched. The maximum supply of XRP is 100 billion, of which the company controls about 60% and holds most of it in a secure escrow account. Since Ripple will release some XRP in custody from time to time into the market, the supply of XRP may suddenly increase, causing the price to fall. Of course, this move has been criticized by many investors.

Excessive centralization

XRP is the provider of digital asset infrastructure for financial institutionsRipple’s solutions leverage the XRP Ledger and its native digital asset, XRP, which enables fast, low-cost, highly scalable transactions across developer and financial use cases.XRP Ledger (XRPL) is built for business. With over a decade of error-free performance, XRP Ledger is a secure and decentralized Layer 1 blockchain that is intentionally designed for the efficient tokenization and exchange of crypto-native and real-world assets.

（Source: CoinCarp）

The legal battle with the SEC

In December 2020, the SEC (US Securities and Exchange Commission) filed a lawsuit against Ripple. The SEC believes that since the company can release XRP at any time, XRP should be registered as a “security”, and therefore accused the company and co-founders Chris Larsen and CEO Brad Garlinghouse of violating U.S. law by selling XRP as an unregistered security.

The focus of XRP in the future

Litigation and Regulation

The SEC lawsuit has had a huge impact on Ripple as well as XRP. In addition to the ongoing litigation, XRP is also working with the U.S. Congress on cryptocurrency regulation, hoping to ease the current bad image of cryptocurrencies and establish a way to protect consumers while taking into account market innovation.

As of September 13, 2022, both the SEC and XRP have filed motions with the court for a swift summary judgment by a judge, showing that neither side wants the legal action to proceed, and that if XRP succeeds, the conclusion of the lawsuit could bring XRP to be relisted on most of U.S. exchanges. If XRP loses the case, it means that most of the cryptocurrencies in the United States will be considered securities, so these exchanges will need to register with the SEC as a broker. Hence, this lawsuit is not only crucial for XRP, but also for the future of the entire cryptocurrency industry.

Financial role

Former Goldman Sachs analyst Andrew Lokenauth is very bullish on the future of XRP and believes that XRP may be the successor to SWIFT, the current global interbank transfer standard. But it remains to be seen whether Ripple can redefine online payments in the end. Once the SEC lawsuit can be satisfactorily resolved, XRPL, despite having less speed and risk, may also be more legally compliant, and then XRP will likely become a better alternative to SWIFT.

As a centralized payment system using blockchain, XRP combines the advantages, such as security, processing speed and efficiency. There may still be imperfections, but it is believed that it will be a common financial tool when blockchain technology is popularized in the future. It is worthy of our continuous observation and expectation.