RippleLabs, Ripple Net, and XRP- let’s break them down clearly.
- Ripple Labs is the company.
- Ripple Network is the platform.
- XRP is the currency that runs on the platform.
Ripple Labs created XRP as a fast, cost-effective alternative to digital assets and traditional payment options.
“Making cross country payments over the internet will be as easy as sending an email.”
How does XRP work?
Imagine you’re planning a trip to India. You start in the UK with Great British Pounds (GBP), but how do you get the Indian Rupees (INR) you need? Well, you’d probably go to a currency exchange stand or a bank. The person at the desk will take your GBP, convert it into USD (the world’s reserve currency), and then into INR. It’s not a bad process, but it is rather slow and expensive.
Ripple Labs aims to cut out this process with XRP. Its goal is to peg every currency in the world to XRP and make it a universal bridge currency. Instead of requiring hundreds of different exchange rates between foreign currencies, XRP bridges all of them.
What if you wanted to send money to a friend overseas? If you send by bank transfer, you’d probably have to wait for 3 to 5 business days, pay a conversion fee, and then pay the bank a small fee.
No thanks.
XRP aims for real-time settlement. Instead of 3 to 5 days, how about 3 to 5 seconds? And, unlike other cryptocurrencies such as BTC and ETH, which can process 5 and 15 transactions per second (TPS) respectively, XRP has a TPS of 1500. Finally, because XRP doesn’t need to be mined, the gas fee is almost obsolete
This bold mission and its already notable presence in the financial world make XRP seem like a pretty great project. However, some key warning signs can’t be ignored.
The centralization of power
When Ripple was founded, it was set to release 80 billion tokens to the public, whilst 20 billion were distributed to 3 founders.
So far, 45 billion tokens are in circulation. What will happen to the value of XRP when the other 35 Billion tokens are released into circulation? How will this supply shock affect the price?
One of the three founders has also been dumping coins over the past two years. It’s not very encouraging when one of a project’s creators is dumping his own coins.
As advocates of decentralization, this extreme centralization of power is not very appealing. Imagine three people having control of 20% of the money in the world. To add to this, recent allegations from the SEC have also worried avid fans of cryptocurrency.
The SEC Allegations
The SEC is arguing that despite claiming to be a currency, Ripple Labs has treated XRP like a security. They’re suggesting it’s being traded like a stock or equity instead of a currency, giving the SEC jurisdiction over XRP. This allegation in 2020 obliterated XRPs price point, but it made a pretty solid recovery through the bull market.
Industry experts are pretty confident Ripple Labs will win the case and move forward with its mission. However, time is yet to tell that tale.
All these facts are pretty damning, but we’d be lying if we said Ripple Lab’s mission statement wasn’t an exciting one. Maybe one day Ripple will make sending money across the internet as easy as sending an email.
