Ripple and XRP – Decentralized Big Bank Blockchain or Fat Cat Venture Capital Rip Off

As if over night its asset value was pulled from thin air, Ripple is now the third highest ranking crypto-asset with a market cap of $11.5B (at the time of this posting). The Ripple XRP, its crypto-token, rose about 12X since Apr 25, 2017, yet it is only traded on Kraken (trading xrp since Oct2013) and Bitstamp (trading xrp since Jan2017) and one or two smaller exchanges. Like the mysterious illusionist, Ripple piqued my interest and impelled me to take a look behind the curtain.

Ripple is built for bankers by bankers and was funded by top tier venture capital
The Ripple website characterizes them like this: “Ripple is a venture-backed startup with offices in San Francisco, New York, London, Luxembourg and Sydney. As an industry advocate for the Internet of Value, Ripple sits on the Federal Reserve’s Faster Payments Task Force Steering Committee and co-chairs the W3C’s Web Payments Working Group”.

Although Ripple’s marketing material refers to the blockchain it does not use blockchain technology, rather its own version of a distributed ledger protocol, ILP. Ripple’s value add is its the only open source decentralized payment system that complies with the global banking systems regulations, privacy and need for transaction processing speed.

The company defines it this way: “Ripple’s solution is built around an open, neutral protocol (Interledger Protocol or ILP) to power payments across different ledgers and networks globally. It offers a cryptographically secure end-to-end payment flow with transaction immutability and information redundancy. Architected to fit within a bank’s existing infrastructure, Ripple is designed to comply with risk, privacy and compliance requirements.”

How Ripple Works

Observations

• Ripple is a payment system to make bank to bank transfers more efficient.
• Ripple is designed to fit within the existing Global Banking Infrastructure with all the same players that exist today.
• According to Ripple their system processes transactions in 4secs, whereas ETH = 2 min, BTC = 1 hour. They go on to say they can scale to process payments as fast as Visa.
• Ripple’s open source code (Ripple github) is as vulnerable as any other and has in fact experienced bugs that have deconstructed the ledger
• It is decentralized only in the sense it has distributed nodes, which may or may not be owned and operated by Ripple. It is rumored: All the nodes belong to Ripple. Latest press releases from Ripple are suggesting that they will add 3d party trusted audit nodes (Source: Reddit Here). Actually the Reddit Source is a good read with hundreds of comments and good discussion. Further, it was posted on /r/Bitcoin and not /r/Ripple.

My Humble Opinions

Ripple has an enticing story, it can offer banks the ability to process payment transactions in seconds not days. Ripple also is cut from the same DNA as Traditional Banking and has their backing. These advantages cannot be overlooked. Traditional Bankers are going to be hard pressed to let the new wave of Blockchain Entrepreneurs into their closed gardens unless they are forced to. Ripple has a lot of money behind them, the backing and an industry force like no other.

However, just as outsiders Youtube, Amazon and Netflix rekt traditional media I can’t help feeling the same is happening to traditional banking. To me Ripple feels like the HULU of this space, a distant 4th place even though it was built and controlled by traditional media giants. Also, I cannot get beyond the 100 Billion XRP Tokens in the float with more than 62 Billion currently being controlled by the company. The lack of exchanges supporting it is also an issue.

Every potential XRP investor needs to weight the pros and cons for themselves. The story, the great price increases and volatility make the XRP an alluring investment. In the end you will need to decide what is right for you – just remember Bulls Make Money, Bears Make Money, Pigs get Slaughtered.

For the record I did not contact the company for this article, nor have I ever owned the XRP.