Aug 5, 2021
[7 min Read]
XRP is a cryptocurrency that aims to both increase speed and decrease the cost of transferring money between financial institutions. XRP is used as a bridge currency for financial institutions exchanging value between multiple fiat currencies.
XRP is the native token to the XRP Ledger, which is an open-source crypto ledger powered by a peer-to-peer (P2P) network of nodes.
XRP has a 24-hr trading volume of $3.2 billion (CAD), a market cap of $41 billion (CAD), and XRP price is $0.89 (CAD).
Ripple ($XRP) was founded in 2012 by Chris Larsen and Jed McCaleb. At this point in time the project was named “Opencoin” and was focused on developing the Ripple payment protocol to enable banks/corporations to send money globally using blockchain technology. Also in 2012, Ripple created their “XRP Ledger”, which is an open-source ledger powered by P2P nodes and uses the XRP native token.
Opencoin was rebranded to Ripple Labs in September of 2013, and the XRP token was officially launched. Ripple raised money and launched their token in 2013, and internal disputes caused Jed McCaleb to leave the team to found Steller (XLM).
After releasing XRP and the XRP Ledger, Ripple focused their efforts on the adoption of their cryptocurrency/ledger from financial institutions. Furthermore, Ripple also entered the cross-border payment space but got fined for violating the bank secrecy act. To comply with this act, Ripple enhanced their anti-money laundering capabilities, and implemented stricter permission requirements.
In 2016, Ripple obtained a “BitLicense” from the state of New York, giving XRP the capability to further integrate their cryptocurrency/leger into the traditional financial system.
Today, XRP allows financial institutions to exchange value between currencies through XRP compatible exchanges, as a bridge currency for its liquidity.
XRP's primary use is as a bridge currency for financial institutions exchanging value between currencies (through Ripple xRapid), however it can also be used for P2P transactions. XRP is very good for both types of transactions because their quick transaction speed, in which they can settle payments in 4 seconds and clear 1500 transactions/second.
XRP Launch and Token Distribution:
XRP launched in January of 2013, in which they pre-mined and allocated 100B tokens allocated as follows:
This distribution is great, due to the fact that approximately 80% of the total supply was given to the community and investors. This should allow Ripple (XRP) to sustain upside as it runs, due to the fact that the founders cannot dump every time it runs. This argument is further strengthened based off of the fact that 9B out of the 20B tokens given to the founders was donated to charity, and both of the founders have tight restrictions on when and how much they can sell at a given time. This is great news for holders of XRP especially if we see XRP start to run (for a variety of reasons which will be listed later).
XRP is a deflationary token, this is because XRP tokens are burned to pay for fees for transactions. XRP is also a capped supply token, meaning that all of their coins have been pre-mined.
Ripple has integrated user verification protocols to define which users they trust and how much they trust them. Ripple finds a link between users looking to transact through each users trusted relationships in order to complete the transaction between the 2 users. This is said to “ripple” across their network, which is where they got their rebranded name.
Ripple's pathfinding algorithm identifies the quickest (and least expensive) way to complete transactions. Their algorithm considers the number of market makers needed to provide sufficient liquidity for each transaction. This algorithm helps to make Ripple's (XRP) cross-currency transactions processable in 2-5 seconds.
On March 29th, 2021, Ripple announced that they acquired a 40% stake in Asia's leading cross-border payments specialist “Tranglo”. This partnership allows Ripple to meet their ongoing customer demand in Asia and expand their On-Demand Liquidity (ODL). This acquisition makes sense for both parties as they are both focused on addressing the same issue.
Ripple's investment reflects their commitment to improving the payment systems in Southeast Asia (which is the fastest growing region for Ripple adoption).
There is a lot to unpack about the history, significance, and updates in where the SEC vs. Ripple Labs lawsuit, so I will start where it all began.
On December 22nd 2020, the SEC put out a press release titled “SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering”. This release goes on to state that filed a lawsuit against Ripple and two of their executives for an unregistered digital assets securities offering. The SEC also alleged that Ripple (and the executives) failed to satisfy core investor protection provisions and lacked to disclose information which they were entitled to disclose. This news shook the crypto world and was the first major event that struck government interference worries among cryptocurrency investors. As a result of this, this lawsuit is very important to the whole cryptocurrency community and investors, as a win would help to subdue these fears in the future.
On April 6th, 2021, Ripple won a discovery motion that required the SEC to hand over some of their internal documents that pertain to Bitcoin and Ethereum. These documents highlight the communication within the SEC about Bitcoin, Ethereum, and XRP. The communication found within these documents saw that the SEC did not and does not consider Bitcoin and Ethereum to be “securities” under their definition/jurisdiction. Getting these documents was a big win for Ripple in the overall battle between them and the SEC.
On April 25th,2021, there was another update in the case. The SEXC requested access to Ripple's foreign trading records, which the SEC claimed was vital to their case, and that Ripple executives were sending large amounts of XRP to foreign wallets that were out of the SEC's jurisdiction. The SEC sent letters out to exchanges that dealt with XRP transactions, however, all of their requests got declined, barred, or cancelled by the foreign exchanges. The fact that the SEC was not able to obtain these records is a huge win for crypto, and strengthens the belief that cryptocurrencies are truly decentralized, secure, and anonymous.
On May 30th, 2021, the SEC requested access to Ripple's “legal concerns” about XRP's status, which could help them to strengthen their case. However, this motion was stopped by Ripple as they the information is protected by “attorney-client privilege”. This is another small (but mighty) win in Ripple's fight against centralized regulation.
That brings us to the most recent piece of news to come out of the lawsuit. On July 17th, 2021, a judge ruled that Ripple has thee right to depose a former SEC Official as part of the ongoing lawsuit. Of course, the SEC opposed this, however, the judge has granted it and it is likely that we will see Ripple take said action. This is significant as it was this official (Bill Hinman) who declared that Ethereum was not a security, stating that it was “sufficiently decentralized”. This move surprised many, and we may soon see an explanation as to why he did this and his thoughts on XRP.
It will definitely be interesting to see the deposition, as well as the rest of this case unfold as it has deep significance not only for XR, but for the cryptocurrencies as a whole.