RIPPLE \u2013 COIN REVIEW BUY IN THE U.S. BUY IN CANADA BUY IN OTHER COUNTRIES LAST UPDATED JANUARY 23, 2018 One of the most controversial cryptocurrencies, the Ripple coin (XRP) has garnered significant mainstream business and media attention since Ripple (the company), unlike the teams behind most other cryptos, is a private, for-profit concern that holds over 60% of all XRP. RIPPLE COIN REVIEW EXPAND REVIEW SUMMARY DEVELOPMENT TEAM COIN SUPPLY COIN VALUE STRENGTH OF ECOSYSTEM UNDERYLYING TECHNOLOGY ADDRESSABLE MARKET PUBLIC INTEREST SCALABILITY PROMINENT INVESTORS LIQUIDITY AND VOLATILITY Pros \tEstablished partnerships with institutions provide potential for large scale adoption \tPotential to disrupt remittance and international payment markets \tBetter positioned for scalability than other crypto assets Cons \tPrivately controlled coin supply raises questions over inflation \tStill predominantly centralized validation \tPartnerships are predominantly in an exploratory phase BUY RIPPLE Ripple Quotes by TradingView The Ripple Network (RippleNet), which enables transactions across institutions (banks, corporations, governments, etc.), has been built to allow for transactions in fiat currency (USD, CNY, etc) as well as digital assets (BTC, ETH, etc) among its members. What is important to note is that currently the majority of transactions on the network are using it to provide transact in the same currency on both sides (i.e. send USD from a bank in the US to another bank in Asia). These types of single currency transactions utilize Ripples blockchain technology but do not involve the XRP token. It's only when members of RippleNet need to convert from one currency to another that XRP is used to facilitate the transaction. Many decry the approach Ripple has taken towards its supply schedule, the centralization of the network and its strong relationships with the traditional financial players. Since cryptocurrency is based on open source, non-corporate values many in the crypto community see Ripple as the traditional financial establishment trying to stay relevant. DEVELOPMENT TEAM The protocols and platform that XRP exists on are wholly controlled by Ripple (the company), but are built on an open-source platform that can be\u00a0openly accessed\u00a0and used by other developers wishing to interact with the network. At the end of the day outside developers can offer contributions to the codebase, but Ripple (the company) gets to decide whether or not to include these contributions. COIN SUPPLY Since all 100 billion XRP were created at the inception of the currency, there\u2019s no supply schedule or coin mining\/creation per se. XRP is actually deflationary since for each XRP transaction the fee causes the destruction of a small amount of XRP. This deflationary component of XRP is minute and was designed to ensure stability of the ledger and prevent malicious users from spamming the network (the value of the transaction fee is proportional to the load on RippleNet). A very important factor to consider when discussing the inflationary aspects of XRP is that over 60% of the XRP in existence was granted to Ripple Labs (aka Ripple the company) in addition to\u00a0large amounts granted to the founders\u00a0at the time of inception. In December 2017,\u00a0Ripple placed a large portion of their XRP (55 billion) into an escrow\u00a0with a schedule to release 1 billion of that XRP per month, which can be used by the company to attract partners to RippleNet and the platform in general. This provides some assurance as to the supply of XRP available on the market. Yet, even with\u00a0amendments to the protocol\u00a0that\u00a0ensure no additional XRP can ever be created and more independent validators being added to RippleNet, Ripple still has much control over the availability of XRP. To this point, the company has not shown any signs that they wish to influence the price of XRP with their reserves. Quite the contrary as they have gone to great lengths to signal to their partners that the use of their XRP is only to be used to improve the uptake of the platform. Though Ripple\u2019s interests and actions to date align with providing more transparency and certainty around the supply of XRP, as has been evidenced many times in the cryptocurrency world, motivations and behaviour can change and evolve quite rapidly. COIN VALUE LINKED TO SUCCESS OF BLOCKCHAIN PLATFORM The functional use case for XRP is clear. Whenever a cross-border payment is needed between two nodes on the Ripple Network, XRP can be used as a source of liquidity for the payment. XRP and RippleNet aren\u2019t really designed for personal transactions, they\u2019re used to facilitate international payments for institutions (banks, remittance companies, sharing economy platforms, international corporations, etc.). In fact, XRP really does solve many of the challenges of international institutions. Cross-currency payments require holding capital of the foreign currency on each side. Correspondent banks facilitate the process, but they further complicate, lengthen and add cost to the settlement of the transaction. Finding a faster, more efficient and lower cost method to perform payments internationally is valuable to many organizations: \tSharing economy companies, such as Uber, AirBnB. \tRemittance organizations like Moneygram where international payments are key to doing business. \tSmall- to medium-sized banks where sourcing international liquidity is costly, especially for smaller value payments. So the potential is very much there for Ripple and XRP to be a major player in facilitating international payments. To date most transactions occurring on RippleNet don\u2019t use XRP. Ripple also offers a solution that includes an Inter Ledger Protocol (ILP) to members of RippleNet to facilitate transactions using their traditional liquidity providers and correspondents. Ripple\u2019s challenge is to convince these members to start using XRP for these transactions. Though they have recently made\u00a0some headway\u00a0in that area they still have a long way to go before XRP becomes the liquidity source of choice. STRENGTH OF THE COIN ECOSYSTEM\/BLOCKCHAIN The overall network ecosystem is controlled primarily by Ripple (the company). XRP transaction consensus and validation occurs through a Proof of Correctness protocol called the\u00a0Ripple Protocol Consensus Algorithm, which\u00a0operates on distributed servers referred to as nodes. Currently, the majority of these nodes are actually controlled by Ripple (the company) and so there\u2019s a school of thought that this is not truly a decentralized consensus method. However, Ripple has been working to add more and more independent validator nodes onto the network. The challenge is that with the Ripple Protocol Consensus Algorithm there\u2019s no actual benefit or transaction fee that gets paid to the validator nodes so the only incentive for independent validators is the improved reliability and stability of the overall network.\u00a0The benefit of this approach however is that the cost of being a validating node on the Ripple network is quite low and they function as\u00a0\u201clightweight systems equivalent to running an email server\u201d. In the long-term, Ripple validators are going to be the same institutions who utilize the network to source cross-border liquidity as it\u2019s in their best interest to ensure the reliability and stability of the network. Ripple allows each user on the network to choose their own list of trusted validators that they believe will not conspire against them called the Unique Node List (UNL). However, Ripple also provides users with a default UNL that consists primarily of Ripple-controlled validator nodes and recommends that users utilize that default list. So yet again, Ripple has centralized the consensus process under its own control. They\u2019re communicating to the community that this also will change over time, as they have stated that for every additional\u00a0\u201ctwo attested third-party validating nodes that meet the objective criteria mentioned above, we will remove one validating node operated by Ripple\u201d\u00a0until all Ripple validator nodes are decommissioned. Progress for this further decentralization is being monitored through the maintained\u00a0list of validators. UNDERLYING TECHNOLOGY\/FUTURE PROOF The Ripple Protocol Consensus Algorithm and the\u00a0XRP Ledger Data Format\u00a0are the underlying components of XRP. They have been developed in 2012 as a trust-based alternative to the proof-of-work consensus mechanism found in Bitcoin. Some of the technical advantages of Ripple, such as the openness of its transactions and the scaling of transaction fees based on the load on the network, are also some of its weaknesses. Since all transactions are transparent and the movement of funds across the network moves across links of the nodes in the network to which the users are connected, in theory\u00a0it\u2019s possible to remove key nodes in the network and prevent users from accessing their funds. Also, since transaction fees (the destruction of XRP for each transaction) scale based on the load on the network, they will invariably go up as the use of XRP grows. However, the key aspect of both of these issues is that: \tthey\u2019re known and steps can be taken to prevent them from harming the users of the network (i.e. broadening the number of nodes and connections among them). \tthe predictability of transaction fees provides some reassurance to users about the cost of transactions. ADDRESSABLE MARKET Ripple has been pursuing a dual-pronged strategy: \tSuck in established financial players to its Inter Ledger Protocol to track and expedite cross-border payments using existing liquidity providers. \tDemonstrate the additional advantages of using XRP as a liquidity mechanism to further reduce costs of cross-border payments to those same players. In the end, the addressable market for XRP is the same market that the\u00a0SWIFT\u00a0network currently dominates.\u00a0Ripple\u2019s xCurrent\u00a0product already allows institutions to transmit SWIFT-based messages into the Inter Ledger Protocol, but the long-term strategy is to replace SWIFT altogether and target the\u00a0estimated $2.3 trillion revenue from global payments in 2019. PUBLIC INTEREST Ripple has basically established itself as the most talked about cryptocurrency after Bitcoin and Ethereum. Not all of that talk is positive, however, as many well-respected voices in the crypto world have come to see Ripple as a Trojan horse for existing banks and the big corporations to interfere with the progress of blockchain-based currencies. Some\u00a0don\u2019t believe it to be a cryptocurrency at all. Interestingly, if not for a difficulty getting a work visa, Vitalik Buterin (founder of Ethereum)\u00a0almost ended up working for them! Ripple is controversial to say the least, but what can be said is that after the peak of interest near the end of 2017\/early 2018, it appears as though the news cycle has moved on\u2026 for now. SCALABILITY According to testing done by Ripple, RippleNet is able to handle up to 1500 transactions per second (tps) \u2014 making it much more scalable than Bitcoin (currently 3-15 tps), but much less than the comparison du jour, Visa, which is\u00a0capable of up to 56,000 tps. However, Ripple and XRP in particular aren\u2019t trying to compete with Visa in terms of transaction volume. The real comparator for Ripple is SWIFTNet. SWIFTNet has managed a peak of 32M transactions in a day, working out to roughly 380 tps.\u00a0 So for its use case XRP has more room to compete with the established SWIFT protocol and some more to spare. Furthermore, aggregating transactions off ledger is possible using a Ripple feature called Payment Channels (very similar to the proposed Bitcoin Lightning network) and would further improve overall transaction speed on XRP. Needless to say, scalability is not an issue for XRP. PROMINENT INVESTORS\/BACKERS Ripple has had quite a history and it\u2019s predecessor, RipplePay was actually conceived back in 2004, before the now infamous Bitcoin whitepaper by Satoshi Nakamoto. The company itself was founded in 2012 (then named OpenCoin). Since then it has received funding and backing from prominent Silicon Valley venture capitalists such as\u00a0Andreessen Horowitz, large tech players such as\u00a0Google Ventures\u00a0as well as the latest $55M dollar funding round that includes investments from established financial players like\u00a0Standard Chartered and SBI Holdings. This powerful cadre of backers is exactly the reason some in the crypto community feel Ripple won\u2019t be able to truly innovate and utilize the full power of decentralization as they\u2019ll be held back by their investors hoping to maintain the status quo. LIQUIDITY AND VOLATILITY Ripple\u2019s liquidity is strong relative to its blue chip crypto peers .\u00a0 The average 24-hour dollar value traded volume for the last 30-days for XRP was $4.1B, relative to the average market capitalization over the same period of $76.9B, implying 5.3% of the float is traded daily. Cryptocurrencies are inherently highly volatile investments (new market, coupled with small market capitalizations), the lower the relative price volatility the better (less shaky hands are holding the asset). Ripple has a relatively high 90-day average daily price volatility among the top 10 cryptocurrencies, at 215% (annualized figure). TOTAL SCORE The general opinion about the future value of XRP is directly linked to what one believes the intentions and motivations of Ripple (the company) are and how successful RippleNet will be in attracting more traditional institutions and enterprises to its network. While Ripple is certainly not a\u00a0cryptocurrency\u00a0for the decentralization purist, we believe owning XRP in a diversified crypto basket would be prudent. Despite the pace of disruption that cryptocurrencies and blockchain technology are having on the financial world, established financial institutions still play a part so there\u2019s a lot to like about the approach and trajectory of Ripple and its proxy cryptocurrency XRP.