The Gauging Value of Ripples

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Dec 12, 2017
For some reason, the existence of these tokens is also ignored by online data source Coinmarketcap, which significantly distorts the actual value of the token supply (basing market cap on "circulating supply").

These tokens are supposed to be fungible, so even if parts of them are temporarily locked up by promises or via "smart contracts" (which ironically, Ripple can't really do), I see no reason to pretend only 38 billion tokens exist.

That's like ignoring the estimated 1 million bitcoin in [bitcoin creator] Satoshi Nakamoto's wallet just because they are not circulating at the moment, and may never circulate. The only correct market cap for Ripple is based on 100 billion tokens, and that currently puts it at the number two spot, above ethereum. A few weeks ago, even temporarily above bitcoin, peaking above $45bn.

Is such valuation reasonable for a token that serves no obvious purpose, and even seems to undermine the usefulness of the underlying protocol?
Ripple investors will point to Ripple's strategic partnerships with significant financial institutions and some ongoing experimental implementations. They will point to the 160 employees, possibly making them the largest blockchain company. They will point out the astronomical figures involved in intra-bank settlements, the market Ripple is aiming for, by presenting its protocol as an alternative to systems like Swift.

Some of these points are absolutely reasonable. Ripple has highly qualified engineers working for it, that undoubtedly produce some useful code that can solve real-world problems. It also has more than credible financial backing and partners in the sector.
There have been a few proof-of-concept implementations and recently Thailand's Siam Commercial Bank announced they starting using Ripple software for Thailand-to-Japan remittance.

This is a big deal, but it needs context; first of all, SCB bank is an investor in Ripple company, making it fairly logical they would experiment and promote the blockchain technology they invested in. More importantly however, I see no mention of XRP in any of the press releases.

Is it being used? Or are they using Interledger Protocol (ILP)? ILP was also developed by Ripple, and appears to be a fairly impressive piece of technology to bridge between various blockchains and systems. It's open source, hosted by the Linux Foundation and could become a part of the Hyperledger framework.

But note that ILP itself has no native token; it doesn't depend on XRP and doesn't add value to it. Even if ILP finds wide adoption in the fintech industry, it will do precious little for XRP.
As for the moonshot of replacing Swift; first of all, I highly doubt a global consensus protocol is the right approach and could even scale to that level. But also, banks currently control Swift. How likely is it they would relinquish control to a small startup and allow themselves to become beholden to its private currency, that they have no need for? I just don't see that happening.

This is especially true when alternatives like Hyperledger exist that do not suffer from Ripple's inherent drawbacks; a protocol which is backed by a far larger consortium of corporations, which relies on proven consensus algorithms that have been researched, peer reviewed and thoroughly tested for over 15 years, and a protocol which at least at first glance, appears to do almost everything Ripple does and more, including things like smart contracts.

The only obvious thing that appears missing from Hyperledger compared to Ripple, is the one thing for which I see absolutely no reason for them to want: the XRP token.

'P4man' is an active bitcoin miner and investor with an academic background in economy and IT. He has been a member of the online discussion forum Bitcoin Talk since September, 2011.
In this opinion piece, P4man looks at the cryptocurrency market to see if there is a credible investment alternative to bitcoin, focusing this time on XRP, the native token for blockchain startup Ripple's consensus protocol.