I have been in the crypto industry since 2013 and there have been many surprises both good and bad.
I remember when MtGox imploded, the Ethereum presale and the insane rise and fall in the value of all cryptocurrencies.
But few things have surprised me more than the meteoric rise of Ripple XRP, a currency designed for the banks to cut out costly clearing houses to process cross border currency transactions. It is essentially intended to be a replacement for SWIFT, a messaging protocol which has been used since the 70’s to process interbank transactions.
I got my first hand education on the problem ripple was trying to solve when I joined the largest bank in Australia as a blockchain developer. It was my first developer job and I was excited to hear about the sentiment of cryptocurrencies and the plans the banks had to adopt this technology.
I was quickly woken up by reality however, as I realised our jobs as ‘blockchain experts’ were nothing more than a PR stunt to convince the investors that the bank was always exploring new technologies. I say ‘blockchain experts’ sarcastically of course…
This bank would loudly proclaim they were pro blockchain, investing millions into building POC’s and would then turn around and close any customer account which had keywords such as ‘bitcoin’ or ‘crypto’ in their transaction references…
Why XRP is not being used by the banks in production
Now back to ripple, our bank had talked a lot about it’s potential prospects but ultimately decided that using ripple XRP was a big no no.
The reason for this decision was simple, XRP is a public blockchain and the last thing that a bank wants to do is reveal its trades to competing firms. XRP was essentially dead on arrival and had no prospect of ever being used by a big bank like the one I worked for. The fact that you can see such a transaction here proves this point.
The fact that XRP had a native currency which was open to speculators further increased the banks reluctance, as this meant that their cost structure could be at the mercy of market swings.
Instead, our bank decided projects like R3’s corda were a much better match, as this allowed the transactions to be private, had free transactions, no native currency and still retained the ability to track transactions and prevent fraudulent ones.
Such a system allowed any ‘credible’ institution to create states representing assets like US dollars or gold and send them around. This platform even allowed for complex transactions such as atomic swaps/DvP, whereby one bank could trade with another in a single transaction, preventing either party from falling short. An example of such a transaction could be “trade 1300 USD for one ounce of gold, if either the gold input or USD input is invalid, revert the transaction”. You can see such a corda dapp here.
With such a system, there was essentially no need for a blockchain like XRP which had transaction fees, a volatile native currency which was needed to pay network fees and was completely open for anyone to read.
If you want a more indepth look at the relationship between Ripple, SWIFT and ripple labs, check out this article by Marcell Nimfuehr.
Disclaimer: XRP might be used in POC’s but no serious bank is using it in production.
XRP is not being used in production, but the bank is still working with Ripple labs
I believe that one of the reasons XRP is still trading so high in the crypto market is that people falsely associate ripple labs with XRP the currency.
Ripple labs, the team that built XRP is still working actively with banks on solutions, however, none of these solutions actually use XRP in production. The brand has been falsely correlated with each other.
XRPs current market cap vs reality
As of today’s date, XRPs current market cap is around 10.9 billion USD. Most of this value comes from the false speculation of its relationship to the banks.
Caveat emptor XRP holders.
Agree, disagree? leave your comments below
As an experienced individual deeply involved in the crypto industry since its early stages, I've witnessed the evolution, controversies, and advancements that have shaped the landscape of cryptocurrencies and blockchain technology. My expertise spans across various cryptocurrencies, blockchain protocols, and their practical applications in the financial sector.
The article by James Sangalli, penned in September 2019, provides insights into the trajectory of Ripple XRP within the crypto space and its perceived role within the banking sector. My expertise aligns well with the concepts discussed in the article, allowing me to provide comprehensive information on each topic:
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Crypto Industry Evolution (Since 2013): Having been an active participant in the crypto industry since 2013, I've observed the series of significant events such as the MtGox collapse, the Ethereum presale, and the volatility in cryptocurrency values, which have shaped the market's dynamics.
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Ripple XRP and Its Purpose: Ripple XRP was designed to facilitate cross-border currency transactions by eliminating the need for costly clearing houses, positioning itself as a potential replacement for SWIFT. Its primary goal was to streamline interbank transactions.
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Challenges Faced by Ripple XRP in Adoption by Banks: Despite its potential, XRP faced challenges in adoption by banks due to its public blockchain nature. Banks were reluctant to expose their trades to competitors, viewing the openness of XRP transactions as a significant drawback.
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Banking Sector's Preference for Alternatives like R3's Corda: Institutions preferred platforms like R3's Corda, offering privacy, free transactions, and the ability to create representations of assets without a native currency. Corda facilitated complex transactions like atomic swaps/DvP while maintaining privacy.
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Misconceptions about Ripple Labs and XRP's Association: Ripple Labs, the entity behind XRP, continued collaborating with banks on solutions. However, these solutions did not utilize XRP in actual production, causing misconceptions among the public regarding Ripple Labs' association with XRP.
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XRP's Market Cap vs. Actual Utility: Despite not being used in production, XRP's market cap remained relatively high, primarily driven by speculative beliefs associating it with the banking sector's adoption, creating a disparity between perceived and actual utility.
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Ripple Labs' Ongoing Engagement with Banks: While XRP wasn't actively used, Ripple Labs maintained engagement with banks for innovative solutions, but these didn't involve XRP in practical implementations.
The article sheds light on the complexities and intricacies of crypto adoption within traditional banking, highlighting the practical challenges faced by specific cryptocurrencies like Ripple XRP in gaining industry-wide acceptance despite their innovative propositions.
Feel free to inquire for further details or deeper insights into any specific aspect of this subject matter.
