Among the top 10 cryptocurrencies, Ripple is the third for market cap, behind Ethereum and Bitcoin, and is one of the cryptos with the most volatile price changes. What will happen to Ripple’s price? Will it rise? Will it go down or rise? To see how Ripple price might move in the future, we need to see how ripple works and its main differences from bitcoin and other cryprocurrencies.
How ripple works?
Unlike the other coins in the top 10, Ripple is not decentralized and so is not actually a cryptocurrency, but a payment system that can support any form of cryptocurrency, traditional currency (fiat) or asset, and that includes the proprietary XRP token in its network. Ripple transactions are verified thanks to the consent of the central servers contributing to the network. This is done through an automatic process: a transaction is validated in 4 seconds. This factor is different from Bitcoin, which is based on the so-called “Proof Of Work”, where users validate transactions with their own computing power Ripple Labs website explains that the aim of the project is: “using blockchain technology and digital assets to enable financial institutions to send money across borders, instantly, reliably and for fractions of a penny.” Indeed, while Bitcoin and other cryptocurrencies like Litecoin were born to serve as a global digital money, Ripple was born as a vehicle to transfer liquidity between financial institutions. It is a multilateral payment system.
What is a multilateral payment system?
To put it simply, it’s a system used to transfer liquidity between different banks. This is how it works: let’s assume that Paolo pays 50 Euro to Alice. Paolo uses bank A, and Alice uses bank B. The operation will be Paolo—>A—>B—>Alice. That means Paolo asks the bank to execute a transfer, and Alice receives it. A payment system takes part at the moment in which bank A transfers the 50 euros to bank B. A has a debt of 50 euros to B and (simplifying) the system executes the transfer. This is a bilateral payment system. If we imagine an economic system with 100 different banks, each bank in this way will have a debit or credit to each of the other 99 banks. The transfers will take place simultaneously by summing all the debits and credits of each bank. This is a multilateral payment system.
The centralization factor in Ripple project
Contrary to other cryptocurrencies, Ripple’s organization is centralized (it has its own headquarters in San Francisco) and is easily identifiable by the authorities. As a result, they will may influence Ripple project, which is a factor to be taken into account.
For example, in May 2015, Ripple Labs Inc. and one of its subsidiaries were fined $700,000 by the US authorities for providing unlicensed payment services and failing to implement appropriate anti-money laundering measures.
Subsequently, Ripple reached an agreement to obtain a regular license and implemented appropriate measures.
However, the fact that Ripple is centralized also means that its development is centralized and not fully transparent: as a result, it may be more difficult to evaluate the under or overestimation of XRP price, with less information publicly available.
Ripple supply issues
A big problem is that Ripple Labs own about 60% of all existing XRP tokens, even though they are slowly releasing them. They could potentially control the market. In 2017, Ripple Labs announced that they would make 1 billion XRP tokens a month available to the market for the next 55 months (i.e. until the end of 2021). To date, 43.6 billion XRP tokens are in circulation on the market, compared to a total supply of 100 billion tokens: as billions of tokens are made available, the price of XRP could be affected. This is also true when we talk about its real market cap: we don’t know at the moment how many of those 43.6 billion XRP tokens are traded on the market. The capacity to absorb new supply could be even lower than expected (find more HERE about market liquidity), preventing XRP price to rise (or making it fall in case of problems)
Ripple without xrp?
Also, pay attention: Ripple is a very “estabilished” project, but XRP token is not necessary for this technology: it is only a mandatory reserve for every account on the ripple network. Ripple project was built to move a lot of diffenrent assets, both traditional assets and cryptocurrencies. So XRP token is not indispensable. Maybe the project will rise and xrp price won’t move. These two things could be independent in the future: an important factor to consider for investments.
How can I buy and invest in Ripple?
Remember to distinguish between the token and the project! Below you can find the best exchanges for XRP token: – BINANCE JERSEY for depositing via SEPA Bank Transfer or International Bank Transfer; – BITSTAMP for depositing via Visa or Mastercard, SEPA Bank Transfer or International Bank Transfer; – KRAKEN for depositing via SEPA Bank Transfer or International Bank Transfer;
In short, Ripple is a very interesting project. However, XRP tokens and Ripple project are two different things: be careful not to confuse the two!