XRP is a global cross-currency payments system, created in 2012 by Ripple Labs. The main advantage of the network is that it allows mutual transfers to anywhere in the world in just a few seconds.
This makes Ripple a very attractive choice for banks that rely on a real-time payment system. At the end of 2017, it was announced that the American financial giant American Express and the Hispano-British group Santander would switch to the Ripple protocol for transatlantic transfers. In addition, this protocol is used by more than 75 payment systems and 90 banks around the world, including UniCredit and Standard Chartered.
The exchange system in the system is simple. For example, a person has to convert US euros (EUR) to Brazilian reals (BRL). First, it transfers its euros to the internal currency of the Ripple system – XRP, then the transfer is made in the wallet with Reales belonging to the Bank. At the end of the operation, the person receives the Brazilian currency. Thanks to xRapid technology, this exchange is done in just a few seconds. This is one of the main advantages of XRP. In addition, all transfers in the system are revocable, that is, they can be canceled and returned.
The high speed of transfers in Ripple is due to the fact that the network is supported by 14 servers across the world, as opposed to the same Bitcoin which depends on miners helping to overcome a large load. This is why this system is so attractive to banks.
Nowadays, more and more banks are opting for Ripple. This excitement allowed XRP to take a huge leap in value. Now, this currency by market cap ranked third ($ 20.2 billion) after Bitcoin ($ 119.9 billion) and Ethereum ($ 39.06 billion). The XRP cost is $ 0.517754 despite the fact that the currency rate depends not only on bonds but also on conventional transfers. After all, as described above, every exchange involves XRP and its liquidity increases as well.
But, contrary to the expectations of many, banks are not going to switch completely to XRP in the near future, using this currency not only for exchange but also for transfers. This is because businesses need stability, which any cryptocurrency is still a long way off. Naturally, no one will take the risk of a price collapse at any time, so companies will treat XRP with caution for a long time.
Additionally, Ripple Labs recently began suing R3 for outstanding contractual obligations. This corporate position is not attractive to large corporations and investors.
XRP is impossible to mine because 100 billion coins have been issued in advance. And 61 billion of them are owned by Ripple, and around 300 million XRP is spent to cover costs per month.
Additionally, 55 billion developer-owned XRP is blocked using 55 smart contracts. This policy allows the company to make transfers as transparent as possible. In addition, Ripple Labs thus reduces its chances of bankruptcy even with a hypothetical ban and a collapse of XRP.
Initially, Ripple Labs claimed XRP as a decentralized system. However, the large number of documents in the hands of the company raises doubts about the veracity of the developers’ comments. The control of 61% of the total amount of currency by a company cannot be called decentralization.
Even though Ripple Labs does not use this money and keep it, this amount of XRP can easily affect the market. In the event of a hacker attack on the system, there is a risk of complete collapse of the entire currency. Moreover, the collapse of XRP may be followed by a chain reaction of the entire market to the collapse of the third capitalization currency, which will also not lead to any good.
In addition, the close relationship between Ripple and the banks is also of concern. After all, the more companies use this protocol, the higher the possibility of influencing cryptocurrency.
Basically, it is possible that banks control the rate of XRP because it is very profitable for them.
In addition, it is very easy for banks to influence the exchange rate. Large associations can influence XRP not only through the Pump & Dump program, but also by the depreciation of the currency through exchanges, by strongly “injecting” large sums into it. In addition, the seventh place in terms of trading volume in the third place in capitalization is a clear sign of currency control for a small circle of companies. All of this completely negates the decentralization thesis of XRP.
Decentralization is one of the main principles of all cryptocurrencies. That’s what they were created for in their day – to depend on nothing. The lack of control over specific people allows others to freely invest their funds in cryptocurrency without fear for the safety of their own money. In addition, decentralization allows the user to remain anonymous, which is particularly appreciated in today’s world.
Decentralization is a very powerful lever for promoting the economy. For example, in countries where the state strictly controls market relations, the quality of life of people is very low due to high prices, low wages and high taxes, which appear due to constant inspections and d ‘strict control of production. These countries, for example, are some African states or North Korea.
Conversely, in countries where the economy is little affected by the state, the quality of life of the population is high, as ordinary people have the opportunity to conduct their own affairs and conduct free transactions. In these countries, high wages, normal prices and proportional taxes. This trend is not accidental, as decentralization always drives the economy forward. This law also applies to cryptocurrencies, setting a mandatory condition for each currency – the presence of an uncontrolled system.
Despite all the advantages of the Ripple network and its local currency XRP, you cannot trust a centralized system in the cryptocurrency market. When all coins and tokens want to achieve full independence from the outside world in order to advance the economy, the developers at Ripple Labs are increasing the number of factors affecting the XRP rate.
Banks and creators have too large a stake in this currency, so we can safely say that XRP is a centralized corporate currency. Therefore, it cannot be called a complete cryptocurrency, as it does not meet one of the main requirements of the market.
In 2019, banks will continue to switch to the Ripple protocol. Thanks to this, the XRP rate can increase several times by December. Although the crypto market is currently going through a recession, XRP has a chance for stable growth due to the high level of business confidence in the Ripple system. But in the long run, we can’t talk about the progress of XRP.
Banks need exchange rate stability, they don’t need a sharp rise or fall in the currency. Companies will use their influence on the token and control its price as much as possible. Most likely, XRP will reach a psychological level and start to balance on a specific cost, which will give banks the desired stability.