Dmytro Aksonov/E+ via Getty Images
Ripple
Ripple (XRP-USD), the network focused on decentralized banking solutions, is regarded by its supporters as a strong competitor to and potential successor of SWIFT, the international banking messaging network.
Ryan Fugger started Ripple as Ripplepay in 2004; it initially only allowed traditional online payments. Fugger later handed the reins of Ripplepay over to Jed McCaleb, an early Bitcoin pioneer, in 2011. McCaleb is also the founder of the now-defunct crypto exchange Mt. Gox.
Ripple’s technology enables faster and lower-cost interbank transactions. XRP, a cryptocurrency designed for use primarily in the Ripple Network, has maintained its position among the top ten coins on Coinmarketcap despite controversies surrounding the Ripple project.
Ripple’s Suite Of Products and Services
Ripple has built a suite of products and services aimed at providing modern financial and cross-border payment solutions. Ripple provides cloud services, APIs, and SDKs for developers to easily integrate Ripple payment solutions into applications and existing systems.
RippleNet
RippleNet is the core of Ripple products and services. RippleNet seeks to unify global banking standards and protocols. Current systems are siloed and do not interact well; this makes cross-border payments slow and expensive.
RippleNet aims to solve the problem of slow transactions by building one decentralized yet regulated global network; banks would connect to this network via an API. When banks all over the world are on the same network and protocol, international transfers will be settled at lightning speed.
XRP Ledger (XRPL)
The XRP Ledger (XRPL) is a decentralized, fast, and energy-efficient Layer-1 network. XRPL uses a HashTree to compile data which is then distributed to nodes on the network for validation.
XRP is the primary coin used on XRPL. All the supplies of XRP were pre-mined during launch; 100 billion XRP were mined, and no new XRP can be mined or minted. Ripple Labs holds and controls a substantial amount of XRP; this puts Ripple’s claim of XRP being decentralized in question.
Ripple and The SEC, a Seemingly Unending Brawl
As a US-based fintech company, Ripple is not spared from the U.S. Security and Exchange Commission (SEC) scrutiny and probes. In 2020, the SEC filed a lawsuit against Ripple for using XRP as a digital asset to raise funds in a 2013 Initial Public Offering. According to the SEC lawsuit, the CEOs of Ripple raised over $1.3 billion in an IPO of XRP, which was an unregistered security.
The lawsuit alleged that Chris Larsen, Ripple Labs co-founder, and Brad Garlinghouse, Ripple’s current CEO, also made personal unregistered sales of XRP totalling approximately $600 million. The SEC’s complaint was first filed on December 22, 2020, in a federal district court in Manhattan. The defendants were charged with violating the registration provisions of the Securities Act of 1933.
Ripple has gone all the way with the SEC into a legal brawl instead of opting to negotiate a settlement with the SEC. Ripple’s lawyers argue that the SEC never warned or gave Ripple fair notice about XRP being security.
One of Ripple’s arguments is based on a speech made by William Hinman, the then director of Corporation Finance at the SEC, at the Yahoo Finance All Markets Summit in 2018. Hinman declared that Ethereum, despite its 2014 Initial Coin Offering, is not considered a security by the SEC. Hinman’s declaration has since been disclaimed, and the SEC argues that Hinman’s speech was his personal opinion and did not represent that of the SEC.
I believe Ripple will win the lawsuit. I-Remit and TapJet, two firms that utilize Ripple’s services, including XRP, have moved to appear in court to support Ripple in the ongoing lawsuit. The SEC opposed this move in a letter they sent to Federal Judge Analisa Torres.
The two-year-long lawsuit seems to be near its final verdict as both SEC and Ripple have called for an immediate ruling, which is bullish for XRP. The news that the court has rejected SEC’s objection to disclosing more documents linked to Hinman’s 2018 speech led to a surge in XRP price on September 30; XRP rallied by 12% in twenty-four hours. A similar rally happened in February this year following a positive turn of court proceedings in Ripple’s favour; XRP jumped 22% at the time. These post-hearing rallies might just be a taste of what is to come if XRP wins the case.
Takeaway
XRP, as one of the oldest cryptocurrencies, didn’t have many competing cryptocurrencies in the early days; hence it gained popularity and so much hype. There are now cryptocurrencies that are as fast as XRP, with genuinely decentralized blockchains. There are a large number of companies making similar interbank solutions as Ripple.
Some legacy systems that Ripple seeks to replace are now being upgraded; some have formed partnerships with blockchain companies. For instance, SWIFT has partnered with Chainlink to work on a project that will allow traditional financial firms to transact across blockchain networks. SWIFT will use Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to enable SWIFT messages to instruct on-chain token transfers. This, however, does not imply that Ripple’s suite of products will become useless overnight.
I believe Ripple could find a place in the Fintech space, and it would certainly benefit from winning this landmark case, which is why I am holding a small position.
Be the first to comment