Edward W. Mandel
Jun 28, 2019

At BQT, we our curated list of asset pairs is and will perpetually remain a work in progress. That said, we’ve already listed BNB, Binance’s internal token on bqtx.com. If it were a true cryptocurrency, it would be the seventh-largest by market cap. That suggest we need to examine the top six: EOS, LTC, BCH, ETH, BTC and today’s installment, XRP.

Market cap

As of this writing, the market cap for ripple, or XRP, is $17.6 billion, according to CoinMarketCap. That’s around 6% of all crypto assets’ combined.

XRP has been vying with ETH for the No 2 spot on the leader board for years. At the moment, it’s losing as it trends downward, but XRP’s price is spikey, even for a digital asset’s. It had been a quiet, thinly traded altcoin from its 2013 debut until March 2017 when its market cap rose by a factor of 8 in less than a month. That’s in dollar terms. Compared to the benchmark BTC, its price soared from two orders of magnitude.

But it was not to last. During most of the rest of 2017, as other cryptocurrencies soared against fiats, XRP dropped from its $0.35 peak to a trading range between $0.20 and $0.25 as it gave back every inch of its appreciation in BTC terms.

Then came that insane round of amateurs jumping feet-first, brains-never into the crypto market. They couldn’t spell XRP but, by January 2018, were willing to pay $2.50 for it. The end was predictable, but XRP actually held up pretty well compared with BTC and other cryptos. It even rallied a bit in September 2018 and rode along for a couple months holding steady around $0.50.

The so-called “crypto-winter” wasn’t kind to XRP, which found itself trading below $0.30 by mid-December. Despite a couple mini-rallies followed by slow but steady declines, that $0.30 figure turned out to be XRP’s floor, and it walked every inch of it through early May 2019. As of this writing, though, it seems to have punched through a resistance level with new support just below $0.40.

Its rivalry with ETH might be more of a factor of the Ethereum network’s leading coin’s own dynamics. ETH was one of dozens of cryptocurrencies that XRP crept up on during the cusp of 2017 and 2018. But it was that stretch from September through mid-December 2018 when XRP was merely holding value in fiat terms that it skyrocketed in comparison to ETH and unseated it as the second-most valuable digital asset. That was a matter of ETH being sold off, not of XRP doing anything dramatic, and ether has since reclaimed its second-place rank.


Ripple might actually be the first digital payment mechanism. The BitMEX blog has an excellent article on its history, but I’ll give you the nutshell version of the unsigned piece here.

Ryan Fugger (he’s heard them all) founded RipplePay as far back as 2004. At the time it was conceived as a peer-to-peer lending platform, through which someone with money to invest can give it to someone who needs a loan, then the individual lender gets the benefit of the interest. This was meant to disrupt retail banking, in which the bank lends the money at 9% and pays the depositor — that is, the true lender — 1% for the privilege of deploying their funds.

Not only did RipplePay predate Bitcoin by five years, it also predated other P2P lenders such as Prosper and Lending Club by two. That said, P2P lending never had a chance of enduring as a business model. William Freedman, a cryptocurrency writer often cited in this space as well as a personal friend, used to write for Alternative Lending Report, an online lending trade journal, and shared some of his insights with me for this article.

“It was all well and good in theory but, as Yogi Berra said, ‘In theory, there’s no difference between theory and practice. In practice, there is,’” Freedman told me, and I’m still trying to figure out what he meant by that. “Everyone underestimated how the banks were going to react. Today, you can go to any of those portals like Kabbage or LendingTree to see if you qualify for a loan, but odds are that it’s not Bob or Alice down the street who’s going to be the source of the money. It’s going to be a bank that lends to retail consumers. Even Goldman Sachs is in so-called peer-to-peer lending right now, and none of us is Goldman’s peer.”

The term “peer-to-peer” has largely faded from the online landscape. It’s been replaced by “balance-sheet” lending, which is essentially a standard business loan with the company’s hard assets or receivables as collateral, and “marketplace” lending which is, according to Freedman, “nearly indistinguishable from predatory payday loans.”

Early on, though, Fugger did what smart founders often do: pivot or step out of the spotlight or, in his case, both. Bringing on Mt. Gox founder Jed McCaleb as CTO and de facto boss, Fugger enabled him to turn a P2P lender into a P2P payment platform. Chris Larsen, erstwhile CEO of the aforementioned Prosper, came on as cofounder and remains executive chairman of the company today.

If you get this reference, maybe you’re too old to be investing in crypto.

And Ripple was born. Psych. No. And OpenCoin was born. The year was 2012 and Bitcoin had already risen from a genesis block to the point where it was at least worth 1/10,000th of a pair of pizzas from Papa John’s. Actually, that first known crypto transaction occurred in 2010. By the time OpenCoin launched, 3 BTC could’ve paid for that order plus a fair tip for the delivery guy.

Although the asset was called OpenCoin in polite conversation, more people referred to it as “ripple” because that was the name of the payment protocol it served as utility token for. And let’s be honest: Ripple is a much better name. In either case, XRP has been traded since 2012, even though it never claimed stable release until 2018. That’s the point at which it launched its Xpring platform focused on investing in startups that would focus on development within the XRP ecosystem, according to Dalmas Ngetich’s recent article in Ethereum World News.

McCaleb did his job and stewarded OpenCoin through two successful rounds of angel funding, then left with his share of the money. (It’s been suggested Larsen forced him out.) OpenCoin changed its name — or, if you will changed its name back — to Ripple. It was called Ripple Labs for a little while in between, but let’s not quibble.

Use cases

The major purpose of XRP is to facilitate micropayments. Who Ripple chooses to share its technology with, though, suggests that it has no qualms about putting its low transaction cost, speedy processing time and payment tracking capability to work for some old-school rent seekers.

XRP is unique among major cryptocurrencies in its friendliness to legacy enterprises. By the end of 2014, Ripple Labs began working with cross-border payment processor Earthport. That was the first of many partnerships with legacy payment industry and, it ought to be mentioned, Earthport was recently taken over by Visa, the poster child for everything that’s wrong with how value was transferred at the dawn of the Information Age.

BBVA, one of Spain’s largest banks, joined the Ripple network more than two years ago. Shortly after that, American Express got into the act, followed by MoneyGram and BBVA rival Santander. A slew of India-based banks got on board and, most recently, Britain’s MoneyNetInt and Thailand’s Siam Commercial Bank have aligned with Ripple. This has all made Ripple’s major investors — Andreesen Horowitz, Google Ventures, IDG Capital Partners and Accenture among them — quite pleased with themselves.

Along the way, Ripple acquired a New York State Department of Finance BitLicense and formed a venture with Bank of America Merrill Lynch, UniCredit, Standard Chartered, Westpac and other legacy financial services providers.

This accessibility for old-school money managers is a feature, not a bug, and it is reflected in the centralized method XRP offers for establishing consensus.

Cryptocurrencies typically rely on proof-of-work — a “mining” or “hashing” algorithm — to determine a single point of truth, BTC being the obvious example. Others rely on proof-of-stake — as ETH plans to and EOS already does — or proof-of-elapsed-time or proof-of-authority or proof-of-weight or directed acyclic graph — as do a number of less robustly traded tokens. I keep going back to Hacker Noon for this kind of inside-baseball stuff, and Zane Witherspoon’s post there on this topic is well worth a read.

Ripple by contrast is predicated on Byzantine fault tolerance. “What does that mean?” you might inquire. “Ask Witherspoon,” I might respond. He distinguishes between two subtypes: practical Byzantine fault tolerance and federated Byzantine agreement. The first is used by Hyperledger, which IBM built strictly for private, permissioned blockchains such as those used internally at legacy enterprises that have already achieved massive scale. FBA, though is the consensus mechanism favored by the public Ripple and Stellar blockchains.

One way of looking at FBA — and I freely admit it’s a jaundiced view — is as a pyramid. FBA chains are less horizontal and far more vertical than its analogues. At the top of each is hierarchy is a “general” who sorts messages to determine the truth. This is far too centralized for many crypto enthusiasts’ tastes, but not all.

“For its incredible throughput, low transaction cost, and network scalability,” Witherspoon writes, “I believe the FBA class of consensus algorithms are [sic] the best we’ve discovered for distributed consensus.”

And yet centralization is key to XRP. Generals are preselected by the company still frequently if incorrectly referred to as Ripple Labs to distinguish it from its network and its token. The other major FBA player, lumens issuer Stellar, has a much more open process to being named a general. Stellar, by the way, is the company McCaleb formed upon his separation from Ripple.

Oh, and for what it’s worth, BitMEX has documented 32,570 blocks that went missing sometime between the Ripple network’s establishment and February 2018.

Current state

I generally don’t get into this kind of market forecasting, but XRP presents a special case and I’d be remiss not to bring this up: We might never know the exact reason why McCaleb left the project, but by all accounts it was not on good terms. That’s why the current management team locked up 8 billion of the 9.5 billion XRP he has to his name — round that to $3 billion. If he were really malicious and the lockup agreement wasn’t in place, he could’ve just dumped his coin, flooded the market and trashed the value of the individual coins.

Without delving into the provisions that allow McCaleb to sell of his stake in dribs and drabs prior to the end of the lockup period, that period comes to an end seven years after his separation. But few people know for sure exactly when he left — maybe just him and Larsen and their lawyers — but it was sometime between June 2013 and May 2014. That means that XRP holders are in for a potential flooding sometime between June 2020 and May 2021. It’s a sucker move to try to time the market, but maybe you can use that little piece of information.

Another piece of useful information is that there’s a huge discrepancy between the amount of XRP that’s already been created and the relative sliver — BitMEX guesses around 10% — that’s been distributed. At least one lawsuit charges that Ripple is in essence a permanent ICO.

One other data point: I’m looking at a CoinMarketCap screen that tells me that XRP’s trading volume over the past seven days was about 8.9% of its market cap. BTC’s by comparison was 13.1%. Of the seven cryptocurrencies listed at the top of this article, XRP is by far the least-traded by that metric. Let’s remember: Market cap might be an indicator of liquidity, but it is not liquidity itself.

Keeping perspective

The question remains: Is XRP a true cryptocurrency? But that begs a follow-up question: Who cares? Personally, I don’t. Do people use it? Yes. Does it trade dynamically against other digital assets? Yes. At BQT, we’re only concerned with its value. However you want to classify it comes down to a religious argument, and here we choose agnosticism. For what it’s worth, Binance says it’s a cryptocurrency, and BQT will be listing Binance’s own BNB token, so who are we to argue?

Despite Ripple’s philosophically uncomforting tendency toward centralization, BQT would be remiss not to list XRP. If McCaleb decides to dump his holdings and the doomsday scenario plays out, we might reconsider. And maybe that’ll be the time we start pairing up his XLM.

Edward is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and recently launched his own bqtx.com Social Crypto exchange helping traders connect with each other to leverage their crypto assets.

bqtx.com has been in development since March 2017 and its ICO launched September 18. The information can be found online at bqt.io, on Telegram @BQTCommunity and on Twitter as @bqt_ico.