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Ripple still has to make a splash

With all the recent hype surrounding Ripple, I thought it would be time to re-examine the cryptocurrency that has since occurred in Ethereum is the second cryptocurrency in the world by market capitalization. Our company has studied and analyzed Ripple for the best part of its life. In this article, I will examine some of the challenges facing Ripple, its potential for future expansion and I will try to scour the wheat from the chaff when it comes to the second largest cryptocurrency in the world after Bitcoin.

Every day, businesses and consumers send over $ 76 billion in payments through a staggering series of banks and financial intermediaries. From the correspondent banks to the issuing banks, the financial services that support the payment flows are a vast network of nodes and networks, each of which requires its share of the action while the money flows through the veins of global trade. Without this flow, port workers are not paid and loads are not loaded – letters of credit (instrumental to global trade – because no one trusts anyone) who are the key to trade flows have ensured that our modern way of life as we know it is done. However, for a good part of a decade, Ripple, a San Francisco-based company, said it would highlight this inefficient and sometimes archaic system by exploiting the blockchain technology that supports Bitcoin to create what is called the "Internet of Value". the cryptosphere is a real institution in this sense. It has survived numerous cryptocurrency routes and is slightly younger than the Bitcoin itself and much older than Ethereum. From the late autumn of last year to the beginning of January of this year, Ripple has seen an incredible jump of 1300% in the value of its digital token, with many jumps aboard the Ripple train on the basis that, unlike other cryptocurrencies, Ripple had a well-defined purpose and a clear purpose: to help banks move money from one point to another faster and cheaper, especially across borders.

But as anyone claims to have worked with banks, the pace of change within these institutional giants is glacial (in fact, thanks to climate change, the glaciers will change faster these days). According to a senior executive of a large multinational bank who refused to be named,

The representatives of the company (Ripple) arrived earlier in the year and while their technology and value proposition were good, we did not get legal approval. We have agreed on a trial.

But that detail did not prevent Ripple from subsequently announcing a partnership with the aforementioned bank at that time, one that had to take a step back from the next one. Part of the reason for the reluctance for banks to accept Ripple is ironically trust. The blockchain should have created a "trusted" ecosystem that would have denied the obligation for trusted intermediaries to facilitate transactions. But current and former executives from several global banks, some of whom have agreed to work with Ripple to process cryptocurrency, say there are few chances that they can ever outsource their corporate clients to a private cryptocurrency. According to the Ripple website, in January this year, the company held 61 billion of Ripple tokens available, with most of them held under warranty, so as not to be sold in excessive quantities that would absorb the value of Ripple. . If one of the main arguments against legal currencies is the manipulation of the central bank, the same argument can also be used against Ripple. Regardless of the creation of a "trustless" ecosystem – the reason for being a blockchain – Ripple simply replaces several trusted intermediaries with just one – itself.

Ripple founder and man who is wondering if you put mayo in his sandwich, Brad Garlinghouse.

Then there is RippleNet, which is addressed to the Brussels-based interbank financial telecommunications company – better known as SWIFT – a messaging system used to control the flow of money all over the planet. SWIFT has been notoriously hacked (more than once) and today it connects about 11,000 financial companies. RippleNet does not need the Ripple XRP digital token to work, but it was hoped that XRP would become a key ingredient in the mix. For example, as an intermediary currency similar to the dollar. Today if you want to convert Afghan Afghans to South Koreans, you must first convert to dollars – the idea is that XRP can act as a bridge. The value proposition was that instead of tying money in different currencies into accounts at other banks, with problems and expenses, XRP could do the job. But even this does not make sense. Now instead of a heterogeneous group of currencies (which may or may not have value), banks would essentially centralize currency risk by holding XRP deposits. But at least the technology behind RippleNet seems to be valid (for now). More than a handful of banks joined the network and Ripple even managed to sell its own shares to Standard Chartered and Banco Santander. But of the more than 100 banks that registered, only the Swedish bank Skandinaviska Enskilda Banken transfers commercial payments to RippleNet. More than a year ago, Standard Chartered initiated a program to allow payments between Singapore (a fintech hub) and India using RippleNet for its corporate clients, and the UK division of Banco Santander tested an international payment using the Ripple technology that allowed the execution of an international bank a few seconds. Although neither bank has indicated that they will use XRP at any time, they remain optimistic about Ripple's technology and understandably as they have invested directly in it.

But Ripple is all but in its innovation. Other companies such as TransferWise are also addressing the issue of global payment networks like SWIFT itself, which despite the hackings has released its major upgrade called Global Payments Innovation or GPI that allows corporate customers to make payments in hours instead of days and track the money flows in the same way that DHL traces a parcel. Add to what SWIFT is already a reliable network used by banks and approved by compliance departments and that Ripple has its limited work. GPI already has 36 banks that use it to earn over 1 billion US dollars in cross-border payments and while Ripple could argue that SWIFT is simply trying to speed up a system already slow, at idle, hours as opposed to minutes begin to count very little when a ship still travels less than 50 miles per hour. The arguments of efficiency work – up to a certain point. The reality is that although it is preferable to have immediate cross-border money transfers, there are many counter-examples when that level of urgency can not be required or perhaps that level of efficiency is not desired.

"Wait, you mean this is not the line for Hamilton's tickets?"

And even if the bankers were willing to roll the dice on Ripple, their compliance departments were there to stop the roll. Since Ripple still needs to be approved by regulators (which move at an even more glacial pace), bank compliance departments could never allow them to risk cross-border payments using digital assets. And the approval is unlikely to be forthcoming for a number of reasons, the main one among which is that the approval would be a tacit approval of Ripple's business model and could be perceived as a currency approved by the government – something that a central bank or regulator would be hard to do – especially for a private company. Although this does not mean that it has not been done before. During the Great Financial Crisis of 2008, the government stood behind private companies and stuck to their debts to preserve the integrity of the entire financial system. But those were terrible circumstances, the subject of Ripple is much weaker in comparison. Efficiency is hardly an urgent necessity.

Finally, there is the secular (or at least ancient) problem of the cryptocurrency sector with the intrinsic volatility of cryptocurrencies. In January of this year, Ripple's XRP was worth around US $ 2.92, today it is worth US $ 0.35 – almost nothing stable and far from its intended use as a substitute for the dollar to facilitate transactions. And it adds an unnecessary layer of headaches to both compliance departments and bankers. That Ripple is the second largest cryptocurrency in the world today by market capitalization is more a testament to its value as a speculative investment tool, rather than as a serious contender to existing global monetary network solutions.

And it's in trying to be all things for all the people that maybe it's where Ripple's biggest challenge is. At the same time both the payment network and the cryptocurrency, regardless of the internal divorce, the two will be closely associated by an external optical lens and, depending on the status of the cryptocurrencies and their legal status, will certainly weigh on potential considerations of the adopters. In terms of technology, banks and other financial institutions are already exploring blockchain-based solutions that do not require a native cryptocurrency. The countries from China to Uruguay are playing with the idea of ​​digital coins issued by central banks, which would effectively negate the value of a private cryptocurrency to facilitate transfers. And finally, Ripple lacks the decentralization point. With its oversized hold of its digital token, XRP, banks would be derelict in their duty to take care of their customers to focus the risk within a single point of failure. Decentralization itself is an advantage, not a characteristic. And if the only value that can be obtained from the adoption of Ripple is the rececification and the efficiency, then the benefits in terms of efficiency are evident with respect to the greater risks assumed.

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