Review on XRP by Saleh Bayramli

What is the Ripple system

Ripple is a global cross-currency and gross 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 settlement system. In late 2017, it was announced that the American financial giant American Express and the Spanish-British group Santander were switching to the Ripple protocol for transatlantic transfers. Also, more than 75 payment systems and 90 banks around the world, including UniCredit and Standart Chartered, use this protocol.

Exchange scheme

The currency exchange scheme in the system is simple. Let's say a person needs to convert Russian rubles (RUR) to Brazilian reals (BRL). First, he converts his rubles into the internal currency of the Ripple system - XRP ("ripple"). Then the transfer is made to the real wallet owned by the bank.

At the end of the operation, the person receives the Brazilian currency. Thanks to xRapid technology, this exchange takes 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 around the world , in contrast to the same bitcoin, which depends on miners, which help to overcome the heavy load. That is why this system is so attractive for banks.

Ripple's position now

More and more banks are switching to Ripple these days. This hype is what allowed XRP to make a huge jump in value. Now this currency is ranked third in terms of capitalization ($ 20.2 billion) after Bitcoin ($ 119.9 billion) and Ethereum ($ 39.06 billion). XRP cost is $ 0.517754 despite the fact that the rate of this currency depends not only on the holders, but also on ordinary transfers. After all, as described above, XRP is involved in each exchange, and thus its liquidity increases.

But, contrary to the expectations of many, banks are not going to completely switch to XRP in the near future, using this currency not only for exchange, but also for transfers. This is due to the fact that corporations need stability, to which any cryptocurrency is still very far away. Naturally, no one will take the risk of a price collapse at any moment, so companies will be wary of XRP for a long time to come.

In addition, Ripple Labs recently began to sue R3 over unfulfilled obligations stipulated in the agreement. This position of the company is not attractive to large corporations and investors.

XRP is impossible to mine because 100 billion tokens were issued in advance.

Moreover, 61 billion of them belong to Ripple, and about 300 million XRP are spent to cover expenses per month.

In addition, 55 billion tokens of those owned by developers are locked using 55 smart contracts. This policy allows the company to make translations as transparent as possible. In addition, Ripple Labs thus reduces its chances of bankruptcy even with a hypothetical ban and collapse of XRP.

Ripple's centralization problem

Ripple Labs originally claimed XRP as a decentralized system. However, the large volume of tokens in the hands of the company gives rise to doubts about the veracity of the developers' words. Control of 61% of all currency by one company can in no way be called decentralization.

Even if Ripple Labs is not using this money and is just holding 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 a 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 largest currency by capitalization, which will also not lead to anything good.

In addition, the close relationship between Ripple and banks also raises concerns. After all, the more companies use this protocol, the higher the possibility of influencing the cryptocurrency.

Roughly speaking, there is a possibility that banks control the XRP rate, because it is very beneficial 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 scheme, but also through currency depreciation thanks to exchanges, dramatically "pouring" large sums there. In addition, the seventh place in terms of trading volume with the third place in terms of capitalization is a clear sign that the currency is controlled by a narrow circle of companies. All this completely negates the thesis of XRP decentralization.

Why decentralization is so important

Decentralization is one of the main principles of all cryptocurrencies. For this, they were created in due time - so as not to depend on anything. The lack of control over specific people enables 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 especially appreciated in today's world.

Decentralization is a very powerful lever to advance 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 that appear due to constant inspections and tight control of production. Such countries, for example, are some African states or North Korea.

And, conversely, in countries where the economy is little influenced by the state, the quality of life of the population is high, because ordinary people have the opportunity to run their own business and freely carry out transactions. In such countries, salaries are high, prices are normal, and taxes are commensurate. This trend is not accidental, because decentralization always moves the economy forward. This law also applies to cryptocurrencies, setting a prerequisite for each currency - the presence of an uncontrolled system .

Conclusions and forecasts

Despite all the advantages of the Ripple network and its internal currency XRP, you cannot trust the centralized system in the cryptocurrency market. When all coins and tokens want to achieve complete independence from the outside world in order to move the economy forward, developers from Ripple Labs increase the number of factors affecting the XRP rate.

Banks and creators have too much stake in this currency, so it's safe to say that XRP is a corporate centralized currency. Therefore, it cannot be called a full-fledged cryptocurrency, because it does not meet one of the main market requirements.