One of the most talked about cryptocurrencies since the last quarter of 2017, Ripple (XRP) has been heavily dipping since an all time of $4 earlier in 2018. The ‘un-decentralized’ XRP coin is known for its continued support from banks and money transfer agents due to the quick and cheap international payments. The coin on Monday this week hit the $0.5 mark after a rather horizontal movement in the last 7 days. We look at the impact this current price of XRP offers to the Ripple network and community.
How does the $0.5 mark solve XRP problems?
- The Ethereum problem
Cryptocurrency enthusiasts and investors have a preference to shilling when it comes to prices of whatever coins they own. This was the case about 4 months ago when massive shilling was on full drive for holders and HODLers of XRP. One Reddit user even went on to give a full page report on why Ripple will hit the $100-mark this year. PS: It will not happen.
This raises the question, is there any wrong with a coin such as XRP lingering below the $1-mark until it grows enough to surpass it? Why did XRP suffer once it hit second in market capitalization ranking? With a current circulating supply at 40 billion XRP coins, a $100 dollar price would mean a $4 trillion market capitalization, which is to be fair unrealistic.
The $0.5 mark solution
Given the continuing adoption of Ripple (XRP) in banks, a cheap price means the banks have the incentive of using the coin and not only the technology. Why $0.5?
First, we have seen there is a huge correlation between the price of a coin and its movement in the top 10 standings according to market capitalization. As seen this January, when Ripple ($2.5 at the time) passed Ethereum to be the second largest coin, the coin received massive FUD with most enthusiasts asking how and why. This caused a reversal in fortune for the coin, as Ethereum quickly increased in price with
Currently at $0.5, XRP’s market capitalization is only half that of Ethereum, a good thing. Ethereum is one of the most important cryptocurrency in the world right now and continues to rise in prominence. This has a psychological effect on how people will view any currency deemed to be greater than ETH. At the moment, XRP has no major developments to speak of and seeing the coin surpassing ETH may just cause more FUD. This causes a major flee from the XRP market.
- Centralization in Ripple
Ripple (XRP) is known as a centralized cryptocurrency. To novices and new entrants in the cryptocurrency world, this does not seem a big problem. However, to experts and enthusiasts this may present a problem. When Bitcoin was first introduced in 2009, the nature of the currency being decentralized, made it free from control by governments. It was a free network just as the internet is in providing free and uncensored content/information (sometimes).
Centralization makes censorship and blocking of content really easy due to ease in finding the nodes. In case of any problem the government, regulation authority or even Ripple may close any transaction. How centralization is a selling point to XRP escapes my mind completely.
- Confirmation of transactions
Ripple does not follow the conventional way of confirming transactions as most cryptocurrencies are decentralized. Through Unique Nodes List (UNL) also known as ‘validators’, transactions are confirmed on Ripple network just as they are done on the Bitcoin network. However, as at the end of 2017, there were only 5 nodes to connect and confirm transactions. In addition to this, all these nodes were fully owned by the Ripple company making the digital asset highly centralized.
The company finally increased these nodes to 55 while still controlling each of them. It is useful in finding crime and stopping suspicious activity on the network. However, a malicious attempt by regulators may allow censorship and stop transactions on the network at will.
- Ownership of Ripple
The maximum amount of XRP is capped at around 100 billion. Of these, 61 billion XRP will be owned by the Ripple company. The company’s top executives, Brad Garlinghouse and Chris Larsen, own almost 10 billion XRP coins. Brad is currently the richest man in the crypto universe according to Forbes with over 5.3 billon XRP owned, a total valuation of $2.6 billion. Chris is second on the list, with a 6.3% ownership in Ripple and a valuation of $1.5billion with 3 billion XRP owned.
The $0.5 mark solution
The current centralization issue is keeping most out of investing in the coin. However, given XRP’s latest resurgence to hit the half a dollar mark, may show some hope for the ever dipping coin. At the current price, Ripple (XRP) would be able to release its coins to the market at a fair price, while not affecting the real price. The amount raised is then used to build the needed nodes increasing decentralization of the coin.