Ripple in still water: A deep dive on the only cryptocurrency that still matters


Bitcoin is generally thought to be controversial, and it is, but the potential controversy is limited by the fact that there are really only two sides to the debate: pro and anti. Ripple (XRP) is different. The more any two given people know about cryptocurrency, the more likely it seems that they will disagree spectacularly over the potential value and utility of Ripple. How you view Ripple will likely depend on whether you view cryptocurrency primarily as an important means of conducting transactions or primarily as an important safeguard against fiat currency devaluation.

Bitcoin was supposed to provide both these benefits, but whether or not it ultimately delivers on the later, it is presently failing at the former. Due to high fees and volatility, very few people want to accept Bitcoin, and precious few want to spend it. Technologically, Ripple succeeds where Bitcoin fails. Right out of the box, Ripple supports 1,500 transactions per second—nearly the same throughput as Visa, but where Bitcoin is both a coin and a payment protocol, Ripple, or XRP, is merely a coin native to the Ripple protocol. What that all means, and why it matters, is what we will be diving for on today’s deep dive.

So, here’s the question of the day. Which is a better investment: the cryptocurrency more suited for transaction or the one more suited for investment? As usual, where cryptocurrency is concerned, the obvious answer is probably wrong.


Bitcoin emerged from a small group of early backers, some of whom were unknown to each other and some of whom, including the prime mover of the project, Satoshi Nakamoto, remain unidentified to this day. Bitcoin is a peer-to-peer network, meaning there are no central servers. Likewise, there was no central financier—the network simply grew naturally over time as more and more people became interested in the project. Much has been written about the creation of Bitcoin, and that’s understandable, as it was an unprecedented socio-financial development. It could exist, so it did, though its growth was surely hastened by the global mood following the 2008 financial crisis—a dissatisfaction that bordered on paranoia.

Ripple’s creation was the opposite. There was once a company called Opencoin that turned into a company called Ripple Labs and was later rebranded simply as Ripple. That company created the Ripple payment protocol, a distributed open-source protocol including the Ripple ledger and a cryptocurrency, also called Ripple (units are sometimes called Ripples). Company, protocol, and currency—all called Ripple.

No one is suggesting that the company gave the protocol and the currency the same name out of any desire to lure investors into buying the cryptocurrency when what they were impressed by and really wanted a piece of was the protocol. Or maybe someone is, and I just don’t know about it. Actually, it does sound like the kind of thing people like to suggest, doesn’t it?


Even if there were no competition, Bitcoin has serious limits as a transactional tool, due to the problems of speed, fees, and volatility. No matter what the price of Bitcoin, be it $10 or $1,000,000, anyone who wants to make a Bitcoin purchase for, say, five dollars, need only convert five fiat dollars into Bitcoin, then send it to its recipient (who will usually just convert it right back to dollars). Whether half a Bitcoin or half of one-onehundred-thousandth of a Bitcoin is transmitted changes nothing. Of course, few people want to do this, because the transaction might cost six times as much as the amount being transmitted. Also, Bitcoin’s price is volatile, an issue compounded by the fact that it can take up to ten minutes for transactions to settle. A lot can happen to the price of Bitcoin in ten minutes.

Why does it matter? Because Bitcoin needs utility in order to have value. The utility is like the ante in a poker game that gets the pot to rise arbitrarily high. The suddenly germane question is whether Bitcoin can really be said to have any utility when there’s an available competing system, the Ripple protocol, that outstrips it by orders of magnitude.


The Ripple protocol shares none of the problems that plague Bitcoin, though it has its own problems which I’ll get to in a moment. It not only functions more quickly and with less uncertainty than Bitcoin, it functions so smoothly, in fact, that more than 100 large international banks have found it is the best technology of any kind that they have access to when it comes to making cross-border payments. This is real; it’s actual. The strangely common saying that cryptocurrency has nothing essential to offer the financial world has been thoroughly debunked. People will continue to say it of course, just as they’ll continue to scream at you damn kids to get off their lawns.

The Ripple protocol allows for instantaneous point to point transfers of money in any unit (crypto, fiat, or commodity) without banking fees at a 100% neutral exchange rate. It isn’t just better than Bitcoin, it’s better than everything. It’s the fastest, cheapest means of transferring money in existence. While Bitcoin transfers can take ten minutes to settle, Ripple transfers are verified by consensus, a process taking only a few milliseconds.

Few financial institutions are going to want to lack this capability, especially as their competitors adopt it. That’s great news for Ripple, the company, though this might be a reasonable time to mention that Ripple is not publicly traded, so you can’t buy stock in it, and buying XRP, Ripples… well, that’s not even remotely the same thing.

Fear the overlords

So from where do these astonishing powers come? Well, verification by consensus might not mean what you think it means. In fact, the reality of what’s happening, and the words chosen to describe it are to some extent contradictory. That instantaneous consensus is made possible by verification servers that sort of oversee the nodes of the peer-to-peer network. Those servers have been distributed beyond Ripple, the company, meaning the protocol and ledger could continue to function if the company disappeared from the Earth. Ripple has announced plans to continuously add verification servers throughout the network and even proposed that in the future, the distribution of servers could be handled by algorithm, or vote—something, again, that the company would not have direct control over. That may seem reasonable enough, even gracious of the company, but to Bitcoin purists, it’s flat out cheating. That the company has removed its own ability to centrally control the network is, to a purist, irrelevant, as the very existence of such servers means that such control is possible. If you aren’t involved in the cryptocurrency community at all, this may seem like a pointless quibble, and it may be, but to the cryptocurrency community, it is a very serious concern. Did I use the word paranoia when discussing the creation of Bitcoin? Good. I meant to.

So, what does all this tell us about the present and potential value of XRP? Absolutely nothing. In fact, it’s only now, after hammering on that point, that I feel I may responsibly discuss the relative merits of an XRP investment.


XRP or Ripples are the native currency of the Ripple protocol, but if you recall, the Ripple protocol can transmit money in any unit: fiat, crypto, commodity, etc. In most cases, banks that transfer money on the protocol do it in the form of digital credits or debits of particular fiat currencies. Ripple, the company, has been saying for a while that there are particular advantages to using XRP instead, but the issue is beyond my technical understanding.

My conclusion, and it is tentative at present, is that the overwhelming power of the Ripple protocol dims Bitcoin’s prospects considerably, but does nothing—except by way of psychological association and outright error—to add value to XRP. Even if it did, there are two more reasons to why XRP probably isn’t “the one.” There are 39 billion Ripples available for trade today. The number itself could be a problem, but a bigger problem is that the company and its founders hold a great deal of it themselves. Still not seeing the problem? If you buy XRP at current prices, then in order for the world to raise the value of your XRP to the extent that you would like, the world would first have to make trillionaires—yes, trillionaires—of Ripple’s founders. That’s not going to happen.

OK, final point. It’s probably not important. There are 39 billion Ripples trading today, but there will eventually be 100 billion in total. The others are currently being held in escrow. They will be released on a set schedule, and every one of them will be released to Ripple—the company. So before you spend $1 on XRP, consider that doing so values Ripple, the company, at $60 billion minimum.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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