Cryptocurrencies are ingenious, logical things using exact mathematics and cryptography to make transactions or record data in a way that is free from the failings of humans. Unfortunately, their tokens and coins are traded on the open market by those same failing humans, who are subject to greed, FOMO (Fear of Missing Out), ridiculous over excitement, misplaced belief and all the other shortcomings we have to deal with on a day to day basis. And that means a volatile, crazy cryptomarket, with unbelievable price swings and a myriad of supportive and dismissive comments about the future in equal quantities from equal numbers of experts and amateurs alike. It’s noisy out there, and trawling the net looking for answers often leads to more confusion.
Let’s face it, as of November 2017, cryptocurencies are still very much in their infancy. No one, including myself, really has any idea how this will play out. However, I don’t think there’s any doubt they’re here to stay or that they will be as revolutionary as the internet was in the 90’s and 00’s, but there is a real question mark over who will remain when the madness (which probably hasn’t even really started yet) finally ends. There’s strong arguments for many currencies such as Bitcoin (BTC), Litecoin (LTC), Monero (XMR), Ethereum (ETH) and many others, but the fact remains that it’s possible we haven’t seen the biggest players even get started yet. Remember MySpace vs Facebook? Yahoo vs Google? Netscape vs Internet Explorer? They were first and utterly dominant, and yet they fell by the wayside. We’ve seen it before, we’ll almost certainly see it again. These are exciting, crazy, dangerous times, make no mistake.
I personally am long on the currencies mentioned above, but my favourite by far is the quiet guy (in relative terms) at the party – Ripple (XRP).
It doesn’t have the brand recognition of Bitcoin, or the precise positioning of Litecoin, or the slightly mysterious, sexy edge of Ethereum, but it’s cool. Very cool, but without being the least bit cocky. No-one’s too sure about Ripple at first, it seems a little unexciting and standoffish. Until you get to know it. Then you want to be it’s friend. It’s best friend.
And yes I know that Ripple exploded on to the (market) scene with a giant fanfare earlier this year with a mind melting 3000% increase in value (imagine if you’s stuck that £100 in before that eh?!) and I, like many people, missed that wonderful moment. But it got my attention, and the more I started looking into it, the more I liked it. And then I started to love it. And then someone, quite nonchalantly, asked me ‘why?’. So we find ourselves here, as a direct result of this relative stranger’s casual interrogation, discussing such matters in a public blog.
It’s a fair question, right? There’s over one thousand cryptocurrencies out there now, what’s so special about this one? Hell, it’s not even mine-able! What was I thinking!?
Ripple is currently fourth in the market capitalization table of cryptocurrencies (www.coinmarketcap.com) with, at time of writing, a market cap of some $9Bn. That’s pretty big. And yet it still feels ‘small’, like it belongs to just us Ripple nuts. Perhaps it’s because it trades at a very unsexy $0.24 a unit compared to Bitcoin’s giant $8000 a unit. Effectively, Ripple is quietly sitting in the corner with a paper cup of dodgy punch, watching the popular jock entertain the whole place with ridiculous party tricks and loud, raucous laughter. And yet Ripple knows, there’s more going on here than meets the eye.
Of course, the maths makes a valid argument. Bitcoin will only ever have 21,000,000 units in circulation, the last of which won’t come into operation sometime in 2140. Ripple has, well, billions. A hundred billion in fact. That’s a crap load of billions. AND they’re already here, premined and ready to go.
Except they’re not, of course. Over half of those are (or technically are about to be) placed in escrow and are being released at the rate of a billion a month to control supply and alleviate the market’s concern about a sudden flooding of Ripple sinking the market price. But it’s still a very, very big number, and that number is often cited by ‘experts’ as to why Ripple’s price could never be higher than a few cents, or possibly a dollar. And on the face of it, they’re right. But this whole thing is too new, too exciting and too, well, rule breaking to just go with ‘on the face of it’. We have to look deeper. There’s no reason why market capitalizations bigger than Apple’s impressive $900bn couldn’t happen. It’s a brave new world, ladies and gents, and we’re talking currencies here, not stocks or commodities. When you start to compare against those, a £100bn market cap looks, well, tiny. There’s $1.2trn dollars in circulation for example. That’s just cash! And as for Gold? approx $7Trn. SEVEN TRILLION! It’s peanuts. We might need to adjust our thinking a little bit.
That said, I do think that the glass ceiling of market cap will play a psychological role in trading terms, so it’s possible that values may never go over a dollar even though, arguably, they should. But then we have the human factor, and that part is a total wildcard. Who knows what the hell we’ll do when the market starts to go mainstream? Literally anything – for a time at least – is possible.
This is all by the by and very interesting, but it’s not the reason I think Ripple is, well, a bit sexy. Yes, there’s an actual company element behind it, rather than just being a racially pure crypto currency which presents both problems and opportunities, but I think it’s the fact that it just works. Yes, dear reader, this is a proven tech. PROVEN. In a completely unproven and utterly chaotic infant industry, there’s something that has a real practical application and is being used, right now, by the big boys in the playground. American Express, Santander and many other household names – those sorts of big boys.
Of course, the naysayers love to point out that it’s Ripple’s tech that they’re using rather than actual Ripple (XRP), ergo making XRP redundant, but this is only partly true – one is the stepping stone for the other. It’s also a bit confusing is you’re reading that for the first time. Two Ripples? What the hell?!
In short Ripple is the company that is building and integrating the tech. XRP, also called Ripple, is the currency used by the tech to do the transfers. Got that? No? Let’s go a little deeper. And this is a good thing to do because after all this rambling, it finally answers the question of why I love Ripple.
If you want to transfer money to someone in another country, it is, frankly, a pain in the arse. It usually costs a few quid, can take several days, and, behind the scenes, involves a bunch of banks and intermediaries. It may also surprise you to learn that things go wrong, go missing or get delayed a lot more than you think. We call it the SWIFT system and it is unbelievably archaic. Think about it. We live in this wonderful age of amazing tech and instant information exchange and yet we have to wait days and pay dozens of people behind the scenes to move money around. Now imagine you could do it in seconds for a fraction of the cost AND know – categorically – that it’ll get there, thanks to the perfect security of the blockchain. Using the Ripple tech AND the XRP currency as a sort of universal intermediary, you have a lightening fast, incredibly secure system. That, dear reader, is Ripple.
Of course, I’ve simplified it quite a bit, but this blog isn’t a detailed techy breakdown of how it works. There’s plenty of places to go for that, not least Ripple’s site itself at https://ripple.com. This blog is simply why I love it.
It’s not just the fact it’s proven and it solves a real world problem. It’s not the fact that it’s almost certainly (in my view) going to be adopted at the de facto SWIFT replacement to one extent or the other. It’s not the fact that the development team seem to be so focused on the correct deployment and aren’t (for the moment) motivated by the daily fluctuations in the market. (Swell, their recent conference, was considered a disaster for speculators for example, but it was never for them, even though the markets were scathing about the ‘lack of announcements’ which, of course, they’d already made.) No, for me, it’s the fact that where all other currencies technically work against the centralized baking system, Ripple works directly with it. Embracing it. And that’s quite a thing. And definitely more of a thing than we give it credit for at first glance.
What’s even more incredible, is just how impossible this would have been just a few short years ago. And what, therefore, lays ahead. If you’re around forty years old or more, you’re going to be lucky enough to live through two revolutions – that of the internet and that of the financial system. And that will be a hell of a story to tell the grandkids.
Please don’t take this as investment advice. It’s just my view based on my own research, investment strategy and, well, gut feel. You do what you like, but I’m long on XRP and “hodling!”