I recently put together a post about Ripple and XRP. You can find the full post here, but a specific piece of it I wanted to highlight.
Wanted to highlight it after watching Peter’s recent video about xRapid.
As noted in this report:
“the most interesting feature of the inter-bank Ripple protocol [xCurrent] is the fact that these transactions do not have to be denominated in the network’s native currency, XRP”
You can transact with anything over the ledger, including IOUs for USD/EUR or any other cryptoasset.
Therefore, while the Ripple protocol is a good application of blockchain technology that might cause trillions of dollars to be more efficiently transacted across borders, the same report notes that it’s “unlikely to be conducted in XRP”. Given that possible reality, XRP’s valuation might be incredibly optimistic.
According to this insight post published by Ripple, using XRP on the Ripple network (i.e., using xRapid) would deliver significant benefits to clients (up to 60%). However, the real benefit of using XRP is somewhat blurred. This is because:
- It shows the percentage difference for each product/scenario in comparison to the base, not each other. Using Ripple + XRP offers a 14.2% relative improvement over just using the Ripple protocol. Using Ripple + XRP (assuming low volatility) offers a 41.1% relative improvement over just using the Ripple protocol.
- The Ripple + XRP (with low XRP volatility) is an idealised scenario which distracts from the benefit from using XRP under current market conditions. From my interactions with XRP supporters and reading articles, this is the scenario which is latched onto to make the benefit of XRP seem larger than it appears to really be.
Another recent insight published by Ripple reported that trials with:
“…financial institutions using xRapid saw savings of 40-70 percent compared to what they normally pay foreign exchange brokers [in the US to Mexico corridor]”
The post doesn’t provide further details (e.g., mean, median, mode, SD). Additionally, it fails to isolate the benefits of xRapid in comparison to xCurrent. Instead, the benefit is described in relation to traditional money transfer systems.
Why am I paying so much attention to this? Does this really matter? I think so. These blurry comparisons (by Ripple) are making XRP appear more impactful than it probably is. While reading such articles might leave you with the impression that XRP is driving significant improvements (up to 70%), it is likely responsible for less than half of that by itself. Such a misrepresentation may be:
- Driving unrealistic valuations of XRP.
- Bootstrapping exchange liquidity by on-boarding confused (or misled) speculators.
The more I learn about XRP (and Ripple’s relationship with it) the more uneasy I become about it. A recent video by Cedric Dahl echoed some of my concerns (but more extreme).
I wanted to bring this up because people think these insights (published by Ripple themselves, we have no independent insight) prove how successful XRP will become in the near future. It doesn’t. I can’t know their intentions, but it does seem like they’re playing off the misunderstanding about what Ripple products actually use XRP to increase the hype around it with insights like this.
Might seem like I hate Ripple and XRP, but I really don’t. Just makes me wonder when the third largest cryptocurrency seems to be playing tricks to increase hype. Shouldn’t the product speak for itself if it’s so awesome?