Does Ripple Have What it Takes to Be the 'Amazon' of Crypto?

Tuesday, 03/03/2020 | 07:48 GMT by Rachel McIntosh
  • Ripple is continuing to expand across the globe. What's propelling the company forward? And what's holding it back?
Does Ripple Have What it Takes to Be the 'Amazon' of Crypto?

Last month, Brad Garlinghouse, chief executive of Ripple, made a bold statement about his hopes for his company.

"I hope that in five years we're not just Amazon books, we're Amazon," he said in an interview with CNN.

With a $1.07 trillion market cap, Amazon is tough to match--as a company, Ripple was valued at $10 billion after raising $200 million in a Series C funding round in December, and at press time, XRP's market cap was hovering around $10.3 billion, holding a place as the world's third-largest cryptocurrency by market cap. (XRP is the native token of the Ripple ecosystem.)

On the other hand, however, Ripple has progressed quite a bit over the course of the last two years--recently, the company was given the second place on Forbes's list of the most valuable companies in fintech. Stripe (valued at $35 billion) was at the top of the list; Coinbase (valued at $8.1 billion) was in third place.

A "corporate coin"?

And the company is seeking to grow--Garlinghouse also spoke of the possibility of a Ripple IPO in 2020, though he has made it clear that any talk of a public offering is purely theoretical at this point: "in the next 12 months, you'll see IPOs in the crypto/Blockchain space," he commented at the 2020 World Economic Forum in Davos.

"We're not going to be the first and we're not going to be the last, but I expect us to be on the leading side," he added. "It's a natural evolution for our company."

While some analysts have theorized that a Ripple IPO could damage the price of XRP, the fact that Ripple may be considering such a move could be counted as evidence that the company is considering a step further into the public financial sphere, thereby further positioning itself as a sort of "corporate coin" with corporate-, enterprise-, and even government-friendly remittance and cryptocurrency networks.

Integrating and connecting with banks is an important part of Ripple's growth strategy around the world

Indeed, Jack Choros, chief marketing officer at CryptoRadar, told Finance Magnates that although "facilitation of large bank transfers between central banks" is currently "the most important use case for Ripple."

Choros explained that Ripple has leveraged its relationships with banks, "making it way cheaper for them to transfer money."

Jack Choros, chief marketing officer at CryptoRadar.

"[Ripple] brokered long-term transfer agreements with banks all over the world that need liquidity and need to move money fast," Choros said. Therefore, "there's a big opportunity for Ripple as a private business to take a nice cut of such large multimillion-dollar transfers."

And Ripple does seem to be making an impact on the worldwide banking industry--earlier this month, Bank Asia, a Bangladesh-based bank that holds $3.4 billion in assets, joined Ripple's blockchain-based financial services network, RippleNet.

Additionally, a recent report by the World Economic Forum named Ripple specifically alongside JPMorgan Chase's "JPM Coin" as an example of a "crypto-asset designed for inter- or intrabank Payments and settlements" that was "most relevant for wholesale central bank digital currencies (CBDCs)."

A number of Twitter users have also pointed out that a network like XRP's may have a greater array of use cases within banking than a network like JPMCoin's because of its capabilities to facilitate interbank transfers as well as intrabank transfers.

Ripple was also named alongside Ethereum by the Central Bank of France as a possible alternative blockchain for certain parts of a CBDC: "Attributes of a unit of the CBDC may be integrated in a crypto asset circulating on another blockchain, which is possible on Ethereum & Ripple. It would then be possible to use the unit on this blockchain," the report said.

"The [same] reason why crypto purists despise Ripple as a project is the same reason central banks love it."

In some cases, Ripple's networks have already been adopted for usage by banks: on the Ripple website, it reads that "RippleNet makes it easy to connect and transact across a robust network of 200+ financial institutions," including a number of banks.

This has caused some controversy in the cryptocurrency community: "the [same] reason why crypto purists despise Ripple as a project is the same reason central banks love it," Jack Choros commented.

Indeed, the company has been criticized by the crypto community for being too centralized--most recently, a proposed "Deletable Accounts" feature, which would "[allow] XRPL accounts to be removed from the ledger and recover most of the reserve locked in the accounts for spam prevention," caught flack from crypto insiders: Bitcoinist reporter Christina Comben called the proposed feature "disturbingly centralized at best, horribly over-controlling at worst."

However, the fact that Ripple may not be as decentralized as, say, the Bitcoin network, the company doesn't necessarily intend it to be so: "Ripple is a privately owned company that runs a semi-public blockchain," Jack Choros explained.

Therefore, "the goal is not to disrupt the banking system," like Bitcoin is arguably designed to do, "but rather to make the banking system more competitive and price friendly. Ripple wants to use decentralized technology to benefit centralized private companies and banks."

Forming relationships with regulators has been an important part of Ripple's growth strategy

And indeed, Ripple's perhaps "semi-centralized" nature as a whole may have also provided the company with some leverage when it comes to forming positive relationships with regulators.

Brad Garlinghouse insists that Ripple's emphasis on compliance has been a key part of Ripple's growth: in a recent interview with CNN, Garlinghouse said that "once regulators understand you're not circumventing regulatory frameworks, they get very comfortable very quickly."

"A lot of what I am doing [...] is meeting with regulators, meeting with very senior people at banks and explaining to them how crypto can be used--specifically XRP--can be used to solve a real problem, not to circumvent regulation," he said.

"[...]Once people understand that, they very quickly become disarmed--[‘crypto'] is no longer a bad word."

Criticisms of over-centralization

However, there is still some uneasiness about the amount of control that Ripple, as a company, has over the XRP supply. Finland-based cryptocurrency exchange Coinmotion said in a blog post earlier this month after making the decision to delist XRP that "What differentiates XRP from cryptocurrencies is that it is not based on blockchain, it is not mined and it is heavily centralized."

In addition to Ripple Labs' XRP holdings, it is also estimated that Ripple co-founder Jed McCaleb holds massive amounts of the cryptocurrency: a recent analysis by blockchain monitor Whale Alert suggests that Ripple co-founder Jed McCaleb sold off more than one billion XRP between 2014 and 2019.

Indeed, blockchain monitor Whale Alert estimated on February 6th that McCaleb still holds another 4.7 billion XRP, or 5% of the total supply of XRP--a sum that is currently worth more than one billion U.S. dollars.

However, it is important to note that XRP is not used on all of Ripple's payment networks, meaning that the price of XRP does not necessarily have an effect on each of the payment networks. Even RippleNet, which uses XRP to send real-time payments, transfers assets in-and-out of XRP almost instantaneously, meaning that fluctuations in the price of XRP do not have a major effect on the value of payments sent through the network.

Expanding into "unbanked" markets

Despite the criticim, however, Ripple is still growing.

Indeed, the company and Garlinghouse also seem to be utlizing this hands-on, compliance-focused approach to reach into some of the more remote corners of the world--" unbanked" regions that lack financial infrastructure: a statement on the company's website says that "with RippleNet, banks can expand payment offerings into new markets that are otherwise difficult or expensive to reach."

In particular, Ripple seems to have its eye on the APAC region: in a blog post entitled "How to Tap Rapid Growth in Asia-Pacific Remittances," Pegah Soltani, who works in Product Marketing at Ripple, wrote that "it's important to have global reach with locally relevant service offerings."

The post ends with a call-to-action for payments companies to contact Ripple in order to use "RippleNet's On-Demand Liquidity (ODL) as an alternative to traditional pre-funding" as a possible liquidity solution and ODL uses the digital asset XRP as a real-time liquidity bridge between the sending and receiving currencies."

A number of payments providers and banks have already begun partnering with Ripple throughout the APAC region, including SBI Remit in Thailand, the Siam Commercial Bank, as well as MoneyGram and SendFriend in the Philippines.

What is your opinion on Ripple's growth strategy? Do you think that centralization is a benefit or a detriment to Ripple and its products? Share your thoughts in the comments below.

Finance Magnates reached out to Ripple for commentary but did not hear back before press time.

Last month, Brad Garlinghouse, chief executive of Ripple, made a bold statement about his hopes for his company.

"I hope that in five years we're not just Amazon books, we're Amazon," he said in an interview with CNN.

With a $1.07 trillion market cap, Amazon is tough to match--as a company, Ripple was valued at $10 billion after raising $200 million in a Series C funding round in December, and at press time, XRP's market cap was hovering around $10.3 billion, holding a place as the world's third-largest cryptocurrency by market cap. (XRP is the native token of the Ripple ecosystem.)

On the other hand, however, Ripple has progressed quite a bit over the course of the last two years--recently, the company was given the second place on Forbes's list of the most valuable companies in fintech. Stripe (valued at $35 billion) was at the top of the list; Coinbase (valued at $8.1 billion) was in third place.

A "corporate coin"?

And the company is seeking to grow--Garlinghouse also spoke of the possibility of a Ripple IPO in 2020, though he has made it clear that any talk of a public offering is purely theoretical at this point: "in the next 12 months, you'll see IPOs in the crypto/Blockchain space," he commented at the 2020 World Economic Forum in Davos.

"We're not going to be the first and we're not going to be the last, but I expect us to be on the leading side," he added. "It's a natural evolution for our company."

While some analysts have theorized that a Ripple IPO could damage the price of XRP, the fact that Ripple may be considering such a move could be counted as evidence that the company is considering a step further into the public financial sphere, thereby further positioning itself as a sort of "corporate coin" with corporate-, enterprise-, and even government-friendly remittance and cryptocurrency networks.

Integrating and connecting with banks is an important part of Ripple's growth strategy around the world

Indeed, Jack Choros, chief marketing officer at CryptoRadar, told Finance Magnates that although "facilitation of large bank transfers between central banks" is currently "the most important use case for Ripple."

Choros explained that Ripple has leveraged its relationships with banks, "making it way cheaper for them to transfer money."

Jack Choros, chief marketing officer at CryptoRadar.

"[Ripple] brokered long-term transfer agreements with banks all over the world that need liquidity and need to move money fast," Choros said. Therefore, "there's a big opportunity for Ripple as a private business to take a nice cut of such large multimillion-dollar transfers."

And Ripple does seem to be making an impact on the worldwide banking industry--earlier this month, Bank Asia, a Bangladesh-based bank that holds $3.4 billion in assets, joined Ripple's blockchain-based financial services network, RippleNet.

Additionally, a recent report by the World Economic Forum named Ripple specifically alongside JPMorgan Chase's "JPM Coin" as an example of a "crypto-asset designed for inter- or intrabank Payments and settlements" that was "most relevant for wholesale central bank digital currencies (CBDCs)."

A number of Twitter users have also pointed out that a network like XRP's may have a greater array of use cases within banking than a network like JPMCoin's because of its capabilities to facilitate interbank transfers as well as intrabank transfers.

Ripple was also named alongside Ethereum by the Central Bank of France as a possible alternative blockchain for certain parts of a CBDC: "Attributes of a unit of the CBDC may be integrated in a crypto asset circulating on another blockchain, which is possible on Ethereum & Ripple. It would then be possible to use the unit on this blockchain," the report said.

"The [same] reason why crypto purists despise Ripple as a project is the same reason central banks love it."

In some cases, Ripple's networks have already been adopted for usage by banks: on the Ripple website, it reads that "RippleNet makes it easy to connect and transact across a robust network of 200+ financial institutions," including a number of banks.

This has caused some controversy in the cryptocurrency community: "the [same] reason why crypto purists despise Ripple as a project is the same reason central banks love it," Jack Choros commented.

Indeed, the company has been criticized by the crypto community for being too centralized--most recently, a proposed "Deletable Accounts" feature, which would "[allow] XRPL accounts to be removed from the ledger and recover most of the reserve locked in the accounts for spam prevention," caught flack from crypto insiders: Bitcoinist reporter Christina Comben called the proposed feature "disturbingly centralized at best, horribly over-controlling at worst."

However, the fact that Ripple may not be as decentralized as, say, the Bitcoin network, the company doesn't necessarily intend it to be so: "Ripple is a privately owned company that runs a semi-public blockchain," Jack Choros explained.

Therefore, "the goal is not to disrupt the banking system," like Bitcoin is arguably designed to do, "but rather to make the banking system more competitive and price friendly. Ripple wants to use decentralized technology to benefit centralized private companies and banks."

Forming relationships with regulators has been an important part of Ripple's growth strategy

And indeed, Ripple's perhaps "semi-centralized" nature as a whole may have also provided the company with some leverage when it comes to forming positive relationships with regulators.

Brad Garlinghouse insists that Ripple's emphasis on compliance has been a key part of Ripple's growth: in a recent interview with CNN, Garlinghouse said that "once regulators understand you're not circumventing regulatory frameworks, they get very comfortable very quickly."

"A lot of what I am doing [...] is meeting with regulators, meeting with very senior people at banks and explaining to them how crypto can be used--specifically XRP--can be used to solve a real problem, not to circumvent regulation," he said.

"[...]Once people understand that, they very quickly become disarmed--[‘crypto'] is no longer a bad word."

Criticisms of over-centralization

However, there is still some uneasiness about the amount of control that Ripple, as a company, has over the XRP supply. Finland-based cryptocurrency exchange Coinmotion said in a blog post earlier this month after making the decision to delist XRP that "What differentiates XRP from cryptocurrencies is that it is not based on blockchain, it is not mined and it is heavily centralized."

In addition to Ripple Labs' XRP holdings, it is also estimated that Ripple co-founder Jed McCaleb holds massive amounts of the cryptocurrency: a recent analysis by blockchain monitor Whale Alert suggests that Ripple co-founder Jed McCaleb sold off more than one billion XRP between 2014 and 2019.

Indeed, blockchain monitor Whale Alert estimated on February 6th that McCaleb still holds another 4.7 billion XRP, or 5% of the total supply of XRP--a sum that is currently worth more than one billion U.S. dollars.

However, it is important to note that XRP is not used on all of Ripple's payment networks, meaning that the price of XRP does not necessarily have an effect on each of the payment networks. Even RippleNet, which uses XRP to send real-time payments, transfers assets in-and-out of XRP almost instantaneously, meaning that fluctuations in the price of XRP do not have a major effect on the value of payments sent through the network.

Expanding into "unbanked" markets

Despite the criticim, however, Ripple is still growing.

Indeed, the company and Garlinghouse also seem to be utlizing this hands-on, compliance-focused approach to reach into some of the more remote corners of the world--" unbanked" regions that lack financial infrastructure: a statement on the company's website says that "with RippleNet, banks can expand payment offerings into new markets that are otherwise difficult or expensive to reach."

In particular, Ripple seems to have its eye on the APAC region: in a blog post entitled "How to Tap Rapid Growth in Asia-Pacific Remittances," Pegah Soltani, who works in Product Marketing at Ripple, wrote that "it's important to have global reach with locally relevant service offerings."

The post ends with a call-to-action for payments companies to contact Ripple in order to use "RippleNet's On-Demand Liquidity (ODL) as an alternative to traditional pre-funding" as a possible liquidity solution and ODL uses the digital asset XRP as a real-time liquidity bridge between the sending and receiving currencies."

A number of payments providers and banks have already begun partnering with Ripple throughout the APAC region, including SBI Remit in Thailand, the Siam Commercial Bank, as well as MoneyGram and SendFriend in the Philippines.

What is your opinion on Ripple's growth strategy? Do you think that centralization is a benefit or a detriment to Ripple and its products? Share your thoughts in the comments below.

Finance Magnates reached out to Ripple for commentary but did not hear back before press time.

About the Author: Rachel McIntosh
Rachel McIntosh
  • 1509 Articles
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About the Author: Rachel McIntosh
Rachel is a self-taught crypto geek and a passionate writer. She believes in the power that the written word has to educate, connect and empower individuals to make positive and powerful financial choices. She is the Podcast Host and a Cryptocurrency Editor at Finance Magnates.
  • 1509 Articles
  • 58 Followers

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