Currently, Ripple's FDMC is $159 billion - a 60% drop from the all-time high of $331 billion the coin recorded on Jan 4 2018. However, regardless of what we think of Ripple's current valuation and scandalous "ripples" that muddy the company's aura every once in a while, XRP and its bustling ecosystem are, undoubtedly, a booming success
Ripple’s not-so-humble beginnings date back to the time no one has heard of Satoshi Nakamoto. Ryan Fugger founded RipplePay in 2004 with the core idea of a peer-to-peer trust network of financial relations that would replace banks so individuals could directly loan each other, and alterations to these loan balances enabled payments. Payments, then, are simply updates to these loan balances, provided the system can find a path of relationships from the payer to the recipient.
By early 2011, Bitcoin had begun gaining traction, capturing the attention of Ripple’s target demographic. To some extent, Bitcoin had succeeded where Ripple had failed, building a peer-to-peer payment network with what appeared to be a superior architecture to Ripple. In May 2011, Jed McCaleb, an early Bitcoin pioneer, joined Ripple, announced that they would address some of these concerns.
Jed McCaleb had founded Mt. Gox Bitcoin exchange in 2010 and sold it to Mark Karpeles in March 2011. According to an analysis of the failure of Mt. Gox by WizSec’s Kim Nilsson, the platform was already insolvent, to the tune of 80,000 BTC and $50,000, in March 2011 when McCaleb sold it. Shortly after this, Ryan Fugger handed the reins of the Ripple project to McCaleb.
In 2012, McCaleb hired Chris Larsen, who remains on the board today as the executive chairman and whom the current website describes as a co-founder of Ripple. This marked the start of the OpenCoin era, the first of three name changes between 2012 and 2015. Larsen is the former chairman and CEO of E-Loan, a company he co-founded in 1996, took public in 1999 at the height of the tech bubble, and then sold to Banco Popular in 2005. Larsen then founded Prosper Marketplace, a peer-to-peer lending platform, which he left to join Ripple in 2012.
Larsen is not new to volatile prices and price bubbles. E-Loan experienced a peak-to-trough fall of 99.1% between 1999 and 2001. E-Loan’s IPO share price stood at $14 on Jun 28 1999, before selling for $4.25 per share in 2005.
To address the success of Bitcoin, Ripple now planned to allow Bitcoin payments on its network, potentially as a base currency for settlement. This period also marked the launch of the Ripple Gateway structure. The community realised that the peer-to-peer structure did not seem to work, with ordinary users unwilling to trust counterparties sufficiently to make the network usable for payments. To address this, Ripple decided to form gateways, large businesses that many users would be able to trust. This was said to be a compromise, a hybrid system between traditional banking and a peer-to-peer network.
Ripple released its XRP coin in January 2013. Like Bitcoin, XRP is based on a public chain of cryptographic signatures and therefore did not require the initial web of trust or gateway design. XRP could be sent directly from user to user, without the gateways or counterparty risk, which was the method used for all currencies on Ripple, including USD. Ripple perhaps intended XRP to be used in conjunction with the web of trust structure for USD payments — for example, to pay transaction fees. The company set the supply of XRP at a high level of 100 billion, with some claiming this would help Ripple prevent sharp price appreciation. Critics argued that the XRP token might not have been a necessary component of the network.
In April 2013, OpenCoin received $1.5 million in funding from Google Ventures, Andreessen Horowitz, IDG Capital Partners, FF Angel, Lightspeed Venture Partners, the Bitcoin Opportunity Fund, and Vast Ventures. This was the first in many rounds of venture funding, and it included some of the most respected venture-capital companies in the world.
In September 2013, OpenCoin became Ripple Labs. In February 2014, Ripple implemented the “balance freeze” feature, activating in August 2014. This allowed Ripple gateways to freeze or even confiscate coins from any user of its gateway, even without a valid signature for the transaction. The motivation of this was said to be to enable gateways to comply with regulatory requirements, for example, a court order demanding the confiscation of funds. The default setting for a gateway was to have the freeze feature enabled, but it was possible for a gateway to disable this option by using a “NoFreeze” flag, such that tokens a gateway owed could not be frozen or confiscated using this feature. The largest gateway at the time, Bitstamp, did not opt out of the freeze feature.
In October 2015, the company simplified its name to Ripple. In September 2016, Ripple raised $55 million in funding in a round led by Japan’s leading online retail brokerage houses, SBI Holdings (8473 JP). SBI acquired a 10.5% stake in Ripple, widening its range of investments in crypto. SBI and Ripple have set up a joint venture, SBI Ripple Asia, which is 60% owned by SBI and 40% owned by Ripple. The company is hoping to provide a settlement platform using Ripple’s “distributed financial technology”.
In September 2017, R3, another blockchain company, sued Ripple. R3 argued that Ripple agreed in September 2016 to give it the option to buy 5 billion XRP at an exercise price of $0.0085 before September 2019. At the peak, the intrinsic value of this call option was worth around $16.5 billion. R3 alleges that in June 2017, Ripple terminated the contract, despite having no right to do so. Ripple then filed a counter case, alleging that R3 did not honour its side of the original 2016 agreement by failing to introduce Ripple to a large number of banking clients or to promote XRP for usage in these banking systems. On Sept 11, 2018, Ripple released a two-sentence statement saying there was a confidential settlement.
Counting out BS coins, Ripple (XRP) is now in 5th place in the ranking of capitalisation, which is a clear indicator of the project’s success. Large financial institutions actively use XRapid – a liquidity solution for banks that uses Ripple’s XRP as a bridge currency – to conduct cross-border operations capitalising on Ripple’s legendary speed of transactions and its low-commission structure with improved liquidity and reduced capital requirements. So if the past is any indication, the future of Ripple and its tight community is looking mighty bright.
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