CoinMarketCap takes a look at XRP, where the coin came from, and what's new with Ripple.
In this piece, we will explore the history of XRP.
What Is XRP?
Therefore, unlike Bitcoin and its proof-of-work consensus protocol, the XRP Ledger utilizes a consensus mechanism based on the Federated Byzantine Agreement (FBA) model.
Since the XRP ledger does not require mining, its native token, XRP, was premined at a very early stage of its development. A total of 100 billion XRPs were premined and launched in 2013. Today, over 46 billion of the total XRP supply is in circulation. Note that in addition to XRP it is possible to transact with other currencies in the Ripple ecosystem.
The History of Ripple
Shortly after the handover, the team started building the first iteration of Ripple, called OpenCoin. Subsequently, the company’s name changed twice between 2012 and 2015. Notably, the project also underwent a series of cultural and systemic changes. The most significant was the switch to the Ripple Gateway system.
Recall that Ripple had initially opted for a peer-to-peer architecture. In the course of evolving their ideas, the team came to believe that reputable businesses, of a sufficient size, would be needed to ensure users’ trust. These businesses are what Ripple calls Ripple Gateways. This change in architecture marked a sharp shift towards a hybrid system that combines traditional banking structures with a peer-to-peer network.
This combination would later prove to be pivotal to the project’s popularity in the traditional financial sector, as established financial institutions viewed it as a less unfamiliar route into engaging with the crypto and blockchain industry.
Ripple, the for-profit company headed by Chris Larsen, soon began to secure high-profile partnerships and the number of financial institutions using RippleNet to facilitate cross-border payments began to steadily increase.
How To Invest In XRP
The best option is to by XRP from one of the many exchanges supporting Ripple’s native asset. Options include:
- And Many Others
These platforms all help users buy and sell XRP, either through cryptocurrency, stablecoin, or fiat currency pairings.
Even though some crypto exchanges let users buy bitcoin or ethereum with PayPal, the same does not apply to XRP. However, several brokers - including eToro - let users funds their account with PayPal and provide access to the XRP asset.
For those looking to invest in Ripple, buying the XRP asset - either through a crypto exchange or broker and their supported payment methods - is the best option. Moreover, these platforms also aid users exploring how to sell XRP, as they will support converting to and from the supported payment methods.
Controversies and Legal Crises
The first controversial incident associated with XRP was the development team’s decision to utilize a centralized business framework, which gives Ripple full control of XRP’s supply. The company therefore has the final say over the distribution and sale of the remaining supply of XRP. This, together with the underlying infrastructure of its payments ecosystem, are clear indicators that unlike Bitcoin, XRP is a centralized cryptocurrency.
This also fed into unease regarding the possibility that Ripple’s founders, Jed McCaleb and Chris Larsen, may have unduly capitalized on this centralized structure in allocating 20 billion XRP to the founding team.
Jed McCaleb left Ripple sometime between 2013 and 2014 to launch Stellar. As he himself owned 6.5 billion XRP, there were concerns that he might dump his holdings and start a chain reaction that could potentially crash the value of the digital asset. This prospect prompted Ripple and McCaleb to reach a formal agreement intended to settle the company’s concerns, which was later revised in 2016 following a lawsuit.
In essence, any of the Ripple Gateways or financial institutions serving as non-XRP currencies issuers on XRP Ledger can censor the balances of users, provided that such balances are not XRP-denominated. This implementation further reinforced the appreciable fact that the XRP ecosystem is somewhat susceptible to elements of centralization.
Ripple was then the subject of another lawsuit in 2017. Blockchain firm R3 accused Ripple of illegally terminating an agreement whereby R3 would purchase 5 billion XRP at an exchange rate of $0.0085 before September 2019. In response, Ripple filed a countersuit alleging that R3 had not kept up its side of the deal.
Ripple Lawsuit With The SEC
Per the SEC, XRP is “classifiable as a security because it financed Ripple’s platform.” All securities need to be registered with the commission, including publicizing specific financial information. Additionally, the “security label” applies after performing the Howey test.
However, Ripple is not intent on settling with the SEC, as the company feels the commission is biased in its approach. Additionally, Ripple claims the SEC seems fine with Ethereum and other crypto platforms, yet deliberately targets XRP. Moreover, Ripple’s initial funding came from venture capital, rather than the sale of XRP.
As the lawsuit continues, it becomes increasingly uncertain what the outcome will be.
From this history, it is clear that the company has weathered some controversies and legal battles until this point, while simultaneously continuing to add high level institutions to work with RippleNet. It’s therefore perhaps less surprising that both the value of XRP and the popularity of the payments network remain reasonably resilient, even in the face of Ripple’s current difficulties with the SEC.
As for the asset’s future, it remains to be seen whether the asset and its ecosystem can continue to withstand such hurdles — and which new partnerships RippleNet will secure.