XRP, Ripple’s token, has rallied massively this week, with the XRP price climbing over 60 percent in just one week. One of the main drivers behind these price jumps is the announcement that the XRP token will be deployed within a payment network for the first time. So far in commercial practice only the infrastructure of the company Ripple was used without XRP being used.
Originally, Ripple took over to attack the supremacy of the transaction processing standard SWIFT. After 45 years of a quasi-monopoly, there are good reasons to replace the outdated SWIFT settlement standard with a new, faster, cheaper and – ideally – even more decentralised system. But how decentralized is the bank coin at all? What role can the crypto currency XRP play here?
And what are the chances of seriously competing with Bitcoin profit?
The Ripple protocol is basically Bitcoin profit and can also be operated without the company Ripple. In practice, however, it is a fairly centralized service that is used by individual banks detached from the company’s own currency XRP. More than 120 banks use the Ripple infrastructure xCurrent to accelerate transactions – completely without XRP tokens.
Token Economy with xRapid?
In order to make up ground against the SWIFT settlement standard, xRapid, a payment infrastructure that this time also uses the XRP token, is to be launched in the coming weeks. The XRP token will be used as an “intermediate currency”, which will be significantly faster and cheaper than traditional bank transfers. Ten banks are currently testing the new Ripple processing standard. However, it is uncertain or difficult to assess at this point whether this standard will be able to assert itself in practice. This service is aimed primarily at financial institutions in emerging markets, which often have to contend with high liquidity costs. Finally, remittances in emerging markets often require prefinanced accounts in the targeted local currency. With xRapid, these liquidity costs could be reduced. In any case, the XRP price responded to the announcement on September 18th with a 17 percent jump and, as we can see from the current price trend, was able to continue the rally. With xRapid, XRP could for the first time fulfil a real function outside speculation.
The matter of Bitcoin profit
It is always a controversial topic how decentralized Ripple or XRP is. On the one hand, it is an open source protocol – anyone can set up a Bitcoin profit network completely detached from the company and act as a validator. However, the prerequisites for this are very high and involve a lot of inconvenience. Therefore, it is not surprising that the open source protocol is hardly used outside the Bitcoin profit. The current use case, the use of the Ripple infrastructure without XRP, is a highly centralized affair.
Another thorn in the side is the distorted separation of company and crypto currency. So Ripple never gets tired of emphasizing that the company basically has nothing to do with the crypto currency. A statement that is misleading, considering that Ripple keeps the XRP in escrow and uses it to finance the company. Also the infrastructure xRapid is clearly tailored to XRP. Accordingly, it doesn’t seem very authentic to pretend that Ripple and XRP are completely detached from each other.