![](https://hackernoon.com/hn-images/1*W6cRtUSbllcIEMmWUMmv9A.png)

In the world of crypto-investing, news and misinformation run rampant. And revealing the truth is important for everyone looking to be a part of the next big innovation.

### **Ripple is dominating**

You’ve heard the news. Ripple has the 2nd highest market cap out of all cryptocurrencies — a whopping $128 billion USD. A valuation higher than Uber, Airbnb, and Slack combined with $20 billion left over in pocket change. Ripple was the best performing cryptocurrency of 2017, with a staggering [36,000%](https://coinmarketcap.com/currencies/ripple/) increase from the beginning of the year!

![](https://hackernoon.com/hn-images/1*YnjhreLOIv3nVck85QABjQ.png)

Coinmarketcap.com Jan-Dec 2017

Things have certainly been going well for Ripple. And to some it’s no surprise. They’ve been killing it for years. From 2012–2016, Ripple raised [$93.6 million](https://www.crunchbase.com/organization/ripple-labs) from [Andreessen Horowitz](https://a16z.com/), [GV](https://www.gv.com/) (Google Ventures), and many more of the top VC firms in Silicon Valley. These are the kinds of the firms that routinely invest in startups like Facebook, Slack, and Uber when they’re starting up. Them backing Ripple means they believe in the mission and they believe in the team.

![](https://hackernoon.com/hn-images/1*rmiZbn8hYiiMQs2HoodG6Q.png)

Major banks using the Ripple platform

And Ripple is everywhere online. Successful pilot programs, working with [100+ financial institutions](https://ripple.com/insights/ripplenet-grows-to-over-100-financial-institutions/), and even the [Japanese government](https://ripple.com/insights/top-korean-banks-work-japan-bank-consortium-modernize-cross-border-payments/) seems to be behind them.

Everything is perfect.

A textbook case of a company with innovative technology that’s taking the market by storm.

And this would be true, if it wasn’t for some of the finer details that have **HUGE** **IMPLICATIONS**.

### **1\. XRP is not Ripple**

When people hear Ripple they instantly think of their coin XRP. This makes sense since other communities and coins are one and the same. When you buy ETH you are betting on Ethereum and when you buy BTC you’re betting on Bitcoin. Why would Ripple be any different?

Well, this is where things become interesting. To understand the differences between XRP and Ripple, first we need to examine Ripple the company.

Ripple was founded in 2012 as Opencoin, renamed to Ripple in 2015, and is currently based in San Francisco, California. They have more than 150 employees, a nice office, and they sell banking software that uses blockchain.

![](https://hackernoon.com/hn-images/1*iaWI_Abi-4MddYVrQ_kQNw.jpeg)

Ripple headquarters in California

What does Ripple do? They have [3 products](https://ripple.com/solutions/) — xCurrent, xRapid, and xVia.

**xCurrent** is their flagship product. It gives banks the ability to efficiently move money across borders. It uses RippleNet, the Ripple blockchain, but does **NOT** use XRP. Banks like this software because it allows them to save money and time when sending payments, without introducing much risk or changes to their workflow.

**xRapid** helps banks improve liquidity when trading in emerging markets. **It is the only Ripple product that does use XRP.** Banks like it because it helps them free up mountains of money they’re stuck sitting on, but dislike it because it introduces unknowns — such as the volatility of XRP.

**xVia** is still in development and scheduled to come out in early 2018. It’s similar to xCurrent, but allows entities besides banks (such as corporations and payment providers) to send money through banks. xVia also does **NOT** use XRP.

Remember that impressive 100+ list of financial institutions Ripple is working with? Guess what, they are all using xCurrent. And **xCurrent does not use XRP**. Of the 100+ partnerships Ripple has, **ONLY ONE** actually uses XRP the cryptocurrency. There is just one small “non bank financial institution” from Mexico called Cuallix that [is using xRapid](https://www.cnbc.com/2017/10/10/ripple-has-over-100-clients-as-mainstream-finance-warms-to-blockchain.html).

This means that the headlines showcasing Ripple’s partnerships with more and more banks are good — Ripple the company is succeeding — but also don’t mean much for XRP gaining adoption.

Now this isn’t to say that banks will never adopt xRapid (and start using XRP). In fact, this has been a part of the Ripple business plan from the very beginning. Get banks using xCurrent and then cross-sell them into xRapid. Banks may come to love xRapid.

![](https://hackernoon.com/hn-images/1*1yrgQQ27O9bQuBa6scZXjA.png)

Or they might not.

For Ripple this difference doesn’t matter much. For investors in XRP, this is the difference that **makes or breaks their investment**.

### **2\. XRP is not the currency of the future**

![](https://hackernoon.com/hn-images/1*TyDG1TKhg5YPXfAvK_OOVw.png)

When people hear Bitcoin, they think digital money. As in, you can send money to anyone in the world without limitations.

XRP might become this in the future, but right now XRP is stuck in banking. And Ripple has made no mention of changing this anytime soon.

This is completely fine and makes perfect sense for Ripple as a company to choose. By focusing on just banks and financial institutions, they can provide value and create a profitable venture.

The problem for XRP investors is that XRP can become overbought by people that think it will beat Bitcoin, replace fiat, and become the world currency. This means the market cap can be artificially higher and undergo a correction when this becomes common knowledge.

Given that Ripple is going after global bank payments, their real goal is to replace SWIFT, the 45 year old society responsible for moving money between banks internationally.

In 2016, SWIFT earned $31 million in profit, sending a [huge amount of money through their system](https://www.fincen.gov/sites/default/files/shared/Appendix_D.pdf). Yet this was small compared to the over [\>$1,000,000,000,000](https://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18) in monetary assets around the globe.

Being limited to the SWIFT market reduces the opportunity of XRP by many orders of magnitude below that of a true digital world currency.

### **3\. XRP is not disruptive technology**

Ripple isn’t the only company interested in revolutionizing banking.

[**R3**](https://www.r3.com/) is doing the exact same thing as Ripple. They’ve raised $107 million from top venture capitalists and are using blockchain to help banks move money internationally. They’re currently in [70 of the world’s largest banks](https://uk.reuters.com/article/us-banks-blockchain-r3-exclusive/exclusive-blockchain-platform-developed-by-banks-to-be-open-source-idUKKCN12K17E) and the reason you might not have heard of them is simply because they have been doing this WITHOUT their own coin.

**SWIFT** is working with more than 11,000 institutions and employs over 2600 people. To capture this market, Ripple will have to 100x. The challenge here is that **there is no reason SWIFT couldn’t develop their own blockchain technology and use their already established relationships to roll it out faster than Ripple can grow.**

![](https://hackernoon.com/hn-images/1*dPyUAGHL9jZamPiXxe2ktg.png)

SWIFT Headquarters in La Hulpe, Belgium

Will SWIFT develop their own blockchain? Harry Newman, SWIFT’s global head of banking seems unphased. He looks at blockchain as simply a new technology which can be integrated into their existing systems if the benefits outweigh the cons.

> _“If it makes sense to build it into our global payments innovation offering over the next few years then we will. That is why I don’t see this as a disruption. I see these as constructive technologies that can be examined and adopted and used.”_

And their actions align with their words. They have completed a [proof-of-concept with 22 banks](https://www.swift.com/news-events/press-releases/22-additional-global-banks-join-the-swift-gpi-blockchain-proof-of-concept) using the Hyperledger Fabric blockchain to help them free up capital stored in their nostro accounts. They have also [tested smart contracts](https://www.coindesk.com/swift-completes-blockchain-smart-contracts-trial/).

Maybe we should all jump on SWIFT’s coin if they come out with one?

**Stellar Lumens (XLM)** was created by the founder of Ripple, Jed McCaleb, in 2014 to solve the problems he saw with Ripple.

![](https://hackernoon.com/hn-images/1*CUTqOTOZaQXLddluqlA8CA.png)

Stellar has since grown to number 8 in total market cap and is boasting deals with [IBM](http://fortune.com/2017/10/16/ibm-blockchain-stellar/) and payment providers in [Australia](http://www.novatti.com/), [Indonesia](https://pundix.com/), [Malaysia](https://moneymatch.co/), and [Korea](https://www.neoframe.com/).

By expanding their focus outside of banks, Stellar has the potential to be much larger than Ripple. And the Stellar protocol supports smart contracts, a key component of the popular Ethereum network. A recent win for them on this front was Kik, the $1B messaging app, [committing to moving their KIN tokens from Ethereum to Stellar in 2018](https://www.coindesk.com/goodbye-ethereum-kik-plans-move-ico-tokens-stellar/).

### **4\. XRP is not decentralized**

Ripple controls RippleNet and they own a whopping 62% of the total XRP coins in existence. This has understandably worried XRP investors and Ripple’s response was to lock up 55 billion coins in escrow.

As with any centralized system, investors now have to trust Ripple to keep their word.

And they most likely will. Given their strategy is to [release 1 billion each month for the next 55 months](https://ripple.com/insights/ripple-escrows-55-billion-xrp-for-supply-predictability/), they stand to gain a lot of money by selling these 55 billion XRP tokens at the current market price.

But the risks of being centralized extend beyond simply whether or not you trust Ripple to keep your best interests in mind and play fairly.

![](https://hackernoon.com/hn-images/1*Gq_qY5DMFf0BNS_cbgf5Gw.png)

**The issue is also resilience.** The reason digital currency have failed in the past is because a centralized digital currency is **too easy to kill with regulation**. Bitcoin’s decentralization is one of the reasons it’s survived when digital coins of the 2000s (like E-gold, Liberty Reserve and Tencent) failed.

Ripple faces the **same weaknesses of these early digital currencies**. It is one entity to attack legally when things inevitably go wrong.

### **5\. XRP adoption ≠ price increase**

Assume everything goes according to plan. Ripple works with 100x more banks. The banks love using blockchain and xCurrent, then decide to take a chance on XRP through xRapid. They love xRapid and feel confident enough in it to process all of their transactions through it — even ones in the millions of dollars. SWIFT drops the ball hard and completely fails to innovate, losing all of their customers and shutting down.

You’re happy. There are more than $5 trillion dollars being transacted daily in XRP. The price of XRP should be to the moon. Right? Well, not necessarily.

![](https://hackernoon.com/hn-images/1*nXZ51hFHZabQ5FFwsx4kIw.jpeg)

The value of XRP is driven upwards by people holding the asset and believing it will be worth more in the future. Banks looking to move money across borders are not speculating. In fact, they have a **disincentive to hold XRP,** since they take on risk due to natural XRP volatility.

This means banks will hold XRP for the absolute minimum amount of time they can. And given the speed of the Ripple network; that time is [4 seconds](https://ripple.com/xrp/). With banks — the actual users of XRP — not holding onto their coins, XRP’s market cap will decrease and **EVEN AT SWIFT LEVELS** will only result in approximately $230 **million**.

This is worlds apart from the current speculative value of $128 **billion**.

### **Conclusion**

Ripple is good, but XRP’s success for investors is an uphill battle.

First Ripple the company needs to do well. Since XRP is centralized, if Ripple dies so too does XRP.

Next Ripple needs to sign up 100x as many banks and financial institutions on xCurrent to become as big as SWIFT at sending payments internationally. Then the banks need to start using xRapid and settling transactions with XRP.

In this process, SWIFT, a 45 year old group that has been evolving with technology over that time, needs to fail to offer a competitive product to Ripple and lose their entire market share. Also R3 and other startups breaking into this space have to fail too.

And only at this time will all 100 billion XRP coins be worth approximately $231 million, or $0.0023 per coin.

This being said, Ripple is still an amazing company. Even if they fail to capture the entire SWIFT market, they could still offer a valuable suite of products to banks. They could still generate significant revenue and command a high price per share.

This just might not be the outcome **XRP** investors are hoping for.

![](https://hackernoon.com/hn-images/1*ZCKLXQxxfEiZbcVcEZGaww.png)

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