The following article is the continuation of our guest author’s scientific treatise and takes a close look at the Ripple ecosystem.
The biggest difference between Ripple and the other crypto currencies such as Bitcoin and Ethereum is that Ripple is issued by a single company – Ripple Labs. All ripples have already been produced – 100 billion of them. Ripple Labs owns 61.3 billion ripples. In early 2018, when Ripple recorded its highest ever price of 2.39 US dollars, Forbes drew the following picture:
Amazing development of the crypto trader
The founder and former crypto trader of Ripple Labs, Chris Larsen, owns 5.19 billion ripples and 17 percent of the shares in Ripple Labs. Together, this amounts to approximately $37.3 billion. Brad Garlinghouse, the current CEO of Ripple Labs and crypto trader, holds 6.3 percent of the shares in Ripple Labs and also owns Ripple. His assets are estimated at $9.5 billion.
Co-founder Jed McCaleb, who left the company in 2013, has 2 billion ripples. Another 5.3 billion ripples will be paid to him on a monthly basis. Of the 61.3 billion ripples owned by Ripple Labs, 55 billion ripples were transferred to a trust fund.
In mid-2017, Ripple Labs decided to transfer the 55 billion ripples to an electronic trust fund, which was implemented electronically by means of a so-called Smart Contract, in order to counter the growing concerns about the crypto currency Ripple. This fund releases 1 billion ripples a month to Ripple Labs for the next 4.5 years. Ripple Labs thus wanted to prevent Ripple from flooding the market, which would cause the price per Ripple to drop to a bottomless pit. Ripple Labs pays its employees with the ripples that become free. What remains is returned to the fund and distributed monthly.
The Ripple Blockchain is not limited to Ripple, but can also transfer other currencies (or other things such as airline miles).
Transaction fees are always paid in Ripple. According to Ripple Labs, the transaction fees are automatically adjusted to the network load. This is to prevent individual players from sabotaging the network. Each transaction must specify how many ripples are connected to it. These ripples are then destroyed upon completion of the transaction. The transaction cost in January 2018 will be 0.00001 XRP.
At Ripple, the transfer of funds is handled by so-called gateways. Gateways are companies or individuals who maintain Ripple’s block chain in a similar way to the miners at Bitcoin or Ethereum. So if, as shown in Figure 1, people want to exchange money in the form of Ripple or other currencies, they must first register with a gateway. This registration must not be anonymous, but requires compliance with banking regulations regarding identities. Therefore, money laundering with Ripple is not possible.
Figure 1: Gateways at Ripple identify their customers according to bank standards (i.e. not anonymously), transfer crypto currencies and other money, and maintain the block chain that Ripple calls RippleNet.
People can buy Ripple by exchanging it for real currencies. This affects the Ripple’s exchange rate. The more people buy Ripple, the higher the price. And the more gateways exist or the more stock exchanges use the Ripple Blockchain (alias RippleNet), the more stable and safe this technology becomes. So the theory.
In an interview with Bloomberg, Joseph Lubin, founder of a company focused on Ethereum, said he was amazed by the development of the Ripple (or XRP token). According to Lubin, Ripple is a useless digital currency. The only benefit is that Ripple Labs can use it to collect a lot of money to finance its projects. Since September 2016, Ripple Labs has sold about $185 million worth of Ripple Labs.