Ripple is a global system for inter-currency payments, created in 2012 by Ripple Labs. The main advantage of the network is that it allows mutual transfers to anywhere in the world in just a few seconds.

This makes Ripple a very attractive choice for banks that rely on a real-time payment system. At the end of 2017, it was announced that the American financial giant American Express and the Spanish-British group Santander would switch to the Ripple Protocol for transatlantic transfers. Also, this Protocol is used by more than 75 payment systems and 90 banks around the world, including UniCredit and Standard Chartered.

Exchange scheme

The currency exchange scheme in the system is simple. For example, a person needs to convert American euros (EUR) to Brazilian reals (BRL). First, he transfers his euros to the internal currency of the Ripple — XRP system, then the transfer is made to the wallet with Reales owned by the Bank. At the end of the operation, the person receives the Brazilian currency. Thanks to xRapid technology, this exchange takes place in just several seconds. This is one of the main advantages of XRP. In addition, all transfers in the system are revocable, that is, they can be canceled and returned.

The high speed of transfers in Ripple is due to the fact that the network is supported by 14 servers around the world, as opposed to the same Bitcoin that depends on miners who help to overcome a large load. That is why this system is so attractive for banks.

Nowadays, more and more banks are switching to Ripple. This excitement has allowed XRP to make a huge jump in value. Now, this currency by market capitalization ranked third ($20.2 billion) after Bitcoin ($of 119.9 billion) and Ethereum ($of 39.06 billion). The cost XRP is $0,517754 despite the fact that the rate of the currency depends not only on bondholders but also from the conventional transfers.  After all, as described above, each exchange involves XRP, and its liquidity thereby increases.

But, contrary to the expectations of many, banks in the near future are not going to completely switch to XRP, using this currency not only for exchange but also for transfers. This is due to the fact that corporations need stability, to which any cryptocurrency is still very far away. Naturally, no one will take the risk of a price collapse at any time, so companies will treat XRP with caution for a long time.

In addition, Ripple Labs has recently started suing R3 for outstanding contractual obligations. This position of the company is not attractive to large corporations and investors.

XRP is impossible to mine because 100 billion coins were issued in advance. And 61 billion of them belong to Ripple, and about 300 million XRP is spent to cover the costs per month.

In addition, 55 billion XRP of those owned by developers are blocked with the help of 55 smart contracts. This policy allows the company to make transfers as transparent as possible. In addition, Ripple Labs thus reduces its chances of bankruptcy even with a hypothetical ban and collapse of XRP.

The problem of centralization Ripple

Initially, Ripple Labs claimed XRP as a decentralized system. However, the large number of coins in the hands of the company gives reason to doubt the veracity of the developers’ words. Control of 61% of the total amount of currency by one company cannot be called decentralization.

Even if Ripple Labs doesn’t use that money and just hold it, that amount of XRP can easily affect the market. In case of a hacker attack on the system, there is a risk of a complete collapse of the entire currency. Moreover, the collapse of XRP can be followed by a chain reaction of the entire market to the collapse of the third currency by capitalization, which also will not lead to anything good.

In addition, the close relationship between Ripple and banks is also a concern. After all, the more companies use this Protocol, the higher the possibility of influencing the cryptocurrency.

Roughly speaking, there is a possibility that banks control the rate of XRP, because it is very profitable for them.

In addition, it is very easy for banks to influence the exchange rate. Large associations can influence XRP not only through the Pump&Dump scheme but also through currency depreciation through exchanges, sharply “pouring” large sums into it. Also, the seventh place in terms of trading volume in the third place in capitalization is a clear sign of currency control to a narrow circle of companies. All this completely negates the thesis of decentralization of XRP.

Why decentralization is so important

Decentralization is one of the main principles of all cryptocurrencies. That’s what they were created for in their time — not to depend on anything. The lack of control over specific people makes it possible for others to freely invest their funds in the cryptocurrency without fear for the safety of their own money. In addition, decentralization allows the user to remain anonymous, which is especially appreciated in today’s world.

Decentralization is a very powerful lever for promoting the economy. For example, in countries where the state strictly controls market relations, the quality of life of people is very low because of high prices, low wages and large taxes, which appear due to constant inspections and strict control of production. Such countries, for example, are some African States or North Korea.

Conversely, in countries where the economy is little affected by the state, the quality of life of the population is high, because ordinary people have the opportunity to conduct their own business and free transactions. In such countries, high wages, normal prices, and commensurate taxes. This trend is not accidental, because decentralization always moves the economy forward. This law also applies to cryptocurrencies, setting a mandatory condition for each currency — the presence of an uncontrolled system.

Conclusions and forecasts

Despite all the advantages of the Ripple network and its internal currency XRP, you can not trust a centralized system in the cryptocurrency market. When all coins and tokens want to achieve complete independence from the outside world in order to move the economy forward, the developers of Ripple Labs increase the number of factors affecting the XRP rate.

Banks and creators have too large a share in this currency, so we can safely say that XRP is a corporate centralized currency. Therefore, it can not be called a full cryptocurrency, because it does not meet one of the main requirements of the market.

In 2019, banks will continue to switch to the Ripple Protocol. Thanks to this, the XRP rate can grow several times by December. Although now the crypto market is experiencing a recession, XRP has a chance of stable growth due to the large trust of corporations in the Ripple system. But in the long term, we cannot talk about the progress of XRP.

Banks need the stability of the exchange rate, they do not need a sharp rise or decline in the currency. Companies will use their influence on the token and control its price as much as possible. Most likely, XRP will reach a psychological level and begin to balance on a specific cost, which will give banks the desired stability.