Ripple – we need to talk : Part 3

XRP – that will be the focus of today’s post.

In Part 1 I introduced Ripple and alluded to my problems with it.

In Part 2 I spoke about the characteristics of Ripple versus those of cryptocurrencies – to show that Ripple is not one.

From [Public domain], via Wikimedia Commons

I ended Part 2 by saying that XRP is performing very well versus the other cryptocurrencies (while not truly being one itself), meaning that it is popular and has many investors who hold it. It certainly has its fanatical XRPArmy!

But, the question remains, what’s in it for them? Is it a good coin to hold?


XRP is clearly designed for banks to use.

That’s banks, not crypto supporters, not youbanks!

As an XRP investor you MUST ask yourself: “Why am I holding an intermediary, liquidity-providing financial tool for cross-border payments between financial organisations?

Yeah I know it’s a mouthful, but you’re the one who chose to hold it – not me!

If you can’t answer that question, then why do you have it?

If you can answer that question, then you must ensure that your expectations of what XRP will do are in line with a realistic future scenario.

If you’re not an XRP investor, then you can just smile and watch from the sidelines – or perhaps you want to enter for a long-term swing trade…

*Red flag: Nowhere have I seen any token economics model for Ripple that describes how the token derives its value, let alone increases its value over time!

Bitcoin pays block rewards to miners – rewards which decrease over time – making it a deflationary currency with a very limited supply (21 million coins).

Binance coin (for example) holds regular coin burns to decrease supply, allows users to save on transaction fees by using it, and will probably gain extra functionality as an integral part of the upcoming Binance DEX.

CargoX has a complex but solid token economics model to increase its value over time. Observing market behaviour, the CargoX team have already changed the token economics model to benefit the token holders more! Read more about it here: Crypto Token Economics Q&A – CargoX . This is a quote from that post:

“One should always take great care when selecting a coin, to ensure that the token will grow in value.”

Ripple is pre-mined. It pays no dividends. There are no token burns. It is a pure utility coin – does it have a way to gain value?

I’m guessing that XRP investors reason something like this: Ripple is popular -> if I hold XRP it will grow in value due to popularity… … which is okay, but what happens after that? Where do they exit? What happens when everyone who wants XRP is now sitting with XRP, but the token value is no longer increasing because the tokens don’t have an inherent way to increase in value?

If you think that the above scenario won’t happen, then think again. How many XRP token do you own? 10 000? 100 000?

A fairly well off crypto investor may own 100 000 – that’s about $30 000 at today’s prices. Having that much he probably won’t want to buy more – he would be better off avoiding excess risk by diversifying his investments – Investing Theory 101.

Sooner or later all the XRP holders will be in a similar scenario – they will reach their stagnation point.

The whole time that this is happening, XRP is being used by banks for cross-border payments at a rapid rate. But it’s being used internally. The banks aren’t going to Binance to top up their supply, they have enough already and they’re swapping it between each other. You’re not benefiting!

You hold fiat currency don’t you? When banks swap that across borders, as they do thousands of times a day, do you benefit from it?

No, you don’t. And for the same reason you won’t benefit by holding XRP.

The fact is that the banks have more than enough liquid USD to conduct their transactions without wanting to get their hands on your teeny tiny share of it. You don’t benefit. The system is designed for banks – not for you – just like Ripple!

“But Bit Brain, I have 100 000 XRP, that’s quite a bit, surely they will want some of that at some stage!”

Nope – not really.

You see: you may have 100 000 XRP (well done if you do, that’s several times the value of my current crypto portfolio!), but there are 100 billion XRP coins in existence. Put another way: there are 4761 times more XRP tokens available than what there are Bitcoins.

XRP was purposefully created with a very high supply, so that there would be enough of it for many banks to use. It doesn’t matter how much you hold, you’re not really affecting the supply.

It get’s worse:

Like Bitcoin, XRP is divisible. But Bitcoin is a store of value which increases in price over time due to scarcity; XRP isn’t scarce. Each XRP token is comprised of 1 000 000 “drops” (their term). This means that there are
100 000 000 000 x 1 000 000
base units of XRP in existence.

100 000 000 000 000 000 base units of XRP is more than enough for the banks to doing their business without requiring the portion of that held by XRP investors like you!

Allow me to qualify that statement:

There is about $10 trillion USD available in the world right now –
$10 000 000 000 000.

Each US dollar can be divided into 100 cents, but for accounting purposes it is actually divided into 1000 mills. This makes it possible not to have to “throw away” fractions of a cent when e.g. converting Japanese Yen to more expensive USD.

What this means is that there are roughly 10 000 000 000 000 x 1000 base units of USD in the world: a total of
10 000 000 000 000 000 units.

I apologise for the large numbers, I know that the human brain has difficulty visualising such things – so here is a smaller number that you can visualise:


Running the numbers we can see than there are 10 times more XRP base units available in the world then what there are USD base units! That’s incredible!

Granted: USD is not the only fiat currency, but it IS the means of exchange for most large international trades, meaning that it is unnecessary to total up all the other fiat currencies as well. Even if you did, I doubt that you’d exceed half the number of XRP base units in existence. There is just that much XRP out there, a staggering amount, literally almost too large to comprehend.

So the answer remains “No”, the banks do not need your XRP and they are not going to offer you a good deal to get it from you on your local crypto exchange!

Who has all this XRP?

It’s a good question. You see, if the XRP was already fairly equally distributed between various XRP investors like you and the XRPArmy, then the banks would need to buy it from you in order to transact with it.

But it isn’t.

This is Jed McCaleb:


Jed is a lucky guy. Apart from being a Mt. Gox and Stellar Lumens founder, Jed is also a Ripple founder.

I’m not going to go into the competition between Stellar and Ripple or do a comparison study now, that’s a story for some other time. Let’s just say that Jeb has strong interests in each and it is his own best interests to attempt to ensure that both do well – at least for now.

You see, Jeb and his two other Ripple co-founders got to split 20 billion XRP between the three of them. Exactly who got how much I do not know, but Jeb is said to have got at least 9 billion of that. That is a big number, that’s 9% of all Ripple in the hands of one man!

Another Ripple founder (Chris) gave 7 billion XRP to “The Ripple Foundation for Financial Innovation” a foundation dedicated to helping the unbanked people of the world. So when you visit and see how Ripple is helping the unbanked communities of the world – I strongly suspect (and I can’t prove this) – that that is thanks to Chris personally and not to the Ripple organisation caring about the common man. Interestingly, Jed also gave 2 billion of his XRP to charity. That 2 billion is also dealt out over time to avoid prices tanking.

The third Ripple founder (Arthur), along with Jed, had his XRP locked up in escrow to avoid him selling it all at once and tanking the price.

The problem is that Jed didn’t just sell off his XRP, he hoarded his XRP and only really started selling it off in bulk last August. How much XRP Jed gets daily and how much he can sell is a long-story on its own. In short, the original 2014 contract he had with Ripple resulted in a lawsuit and a new contract. He can now sell off as much as 0.75% of XRP’s daily volume. Every day.

At today’s volume and price that would be worth $3.33 million or 134.5 million XRP. And he can do that every day until he runs out. That’s not good for you and your 100 000 XRP.

But wait, it get’s worse for the XRP holders:

Why should Ripple care about price of XRP? Why did they need contracts with Jeb? What does it matter to them if the price drops?

Oh yeah – have you taken a look at the XRP circulation figures?


The circulating supply of Ripple is only just over 41 billion XRP. Even with the founders share accounted for, there is still a lot of XRP missing. Who holds it?

Ripple holds it.

That company run by ex-bankers for banks. They hold it in escrow, in addition to holding some circulating XRP. How much does XRP does the Ripple company own?

59 Billion XRP

That is one hell of a lot of XRP in anyone’s language!

No wonder they care about its value not being tanked by a founder! They know that Jeb could easily do that (and has done it to a degree in the past) because they know how little is really being circulated through the exchanges that you and I use. This in itself is a point of contention and a topic of debate, but is somewhat beyond the scope of this post. [Read more about it here: Shock Claim: Ripple (XRP) Market Cap Massively Lower Than Advertised – there is an interesting part in there about the relatively few active Ripple addresses when compared to its alleged market cap.]

When I talk about centralised control of a cryptocurrency, that’s the kind of centralisation I’m talking about. The “owns 59% of tokens” kind, to say nothing of the other points I raised in Part 2.

It gets worse (again).

Older figures indicate that the company once held an estimated 61.8 billion XRP. 55 billion of this was placed in escrow. Every month 1 billion XRP is unlocked for the company to use. If they don’t use it, it goes back into escrow, safe in the knowledge that the next 1 billion XRP is available within days.

Still sitting on so much XRP, you can see that both Ripple and its founders (and even a few lucky charities) could slowly flood the market with XRP any time they chose to sell significant amounts of it. This is a clear case of massive over-supply (10 times more base units than USD remember?) – a death sentence in token economics terms.

The Ripple company won’t dump all their XRP too fast because price will die instantly. But likewise – they are surely not going to go buy yours off you when they have 1 billion a month available for free. As they partner up with banks – attempting to make their xCurrent and newer xRapid products look like lucrative adoption opportunities, do you really think that they will be marketing to them with the line that banks can buy their XRP by trading with you and the XRP Army on HitBTC or Binance? Or do you instead suspect that there may a better over-the-counter option deal available to banks? I don’t know the official answer to that (I don’t work for Ripple – big surprise!), but I do know a thing or two about business. If I were the Ripple CEO marketing my products to banks, I know which option I would choose!


Bit Brainians: I maintain that XRP only gains value due to popularity – popularity caused by hype. Hype is transitory.

“The banks are going to use it” seems to be the common rationalisation for buying it – an argument which falls flat on its face because:

  1. Banks won’t buy it from you.
  2. There is so much XRP available that there will be an over-supply for many years to come.
  3. The token does not have an inherent means of increasing its value.

Here is what I think will happen with Ripple in the long-run:

  • XRP will continue to do well, increasing in value as investors continue to buy “the currency that banks will use”.
  • At some stage XRP will start to fall behind the other cryptos that do have inherent ways of increasing their own value (e.g. token burns) or of providing valuable utility to the common investor (e.g. untraceable transactions).
  • XRP will stagnate.
  • People will realise the banks are using Ripple, but that the banks are doing so without the need for the few tokens that the private investors hold!
  • There will be a large XRP price crash.
  • XRP holders who hold that crash will be wrecked.

By all means: hold XRP – I never said that you shouldn’t buy it.

I do think that price will still climb and I do think that it will take a long time for the herd to realise that XRP is a very poor long-term hold. This is where the long-term swing trade that I mentioned earlier comes in – just get out before the herd does finally wise up to their mother-of-all-shitcoins!

I won’t hold XRP. From a purely ethical standpoint it goes against everything I stand for and everything that I believe crypto stands for. I don’t want a fiat currency in crypto form – thank you very much – you can keep your wolf in sheep’s clothing.

It’s a coin for banks and bankers – the architects of oppression in capitalist societies. I want nothing to do with that!

As always, decide for yourself whether you want to hold it or not. Do your own research – but I warn you, the Ripple truth isn’t pretty. The Ripple truth is that Ripple is a banking business that looks like a cryptocurrency business on the surface, yet isn’t one. If you’re comfortable with that then buy it.

Just don’t try to call your XRP a “cryptocurrency” in front of me. That’s like calling Lucifer an angel – technically correct, but absolutely wrong in reality.

This brings me to the end of my series on Ripple. I hope you’ve enjoyed it. I hope you’ve learnt something. Above all: I hope that if you are a Ripple investor/potential investor, you are now seriously giving that investment some deep thought. It’s not too late to get out, not at all – Ripple still has a bright future, just get out before the XRPArmy realises that their precious company is playing them for fools.

*With reference to my red flag about Ripple token economics and having no plan to increase value: there IS actually a small statement by Ripple on how that can happen:

“XRP can be destroyed by transaction costs or lost by sending it to addresses for which no one holds a key, so XRP is slightly deflationary by nature. “


Since 99 991 708 587 of the original 100 000 000 000 XRP still exist – the less than 0.01% token destruction over a period of seven years is hardly enough to make you rich!

Binance have already destroyed more than 5% of their BNB tokens in less than 1.5 years – just by way of comparison.

And the Ripple team stall have the gall to speak about the deflationary nature of their currency; typical banker behaviour!

Yours in real crypto

Bit Brain

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“By this means (fractional reserve banking) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”

~ John Maynard Keynes

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