FM Wealth Management News Letter
For the last few months we have had a barrage of comments and
questions regarding the Crypto Currency phenomenon. Since the beginning
of the year many have turned their attention to Ripple (XRP). We have
seen the articles by other analysts and we simply don’t agree.
Before we get started, we want to make sure that you completely understand that this Newsletter is not focusing Ripple the company. As a company Ripple has developed innovative solutions for the transfer of money and has signed deals with many major banks. We believe that RippleNet is likely become a replacement for the SWIFT payment system, which is over 40 years old, slow, and expensive in comparison.
In this Newsletter we will be talking about the Ripple token (XRP) which we will argue has practically no function at this moment, apart from letting speculators bet on Ripple’s success (which is making Ripple’s creators very rich).
In the Beginning
At its inception Ripple created 100 billion XRP tokens of which 20 percent were retained by the creators, and the rest was retained by Ripple labs to use (55 billionn tokens are held in escrow) and distribute to market makers in order to provide liquidity.
The mistake that investors are makind is that XRP is related to equity shares, but beware the tokens themselves do not give holders any rights to ownership. In addition to that, the Ripple Token is barely used in any of Ripple’s systems. So therefore there is a risk that XRP could be completely useless;
So we want you to consider that Ripple the company could actually continue successfully even if all the tokens were taken out of circulation and “destroyed”.
Realistically we don’t believe that’s not going to happen. The continued increase of XRP has made the creators very wealthy and we must admit that they have played their game beautifully. They are currently sitting on billions of dollars worth of a potentially useless token and at the same time earning from Ripple’s revenue streams (which is not reliant on XRP). The cherry on the cake of course is that they are not regulated by the SEC, and can be as opaque with the public as they see fit.
Ripple Payment Systems
Currently Ripple has three main products, only one of which uses XRP the token. This is a quick run down, with quotes from the Ripple site itself.
XCurrent is Ripple’s enterprise software solution and is the backbone of Ripple’s business. This software or Block-Chain essentially enables banks to instantly make and settle cross-border payments with end-to-end tracking. American Express and Santander Bank recently announced they would use this system for Cross-Border Business-to-Business Payments. XCurrent has been so successful that it has attracted the interest and support of big banks to the point where over a hundred members are now signed up, but of course XRP is not required or used in this system.
XVia is basically a payment interface for payment providers, corporations, and banks who want to send payments across various networks using a standard interface. The system uses a simple API that requires no software installation and enables users to seamlessly send payments globally with transparency on the payment status and with other information, like invoices, attached. Here again the Token is not needed or used.
XRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience and yes this system uses XRP tokens. Due to the fact that payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. This system dramatically lowers the capital requirements for liquidity.
The way it works is that the token acts as a bridge between different fiat currencies and so in theory cheaper than currently available systems and even the xCurrent system as it could eliminate the need for Nostro accounts.
For example I send money from the US to Mexico, a payment provider using XRapid would convert US dollars to XRP over a US exchange, send the XRP to a Mexican exchange through RippleNet, then convert to Mexican Pesos to complete the transaction. All of this would take place in seconds.
So Where is the Problem
Let’s start with the fact that there are many unanswered questions while at the same time very little information is out there on the mechanics. Unlike the detailed twenty pages dedicated to the processes involved in XCurrent, XRapid has very little info on the Ripple website; it simply links to the page below with a blurb about liquidity.
Before we get started, we want to make sure that you completely understand that this Newsletter is not focusing Ripple the company. As a company Ripple has developed innovative solutions for the transfer of money and has signed deals with many major banks. We believe that RippleNet is likely become a replacement for the SWIFT payment system, which is over 40 years old, slow, and expensive in comparison.
In this Newsletter we will be talking about the Ripple token (XRP) which we will argue has practically no function at this moment, apart from letting speculators bet on Ripple’s success (which is making Ripple’s creators very rich).
In the Beginning
At its inception Ripple created 100 billion XRP tokens of which 20 percent were retained by the creators, and the rest was retained by Ripple labs to use (55 billionn tokens are held in escrow) and distribute to market makers in order to provide liquidity.
The mistake that investors are makind is that XRP is related to equity shares, but beware the tokens themselves do not give holders any rights to ownership. In addition to that, the Ripple Token is barely used in any of Ripple’s systems. So therefore there is a risk that XRP could be completely useless;
So we want you to consider that Ripple the company could actually continue successfully even if all the tokens were taken out of circulation and “destroyed”.
Realistically we don’t believe that’s not going to happen. The continued increase of XRP has made the creators very wealthy and we must admit that they have played their game beautifully. They are currently sitting on billions of dollars worth of a potentially useless token and at the same time earning from Ripple’s revenue streams (which is not reliant on XRP). The cherry on the cake of course is that they are not regulated by the SEC, and can be as opaque with the public as they see fit.
Ripple Payment Systems
Currently Ripple has three main products, only one of which uses XRP the token. This is a quick run down, with quotes from the Ripple site itself.
XCurrent is Ripple’s enterprise software solution and is the backbone of Ripple’s business. This software or Block-Chain essentially enables banks to instantly make and settle cross-border payments with end-to-end tracking. American Express and Santander Bank recently announced they would use this system for Cross-Border Business-to-Business Payments. XCurrent has been so successful that it has attracted the interest and support of big banks to the point where over a hundred members are now signed up, but of course XRP is not required or used in this system.
XVia is basically a payment interface for payment providers, corporations, and banks who want to send payments across various networks using a standard interface. The system uses a simple API that requires no software installation and enables users to seamlessly send payments globally with transparency on the payment status and with other information, like invoices, attached. Here again the Token is not needed or used.
XRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience and yes this system uses XRP tokens. Due to the fact that payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. This system dramatically lowers the capital requirements for liquidity.
The way it works is that the token acts as a bridge between different fiat currencies and so in theory cheaper than currently available systems and even the xCurrent system as it could eliminate the need for Nostro accounts.
For example I send money from the US to Mexico, a payment provider using XRapid would convert US dollars to XRP over a US exchange, send the XRP to a Mexican exchange through RippleNet, then convert to Mexican Pesos to complete the transaction. All of this would take place in seconds.
So Where is the Problem
Let’s start with the fact that there are many unanswered questions while at the same time very little information is out there on the mechanics. Unlike the detailed twenty pages dedicated to the processes involved in XCurrent, XRapid has very little info on the Ripple website; it simply links to the page below with a blurb about liquidity.
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