The co-founder and head of research and development at Block Digital explores the potential positive and negative aspects of Ripple’s involvement in XRP.
In a new interview with Real Vision, Santiago Velez addresses the controversial question of whether Ripple’s ownership of more than half of the total XRP offering will support or hinder the growth of the third largest cryptocurrency by market capitalization.
Velez praises Ripple’s efforts to keep track of its holdings publicly and to place the vast majority of its XRP in escrow accounts. He says Ripple’s holdings pose a risk, noting that Bitcoin has a similar problem with whales that may choose to sell large amounts of BTC in the open market.
Velez agrees that traditional investors face a similar risk and investors at Amazon know that Jeff Bezos could one day decide to sell some of his AMZN stock and bring an oversupply into the market.
“A lot of criticisms of Ripple, the company, are that they are the largest owner of XRP. They present this enormous counterparty risk where they can dive into the market, and you as the token investor are basically that big slip up exposed…
The difference between [Amazon] Shareholders is, they can create new stocks, they can split stocks, things like that. This is not possible with the known overall offer. All you can really do is play within that 99 or 100 billion XRP. This is your maximum allowance. “
Velez praises Ripple’s transparency regarding its XRP holdings and says it is one of the most transparent companies in the crypto space.
“For me, XRP is one of the most transparent ecosystems. The fact that Ripple even communicates this to the community has no obligation to do so. They didn’t have an obligation to include this XRP in those escrow contracts, but they did anyway and they report exactly how much they print, how much they sell. That is another important transparency. They report exactly how much they are selling.
Now CoinMetrics has done an excellent analysis of their release plan and exactly whether it is in line with their claims and has basically been able to create a curve, a money emission curve, and compare that to the reported sales amount. You have delved very deeply into the accuracy of your claims. They were pretty close, there were some minor inconsistencies, but the work they did was outstanding at analysis, but it also essentially confirmed for an investor that this system works pretty much the way they intended had. “
According to Velez, XRP’s value proposition is very different from Bitcoin’s. Rather than becoming a store of value for an alternative to gold, XRP’s growth will depend on the utility it brings to the payments world.
He says Ripple’s XRP-based remittance platform, On-Demand Liquidity, is an example of how XRP could give financial institutions the ability to move money quickly to and from global markets without having to hold different types of currencies.
“[The] The XRP ledger specifically tried to resolve payments. Why is it trying to do that? The consensus algorithm shown has a very high throughput. It’s roughly 1,500 transactions per second while Bitcoin has three to four transactions per second. Ethereum is 15 transactions per second in my opinion, something like that.
What does that mean when you have 1,500 transactions per second available as a settlement layer? On top of that, if your token has a lot of liquidity then you can create some very interesting use cases because if you have a very fast unwind layer and each layer two that you build on can unwind very quickly at the end of the day and reach finality that is important for transactions …
Maybe the banks in [local] Economies say, “Hey, I would like XRP because if I have XRP I don’t need six or seven other currencies.” I don’t even need the dollar. When I suddenly have XRP, I have access to Japan, Mexico, the Philippines, and Brazil. ”
When you hold a supranational currency that has all of these liquidity pairs in different countries, you can suddenly start doing large-scale transactions. That is a global network effect. The small network effects of the local jurisdiction pair between a Thai baht or peso can result in a global network effect. “
Featured image: Shutterstock / Fer Gregory