Ripple’s team consist of many from the finance industry and they have been actively seeking our partnerships. Right now, they have almost 100 commercially deploying customers with the latest big buzz to be the partnership with American Express. That partnership is massive because most cryptocurrencies do not really meet commercial standards and fail to be utilized in the real world. XRP is the native currency that works under the Ripple Transaction Protocol.
On top of that, just recently, it was rumored that Coinbase was adding XRP into its list of coins that can be purchased and that led to a spike in price which obviously fell after that rumor was debunked.Source: https://coinmarketcap.com/currencies/ripple/
Ripple was never ever meant to be like Bitcoin. Its vision was to be the bridge currency that financial institutions use to settle cross-border payments. Ripple can settle up to 1,000 transactions per second compared to Bitcoin which can only settle 7 transactions per second and also at a much higher fee. The main reason why Ripple has such a high market capitalization and is now the 3rd top cryptocurrency on coinmarketcap.com was simply that of these attributes.
While Bitcoin and Ethereum were created for a store of value and when you send payment to another account, the miners help process it and are compensated with either the fees or mining rewards.
However, XRP works differently. All XRP were mined at once and held majority by its parent company. When someone sends XRP to another account, there is a fee paid and these fees are “burned” and removed from the system. So basically, the main reason why XRP should increase in price is that of the fact that its supply reduces overtime because more XRP is burnt every single day. The default transaction fees of using XRP is 10 drops (0.00001 XRP).
From its inception 4 years ago, only 0.008% of the XRP has ever been burnt. I used the value of (100,000,000,000 – 99,992,726,510 (current total supply)) divided by 100,000,000,000 (total supply) and that’s approximately 0.008%. It takes on average 1 year to burn 0.002% of the token supply for simplicity sake (not accounting that the last year would have accounted for most of the burn because of the spike in transactions compared to 2-3 years ago).
We can see that from the graph above, XRP transaction count has been increasing constantly and is now approximately at 1,000,000 per day. Assuming the transaction rates increased over the next 100 years and transaction rates are at 10x more – 10,000,000 per day, it will burn around 0.02% per year. So in a100 years, it will burn only 2% of the token supply. ONLY 2%? Yes, only 2%.
The main question that we have to ask ourselves is that, is XRP overpriced right now? Wouldn’t it still serve the same purpose whether it is at $0.10 or if it is at $10? And if the burning of supply would cause the price of the coin to increase, does it even make sense to value XRP using this model since it only burns a small amount of its supply over time?
That’s the main reason why many others and I within the Cryptosphere are skeptical of XRP (not just because the ripple company holds the bulk of the coins) but also because of the reasons as explained above. With that being said, there would definitely be XRP loyalist who would refute my explanations or claim that XRP will moon. But I am merely doing my valuation based on my observational analysis. I could be wrong as well. Nonetheless, this is all part of the crypto world, where things are constantly changing and we will never be able to accurately predict the future. We should just bear in mind that the Ripple Protocol is different from XRP token, and this post is my two cents worth.
As always, this post is not meant to be taken as financial advice, but information to be taken into consideration when making your trading decisions.