Increased Acceptance by the Financial Industry
MoneyGram and Western Union are just the start in terms of XRP and XRapid adoption. While both of these partnerships represent pilot programs, we should know within the next several months whether the companies are benefiting from XRP implementation. Assuming XRP increases the efficiency of money transfers and transactions, it only makes sense that more businesses within the financial industry (both banks and money order firms) give XRP a try. Nathaniel Popper (New York Times writer and author of Digital Gold) created controversy earlier in the year when he questioned the validity of XRP as a tool for banks. Using anonymous sources, Popper quoted a number of banking industry officials saying no one was planning to or had interest in adoption of XRP for transactions. This spurred Brad Garlinghouse, CEO of Ripple, to announce that 3 of the world’s top 5 largest money transfer companies would be implementing an XRapid pilot program. MoneyGram subsequently announced its partnership with Ripple, followed by Western Union making a quiet connection to XRP earlier this month.
The point being: Ripple has built strong partnerships within the first two months of the year, but needs to continue expanding in the financial industry. Banking is ripe for disruption and Ripple is the technology that could bring about a 10x improvement in efficiency. We have made the argument that the price and value of Ripple is independent of the financial industry (evidenced by the untapped potential of XRP as a currency), but it would still benefit Ripple to have strong use-cases through banking. There are scenarios where the financial industry could come back to haunt Ripple: if MoneyGram or Western Union fails to adopt XRP past the trial-period (or another bank willing to give XRapid a try), it could signal a cascade of uncertainty, thereby bringing about a decrease in investor trust.
However, the alternative seems more likely. There is almost guaranteed to be an announcement at some point in the future by a bank looking to deliver Ripple a blow or otherwise spread crypto-related FUD by discontinuing and disparaging XRP as a transaction protocol. Ideally, the amount of non-adopters will be greatly outweighed by the institutions looking to gain an advantage over the competition, particularly smaller banks and money transfer companies struggling to compete with the larger firms. Best case scenario is that Ripple continues to build partnerships through the financial industry, thereby creating a network of ties that eventually takes adoption exponential. Banks are in the business of making money and improving efficiency. If XRP offers a return on investment, it could become the industry standard.
Recognition of XRP for Commerce-based Transactions
The potential for Ripple goes well beyond disrupting the financial industry and becoming a tool for bank to bank transfers. Ripple could be the obvious choice for a commerce-giant like Amazon to take the plunge into cryptocurrency. It could also give smaller retailers and crypto-investors looking to spend XRP the opportunity to do so through the advent of RipplePay (to be clear, not a real thing–yet) or some similarly transaction-focused implementation. Earlier in the week, we looked at the ways in which a company like Starbucks (global enterprise, but yet to make a move on the growing crypto consumer base) could implement XRP for payments even without a dedicated Ripple processor. It starts with utility. Of the major coins on the marketplace, Ripple offers the most in terms of usability:
- Nonexistent transaction fees. For each Ripple transaction, 0.00001 XRP is consumed. Ripple would have to reach an impossible price per coin of 1000 USD for the transaction fee to even crest one penny. Compare that to similarly large-scale coins attempting to be used in commerce, such as Bitcoin, with an average transaction fee of ~5 USD. It’s difficult enough to have people start spending deflationary currencies the way they would inflation-prone fiat, let alone pay exorbitant fees. Ripple has eliminated this barrier to use and psychological hurdle for spending.
- Scalability. Ripple was designed, from the beginning, to handle large-scale bank to bank transfers. We’ve seen the company branch out into the money order business over the last two months, another industry that requires frequent, global payments that vary in size. Because of this initial focus, Ripple’s network is designed to handle 1500 transactions per second. While this is a far cry from matching VISA’s 25000 tx/s, it comes with the added benefit of security through blockchain. It also represents a significant advantage over the market. TRON’s Main Net Exodus, set to launch next month, will allow for 1000 transactions per second, but a currency like Bitcoin has a tx/s of 7. Ethereum is only a stretch better at 13 tx/s. Lightning Network and other innovations could change the landscape for transaction speeds, but as of now, Ripple owns the scalability debate plaguing almost all cryptocurrencies.
- Under 5 second confirmations. The next time you go to the store, count how long it takes for your debit card transaction to be confirmed. When you're standing in line at a busy grocery store, a ten second wait can feel like a long time. Now compare that to ten minutes, or ten hours, which is becoming the industry’s standard for certain popular currencies. Obviously, having confirmation times beyond a minute becomes an impassable barrier for in-store purchases (like the aforementioned Starbucks). Naval Ravikant, renowned Silicon Valley angel investor, has made an interesting argument that Bitcoin’s problems (including the electricity costs of mining, long confirmation times, etc.), represent a rare time where the trade off in efficiency is beneficial to the market by delivering the substantial benefits (mostly through security, decentralization and consensus) of cryptocurrency. Ripple provides both: a crypto that is efficient in utility as a commerce-based currency, while still providing a blockchain-derived payment source. Scalability is going to become the buzzword around cryptocurrency in 2018 and beyond, much like how blockchain has dominated the conversation thus far. The currencies that are unable to scale and meet the needs of the market will be forced into a steady decline through lack of use and subsequent lack of interest.
Integration into New Platforms and Use-Cases
Social Media? Advertisements? Uber pay as you go?
The list of uses for Ripple are exponential and limited only by the current user interface and ability for implementation. The utility of the actual currency XRP is in place–negligible fees and near-instant transaction speeds–but the tools to build upon have yet to be established. Enterprising engineers and entrepreneurs will start flooding the cryptocurrency space similar to how web development dominated the first decade of the 2000s and mobile/app development has been a hotspot during the last decade. The most telling feature is the enthusiasm for cryptocurrency among younger generations, particularly current college and high school students who will have the most impact on shaping technology in the coming years.
Originally the internet was just a collection of landing pages that functioned as static sources of information and advertisement. The rise of forums and chat features eventually fed into the creation of social media in the form of early networking sites like MySpace. However, consider the leap between that point and the current iteration of Twitter, Instagram, etc. and you can start to imagine a similar trajectory for crypto. Just because the first-iteration of Ripple was designed as a tool to improve the efficiency of bank to bank transfers, doesn’t mean it has to stay within that framework.
It’s amazing that more people are not talking about the ways Ripple could expand beyond the financial industry. While the MoneyGram and Western Union partnerships represent a step forward in adoption, it’s still relying upon the middle man. The function of XRP, sending money anywhere in the world through a secure, fast and free (0.00001 XRP) technology, can be accomplished by any two individuals with a Ripple wallet and internet connection. The technical know-how of this transaction is going to present a barrier for some parties, but that’s the opening for entrepreneurs. Peter Diamandis, Harvard trained physician and founder of the X-Prize, prioritizes the development of these ease-of-use features as the sign that a cryptocurrency is about to takeoff. As Ripple moves in the direction of tools that allow for simple XRP transactions (i.e. reduction in confusion over long wallet addresses, tags, one-button purchasing with fiat through exchanges, etc.), the field will begin to grow exponentially in terms of adoption, implementation and novel uses.