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October 3, 2022
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Contemporary XRP. The Story of Ripple, Part 2 –

This article continues the first part of the Ripple story.

We left the story of one of the largest cryptocurrency projects when Jed McCaleb left Ripple. McCaleb said goodbye to the project in 2013 when his vision of developing the project began to fall short of what Caleb believed. We have been continuing the development of the project since 2013. A chapter worth recalling Ripple Labs. Ripple’s story is just getting started.

Ripple Labs: 2013-2015

In September 2013, OpenCoin was renamed Ripple Labs.

In February 2014, Ripple implemented the “Fund Freezing” update that was activated in August 2014. This allowed Ripple Gateways to freeze or even confiscate any user’s coins, even without a valid transaction signature. This solution was introduced so that the company and its technological solutions comply with the regulatory requirements of the system. An example is the need to confiscate funds ordered by a court. The default setting for Gateways was the Freezing Capability setting. However, this option could be disabled, which effectively prevented the return from blocking funds on the accounts.

In May 2015, US regulators fined Ripple Labs $ 700,000 for selling XRP without proper authorization. Ripple further agreed to implement corrective measures:

  • the need to register Ripple Labs with FinCEN (a network dedicated to monitoring financial crimes):
  • if Ripple would spend / give back any amount of XRP, then the entity that received the funds would have to register its account and provide identification information to Ripple;
  • Ripple must begin to comply with compliance requirements, as well as appoint a special unit to regulate the AML policy;
  • The company must submit to an external audit;
  • Ripple must provide supervisors with tools and data to analyze Ripple network transactions.

Ripple: 2015 to date

October 2015 is, above all, another name change. This time, Ripple Labs has been simplified to a shorter one – Ripple. The history of Ripple thus enters the modern era.

In August 2016, Ripple raised $ 55 million in a funding round hosted by leading Japanese broker, SBI Holdings. SBI then took over 10.5% of Ripple’s shares. Ripple is just a point in SBI’s broad investment portfolio. Both companies have created a joint entity, SBI Ripple Asia, which aims to create a clearing platform entirely based on decentralized finance technology.

In August 2017, R3, another blockchain company, she sued Ripple. R3 claimed that a year earlier, Ripple had offered the option to purchase 5 billion XRP for $ 0.0085 before September 2019. At the peak, this option was valued at approximately $ 16.5 billion. R3 claims that in June 2017, Ripple voided the contract despite not having the right to do so. Ripple responded by filing a counter-suit, arguing that R3 had failed to honor the terms of the original 2016 contract. The idea was to introduce Ripple to a large number of clients from the banking sector in order to use XRP in the structures of their systems.

Ripple supply and company reserves

An interesting issue regarding Ripple are their reserves, as well as the increase in the supply of the XRP token. When Ripple initially issued 100 billion XRP tokens, 80 billion of which were allocated to the company, and 20 billion in total was received by the three founders. Below is the estimated breakdown of supply.

Ripple received 80 billion XRP
Chris Larsen = 9.5 billion XRP
In 2014, Larsen pledged to donate 7 billion of its XRP to a charitable foundation.
Jed McCaleb = 9.5 billion. When leaving Ripple:
McCaleb retained 6 billion XRP (under the terms of the exit agreement)
McCaleb’s Children Received 2 Billion XRP (Under Contract)
1.5 billion was donated to charity (outside the contract)
Arthur Britto = 1 trillion XRP (according to the exit agreement)

When McCaleb left Ripple, there was a risk that he would decide to sell his XRP, which could have drastically affected the price behavior in the market. To counter this, Ripple and McCaleb have created an agreement to limit McCaleb’s ability to sell XRP. The contract was revised in 2016 after Ripple’s accusations against McCaleb of breaching the contract.

McCaleb’s limitations under the agreement signed in 2014:

  • McCaleb can sell XRP for a total of $ 10,000 each week for the first year of the contract.
  • The limit is increased to $ 20,000 during the second, third and fourth years.
  • In the fifth and sixth years, the limit is 750 million XRP.
  • In the seventh year – 1 billion XRP.
  • After year seven – 2 billion XRP.

As for the 80 billion XRP held by the company, the plan was to sell, distribute the coins or use them to finance the company’s operations. According to the Ripple Wiki, we learn that:

When the Ripple network was created, 100 billion XRP was created. The founders donated 80 billion XRP to Ripple Labs. Ripple Labs will develop Ripple software, promote the Ripple payment system, give away and sell XRP.
From December 2014 to July 2015, the company disclosed on its website the amount of XRP owned by the company, the amount of XRP in circulation, and the amount of XRP spent not directly on financing the company’s operating costs. However, the statement did not distinguish which funds were sold and which were given for free. The summary for June 2015 is presented below.

Some time after July 2015, the statement was modified – Ripple stopped showing the value of the reserve. It is difficult to determine how much of the total XRP supply is at this point in time by Ripple. According to an estimate by Bitmex, Ripple should now have about 50-60% of the initial XRP number. Until 2015 it is possible to trace values ​​of individual XRP accounts based on the values ​​provided by the site. Unfortunately, it is difficult to quote them today. Another unknown element is the lack of information on what the operating cost funds were spent on.

Contemporary XRP. The Story of Ripple, Part 2 - 23

Ripple’s Story – End of Part 2

Ripple’s modern history, like its early chapters, is full of interesting events. Ripple is primarily a gigantic value company whose goal is to create a new financial settlement system, which, however, is not based on the same values ​​as bitcoin. That is why many people today accuse Ripple of the project being too closely related to the banking sector. Stories of development, business relations, as well as attempts to enter the banking sector show the validity of these votes. It does not change the fact that Ripple is one of the most unique projects in the cryptocurrency space.

In the next installment of the Ripple Story, we’ll look at the disputes between the founders, as well as several more recent scandals surrounding Ripple and its management.

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