Is Ripple a Good Investment in 2022? Here's What You Should Know

Ripple's XRP is one of the top 10 most valuable cryptocurrencies today, with a market cap of $38 billion. But unlike most of its peers, XRP is not a smart contract platform, stablecoin or memecoin. In fact, some would argue that it’s not even a blockchain. 

So, what is XRP? If you invest in crypto, should you be keeping your eyes on Ripple and XRP? Is Ripple going to explode in 2022? And why can’t you find the damned thing on your favorite exchange?

In this hyper-connected world we’ve been living in for the past 30 odd years, information is exchanged at the speed of light. But in spite of this digital revolution, financial institutions are still moving money across borders using a 50 year old technology called the Society for Worldwide Interbank Financial Telecommunications (SWIFT). 

Now the thing about SWIFT is: it doesn’t actually transfer funds. It’s a messaging system that allows financial institutions to send payment orders to each other, which they themselves are responsible for clearing and settling. Another downside of this system is that it requires these institutions to have accounts in all the countries they operate in. As you’ve probably already experienced before, wire transfers take anywhere from 2 to 5 working days.

Rewind to 2009, and Bitcoin provided a new way to transfer value across borders in seconds without all the red tape. But since Bitcoin couldn’t scale as a medium of exchange, Ripple stepped in to fill this void. Let’s take a peek under the hood of Ripple’s money transfer and currency exchange networks.

People often get Ripple confused with XRP. While the two entities are related, they are not one and the same. Ripple (or Ripple Labs) oftentimes refers to the company that developed XRP. The common goal among all Ripple projects is settling money transfers in real-time, at near-zero cost, while also being secure and transparent. To that end, Ripple Labs has created several solutions like: RippleNet, the XRP Ledger, the XRP coin, RippleX and more. 

We’ll be focusing on the first three.

XRP 

XRP is a cryptocurrency that’s used for a variety of functions in the Ripple ecosystem of products. Its main purpose is to facilitate transactions on a blockchain called the XRP Ledger, but aside from that you could also buy XRP as an investment. 

XRP Ledger

The XRP Ledger has many characteristics of a blockchain, but doesn’t work like your typical one. All blockchains use a certain algorithm to validate transactions in a decentralized way. Bitcoin uses Proof-of-Work (PoW), where mining computers compete to solve mathematical puzzles. So, anyone can participate in Bitcoin mining as long as they have the computing power to do it. 

The XRP Ledger, on the other hand, is much more centralized. Rather than being permissionless, the XRP Ledger has a list of about 35 trusted validators hand-picked by Ripple Labs. Since it sacrifices decentralization to be faster than other systems like Bitcoin, some crypto enthusiasts don’t consider XRP Ledger to be a real blockchain at all.

RippleNet

RippleNet is a global payment network that’s meant to replace legacy systems like SWIFT. It basically provides a bridge that allows different institutions to make their unique payment systems compatible with each other. 

RippleNet’s On-Demand Liquidity (ODL) feature highlights this. Say a bank wanted to transfer British Pounds to a New Zealand Dollar account with RippleNet. With ODL, the sending bank would convert their GBP to XRP for instant global transfer, after which the receiving bank would convert the XRP to NZD. This way, neither bank has to hold the multiple native currencies to transact globally.

Upon its release in 2013, XRP was worth a measly $0.002. By January 2018, XRP reached an all-time high of $3.84 (up 191,900%). And while it is currently a top 10 coin, XRP’s price has struggled to reach those highs again in the 2020-2021 bull market . Not in the least due to Ripple’s well-publicized battle with the SEC. 

At the time of writing this article, XRP is trading at $0.8027, down 79% from all-time highs. So, is XRP still worth investing in? Let’s weigh some of the positives and negatives.

The main reason to invest in XRP is that you believe in Ripple’s approach to solving global money transfer. Ripple solutions offer: 

Fast settlement

While banks take days to settle wire transfers, and Bitcoin takes 10 minutes to a few hours, XRP takes 4-5 seconds.

Low fees

Wire transfer fees can cost up to $50 in the traditional financial system (TradFi). Transactions only cost a minimum of 0.00001 XRP on the Ripple network. Yes, you read that correctly: five decimal places.

Currency exchange

RippleNet can process a whole heap of assets outside of XRP, including other cryptocurrencies, fiat currencies and even commodities. 

Initial traction

RippleNet is one of the largest real world deployments of blockchain to date. According to their website, they’ve onboarded hundreds of financial institutions across 55+ countries. Some of these names include SCB (Thailand), REMITR (Canada), and Transfergo (U.K.).

Venture funding

Since 2013, Ripple Labs has raised nearly $300 million in funding from big names in the venture capital space like Andreesen Horowitz, Google Ventures, Accenture, and Seagate Technology. Having such powerful backers definitely doesn’t hurt.

There are a few legitimate reasons why someone would be bearish on XRP.

Growth plateau

Yes, Ripple Labs set out to replace SWIFT. And it has sold hundreds of institutions on the technology. But maybe you don’t believe that the majority of TradFi will bother to change the status quo and adopt blockchain anyway. 

Centralization

Blockchain technology was created to take control away from central authorities like banks and governments. Ripple solutions, on the other hand, give power back to those very authorities. If you’re a blockchain purist, then you’re definitely not down with that.

Large pre-mined supply 

While mining allows a blockchain to issue new tokens over time, pre-mining is the act of issuing the maximum token supply at once. Just to be clear, this doesn’t mean that the maximum supply is instantly available to trade. The blockchain company could also keep some of the supply in their treasury.

 In the case of XRP, 100 billion tokens were pre-mined, where slightly more than 50% has been made available to the public. 

The issue with this is that XRP’s value will be diluted (i.e. lowered) if Ripple Labs happens to dump the remaining half of the supply on the market. 

SEC lawsuit

Ripple has been battling an SEC lawsuit since 2020. According to the SEC, Ripple Labs has made over $1.3 billion selling XRP as an unregistered security. 

This all stems from the fact that the legal system isn’t up to date with cryptocurrency yet. While the Commodity Futures Trading Commission (CFTC) views Bitcoin and Ethereum (ETH) as commodities, the legal classification of other cryptocurrencies are less clear. The absolute worst case scenario for a cryptocurrency is to get classified as a security. 

Needless to say, institutions aren’t going to continue using Ripple solutions unless this lawsuit is resolved. And if the Ripple name is ruined in the process, then all bets are off. 

Competition

When XRP burst onto the scene in 2013, it was a novel way to implement blockchain in the real world. But these days, Ripple has several competitors, namely Stellar (XML).

Stellar was founded by Jed McCaleb, one of the co-founders of Ripple. Funny enough, McCaleb also founded the now-defunct Mt. Gox. In case you didn’t know, Mt. Gox was the world’s largest Bitcoin exchange around 2013. They ultimately had to shutter their service and file for bankruptcy after losing $450 million of user funds in a series of hacks.

I’d be wary of investing in Jed McCaleb’s projects. Seems like  everything he touches turns into a shitstorm. God save the XML holders.

Many popular exchanges, such as Coinbase, have delisted XRP in the wake of its legal troubles.  So even though XRP is a top 10 cryptocurrency, it is ironically becoming difficult for investors to actually buy it.

But not to worry, there are still a few trustworthy platforms where you can find Ripple. Crypto.com, Binance and Kraken are going to be your best bets. Side note: Kraken has halted XRP trading, but for US residents only.

You can also buy XRP on lesser known exchanges like KuCoin, Gate.io and Poloniex. Not to mention, you can use a decentralized exchange like PancakeSwap. Do take the time to vet these smaller platforms before depositing your funds though.