Ripple’s former business model, which involves it working closely with banks and acting as their cross-border payment rail, is not working very well.
Santander, the Spanish bank that utilizes Ripple to make and settle international payments, said they will no longer be using XRP, claiming that the digital currency is not actively traded enough to support Santander’s needs.
Even Ripple’s strategic partnership with MoneyGram has not paid off. Every quarter, Ripple pays MoneyGram to use its technology. In total, Ripple has paid MoneyGram $43 million to provide liquidity for its ODL network—in the first half of 2020, Ripple’s payments to MoneyGram accounted for 60% of MoneyGram’s operating profits.
“Ripple just does not offer anything of value,” said Dr. Craig S. Wright. “It’s not an efficient settlement system, it doesn’t remove or mitigate the need for money-laundering controls and all of the other controls that banks have. It’s a technology that they’re trying to shoehorn into an industry they don’t understand.”
The Ripple network started in 2004/2005 as OpenCoin Inc.—not to be confused with OpenCoin.org— and in 2008 it failed. It is a digital token masquerading as a blockchain. Fifteen years later, the company, which added XRP for no real reason other than to raise money using an illegal security—is still looking for its fit in the market. Banks don’t need Ripple because Ripple does not make the bank’s current processes—which they have already heavily invested in—more efficient than they already are. The only reason Ripple stays cash-flow positive is because they dump millions of dollars of XRP into the market each quarter.
That being said, rumors are circulating that Ripple is looking to pivot away from their current plan and expand their operations in other fields.
The Amazon of payments
According to Ripple’s CEO Brad Garlinghouse, Ripple is looking to become the Amazon of payments.
“Amazon started as a bookseller and just sold books. We happen to have started with payments,” said Garlinghouse. “Two years from now, you’re going to find that Ripple is to payments as Amazon was to books.”
In other words, Ripple is now looking to expand beyond international payment settlement, and find new areas, industries, and industry partners, where they can actually profit from their operations. However, unlike Amazon, whose first product—books—were a hit and made the company popular, Ripple’s first product, international payment settlement platform, has flopped, and has made the company look even more unappealing to observers.
But is it true?
After news of Ripple’s shift in plans was released, Ripple’s CEO was quick to respond.
1/ My fav skeptics are active today! (@FT @nathanielpopper) Ripple has absolutely no plans to ‘reset’ our strategy. Using XRP to solve a real-world, $10T problem, like cross-border payments, is working (1/4) https://t.co/Gkf70dq7G6
— Brad Garlinghouse (@bgarlinghouse) August 13, 2020
According to Garlinghouse Ripple has “absolutely no plans to ‘reset’ its strategy because using XRP to solve a real-world, $10T problem, like cross-border payments, is working.”
However, it is clear that Ripple is struggling, Garlinghouse has admitted that the only thing keeping Ripple cash-flow positive is their quarterly Ripple sales.
In terms of a shift in business plans, Ethan Beard, who runs Ripple’s developer efforts, said the company will move from “writing cheques to writing code”. That being said, we will see fewer payouts to Ripple’s partners from Ripple in the future, and will most likely see Ripple trying to create technology that others adopt—which will be tough for the company given that their token has no utility and their platforms do not optimize existing operations.
“XRP is simply a token created with no particular reason to exist alongside Ripple,” said Dr. Wright. “Ripple attempted to rebrand themselves by using a non-functioning chain technology that was stapled onto the side of the protocol in order to make it look like they had some relationship to technologies like Bitcoin.”
Ripple has made several mistakes in its eight years. To begin with, they never needed a digital currency. Their current platform is essentially a payment gateway for banks, which can honestly exist without a coin or token. One of Ripple’s biggest problems is that no value is being created on Ripple.
Unlike Bitcoin (BSV), which has an abundance of software developers as well as applications and services that individuals are spending their BSV on every day to make micropayments, Ripple has no utility. There are no platforms where you can spend your Ripple and no software developers are building on Ripple. That being said, Ripple’s primary use-case is speculation.
When you consider that Ripple does not have any profitable operations besides their XRP sales, it makes sense that they created the XRP token even though they really didn’t need to. Ripple knew that the only way for them to be profitable would be to hold an ICO with an illegal security token that would continually rake in income for the company and its founders. There is no real reason to use Ripple, the world knows it, banks know it, and even Ripple knows it. That being said, it is unlikely that Ripple’s shift in their business blueprint will save them.
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