Jessy, Golden Finance
Ripple plans to launch the XRPL EVM sidechain in 2025. At the same time, its US dollar stablecoin is also in the internal testing stage.
The launch of the side chain is to build the Ripple ecosystem. This project, founded in 2012 and specializing in payments, is also going to build an ecosystem. However, in terms of the on-chain ecosystem, unlike traditional public chains in the cryptocurrency circle, Ripple will generally focus its business on RWA.
XRPL is a public chain made by Ripple. The project was launched in 2012. At present, its total TVL value is nearly 15 million US dollars, ranking 78th among all public chains. In recent years, although Ripple's market value has been firmly in the top ten, it no longer has much influence in the industry. In recent years, the major event that has attracted industry attention is that it was sued by the SEC. In July 2023, the case was concluded, and its token XRP was not recognized as a security.
According to its official plan, Ripple currently has three major business segments: payment, stablecoin, and custody. This is actually very consistent with the business positioning of traditional finance, and is also a main line of compliance development in the crypto industry in recent years.
How are Ripple's businesses doing? How does Ripple make money? Is it really just selling coins to make a living as the outside world says?
Payment does not make money, only by selling coins
When Ripple was first established in 2012, its vision was to become an "intermediate bridge currency" used by financial institutions to solve global cross-border payments, in order to build a global payment network with more convenient transfers and lower costs. Its main partners are traditional financial institutions in various countries.
At its peak in 2018, XRP’s market value approached $150 billion, surpassing Ethereum again and ranking second in market value after Bitcoin.
Ripple's predecessor was RipplePay, a payment company founded in 2004. Its goal was to establish a peer-to-peer payment network that could replace the banking financial system. In Ripple's initial product system, there were three major products, xCurrent, ODL cross-border payment platform, and xVia. xCurrent is Ripple's flagship product, which mainly provides cross-border transactions between banks. However, this service does not use XRP. The only product that can use XRP is OLD. The model is that the payer first converts the payment into XRP and sends it to the payee's bank. The bank converts the received XRP into the corresponding currency and then pays it to the corresponding payee. In this scenario, XRP becomes a medium for fund conversion, but banks do not like this product. If the price of XRP fluctuates greatly, it will cause exchange losses. xVia uses the standardized API interface of Ripple network services. Users can directly use the above two functions through this interface. It is called the last stage of the Ripple product ecosystem.
Marcus Treacher, senior vice president of Ripple, once said in an interview that half of Ripple's customer base are banks and the other half are fintech payment providers. 25% of the banks are really big banks, such as Bank of Tokyo, Mitsubishi Bank, Santander Bank and Standard Chartered Bank. Remittances are the easiest for banks and payment companies to accept.
But in fact, many of Ripple’s high-profile partnerships have failed. For example, Santander, one of the largest banks in the European Union, froze Ripple after realizing that using XRP could not meet the needs of its customers. MoneyGram also ended its cooperation with Ripple due to the increasing costs associated with cross-border XRP payments.
Some of the partners listed on Ripple's official website
Ripple itself is basically facing institutional customers. Ripple has claimed in the past that it has more than 200 customers from central banks and financial institutions in more than 40 countries. But usually, apart from the initial announcement that the company will use XRP for cross-border services, there are few signs of how often Ripple's financial services are actually used. How profitable are these businesses of Ripple itself? It has not been disclosed to the public.
Moreover, even the payment business itself does not make much money. The real money-making business is selling XRP tokens. XRP itself has no value. It relies on Ripple to endorse it. XRP is not of much help to Ripple's business, and it is not even used at all.
XRP was issued in March 2013 and began trading in April 2014, with an initial total issuance of 100 billion.
Initially, 20% of the tokens were allocated to the founding team. In January 2018, the price of XRP soared 50,000% and was at its peak. At this time, Ripple founder Chris Larsen, who held 5.2 billion XRP, became the first cryptocurrency billionaire to be listed on the Hurun Rich List with a net worth of US$8 billion. Forbes believes that he is the richest person in the blockchain industry.
More tokens are in the hands of Ripple. A review of Ripple's public records over the past year shows that Ripple has been selling XRP every quarter.
The XRP held by Ripple is divided into two parts, one in its wallet and the other in the ledger. As of the end of March 2024, the total amount of these two parts is 45 billion, accounting for 45% of the total XRP issuance.
The total amount of XRP held directly in RIPPLE wallets on March 31, 2023 is: 5,506,585,918, and on March 31, 2024
Total amount of XRP held directly in Ripple wallets: 4,836,166,156.
Another type of XRP is held in custody on the XRP ledger. These locked XRP will be released monthly in the future, and the released portion will be sold to businesses.
Total XRP in ledger escrow as of March 31, 2023: 42,800,000,013
, as of March 31, 2024, the total amount of XRP held in ledger custody is: 40,100,000,005.
At present, that is to say, within a year, Ripple has sold nearly 3.4 billion XRP, accounting for 3.4% of the total XRP issuance. According to the price of US$0.5, it has cashed out US$1.7 billion by selling XRP in one year.
Although the payment business was not successful, Ripple was able to make a lot of money by selling coins.
Ripple has always had a strong flavor of traditional finance
Although XRP is basically of no use in the Ripple ecosystem, in the past two years, Ripple has indeed been actively exploring the development of the XRPL ecosystem.
In 2024, Ripple began beta testing Ripple USD (RLUSD) on XRP Ledger (XRPL) and Ethereum mainnet. It is reported that Ripple USD will be 100% backed by US dollar deposits, short-term US government bonds and other cash equivalents. These reserve assets will be audited by a third-party accounting firm. Ripple CTO David Schwartz said that the upcoming stablecoin RLUSD will initially be open only to institutions.
Not only that, Ripple is also expanding the programmability of the XRP ledger, introducing native smart contract functions on the XRP ledger mainnet (currently in the research stage), and the XRPL EVM sidechain will soon be launched. After the network is built, Ripple will introduce DeFi and RWA into the Ripple ecosystem.
Archax, a digital asset exchange, broker and custodian regulated by the UK Financial Conduct Authority, announced that it expects to introduce hundreds of millions of dollars of tokenized RWA into XRPL in the coming year.
DeFi and RWA are the two major tools for traditional finance to deploy Web3, and neither of them can be missing. After real assets are put on the chain, various pledge, lending, and other behaviors can be carried out on the blockchain.
Stablecoins are indeed a very stable and profitable business in the industry. Tether's revenue in 2023 exceeded BlackRock's. Currently, more and more institutions are entering the stablecoin business. Ripple's release of its own stablecoin on the XRPL chain is just following this trend.
Ripple is not an institution that innovates and leads the blockchain industry. It can survive well by selling XRP. It is currently working on EVM sidechains and stablecoins. In fact, compared with institutions in the currency circle, it is much later. On the contrary, in line with the pace of traditional financial institutions, Ripple is indeed developing projects steadily, but very slowly and late. According to its public disclosure, it only added AMM functions to DEX this year.
It is also obvious from the direction and speed of these layouts that Ripple does not intend to do what the native cryptocurrency public chain does. Its resources are in traditional finance, and its service targets are mainly corporate customers. In addition to stablecoins and payments, it also has custody services, which is also important for its future development. This business mainly provides crypto custody services for traditional banks.
The Metaco platform acquired by Ripple in 2023 is dedicated to custody business. This year, BCB migrated its custody business to the Metaco platform. Currently, the crypto custody business of DZ Bank, one of the largest banks in Germany, also uses Ripple's services. For Ripple, the acquisition of Metaco is precisely because it sees that many traditional banks will launch crypto businesses in the future, and Ripple sees the future development potential of the institutional cryptocurrency custody industry.
This year, Ripple also acquired the cryptocurrency trust company Standard Custody & Trust. As a US-based cryptocurrency trust company, Standard Custody & Trust will provide Ripple with more asset custody and settlement services.
Another major significance of this incident is that, although Ripple has long regarded expanding overseas markets as its top priority due to the lawsuit with the US SEC, in addition to setting up its Asia-Pacific headquarters in Singapore and holding a local payment license, it once considered IPOs in markets outside the United States. Currently, more than 90% of Ripple's business is outside the United States. But last year, the lawsuit with the SEC finally came to an end. After XRP was not identified as a security, Ripple once again turned its attention back to the US market. This acquisition may indicate that Ripple will continue to focus on the US market in the future.
The license held by Standard Custody & Trust Co. in New York will allow Ripple to provide financial companies with more diversified services such as asset tokenization, cryptocurrency custody and settlement, so that Ripple's business scope will no longer be limited to payment networks. It is reported that Ripple is currently seeking a remittance license in the United States.
From these key layouts of Ripple this year, we can see that it is still committed to the business of transforming traditional finance to Web3, which is more stable and compliant than the traditional currency circle. Ten years ago, it was inappropriate for Ripple to do this. But now, this has become the general trend of the industry. Perhaps Ripple is wise this time, but the XRP token itself has almost no role in this development direction of Ripple.
