It may be for most people that 2020 hasn’t been the best year so far. With the rise of the coronavirus and the resulting economic crisis that has put the entire global financial system in jeopardy, this year hasn’t exactly proved to be a walk in the park on a sunny day–at least, not without a medical-grade face mask, and only if the path through the park happens to be the most direct way to reach the grocery store or the pharmacy.
However, the year hasn’t been all bad for everyone. Last month, Forbes named settlements system and remittance giant Ripple as the second-largest fintech firm in the U.S., just behind Stripe (valued at $35 billion), a payment processing firm based in San Francisco. Coinbase (valued at $8.1 billion) was in third place.
The ranking was considered to be particularly significant because of Ripple’s status as a company that deals in blockchain, which is still largely considered to be a frontier technology.
Marcus Treacher, senior vice president of customer success at Ripple, told Finance Magnates that Ripple’s growth has much to do with the company’s concentration of tapping into the market for international transaction infrastructure: “a large part of our success has been to not lose focus on solving a specific problem around cross border payments,” he said–particularly, the global remittance market.
Indeed, Treacher explained that “Ripple is the only blockchain company with customers using its products commercially for cross-border payments.”
The company’s focus on this particular area has “allowed us to be at the front of technical innovations that use the power of blockchain and digital assets–technologies that have proven really effective in addressing the inefficiencies of the global remittance market and where our customers are already seeing huge benefits,” Treacher said.
“XRP is not centralized.”
However, the company’s journey forward has not gone unmet with its fair share of criticism. Ripple has been widely criticized within the cryptocurrency community for being “too centralized”; critics have alleged that Ripple holds too large a share of XRP, its native token, and have pointed to reports that, for example, Ripple co-founder Jed McCaleb has sold a billion XRP and still controls roughly 5 percent of the token supply.
“Ripple is highly centralized & XRP is more akin to a PayPal account than a trustless system like bitcoin…. It's hard to come up w any rational reason why XRP exists in the Ripple protocol, other than as a means for Ripple to make money. Lots of money.“ https://t.co/c52yl5joiG
— Laura Shin (@laurashin) January 4, 2018
What of these claims?
“XRP is not centralized,” Treacher commented, matter-of-factly. “It’s a decentralized, open-source digital asset, and the XRP Ledger is based on an inherently decentralized, democratic, consensus mechanism — meaning no one party can control it, not even Ripple.”
Additionally, “Ripple is a stakeholder of XRP thus is an interested party in its success,” Treacher continued. Therefore, in his view, “it wouldn’t be logical as a business to disrupt the XRP Ledger or XRP.”
Treacher also pointed to the fact that “the XRP held by Ripple is locked in cryptographically-secure escrow accounts in which one billion XRP is released to Ripple each month. This provides an upper limit on the amount of new XRP that can be brought into circulation, and any additional XRP leftover each month is placed into a new escrow.”
“Deletable Accounts” feature would be “beneficial to account holders who would like to recover XRP reserves from unused accounts.”
Some crypto community members have also expressed concerns over “Deletable Accounts,” a feature that would allow “[allow] XRPL (XRP ledger) accounts to be removed from the ledger and recover most of the reserve locked in the accounts for spam prevention.”
Shortly after the proposal was made, Bitcoinist reporter Christina Comben called the proposed feature “disturbingly centralized at best, horribly over-controlling at worst.”
However, Treacher explained that the feature, which would indeed “make it possible to completely remove an account from the ledger and recover the majority of the reserve from that account,” is a positive thing for the XRP ecosystem.
— Leonidas Hadjiloizou (@LeoHadjiloizou) January 31, 2019
“This is beneficial to account holders who would like to recover XRP reserves from unused accounts,” Treacher said. “This will help benefit the network by freeing up space on the ledger to ensure the XRP Ledger continues to experience high performance and speed without downtime.”
Additionally, there’s no guarantee that the measure will be passed: “as the XRP Ledger follows a consensus protocol to ensure any changes to the ledger are first approved by 80% of its participants,” Treacher explained. “The ‘deletable accounts’ feature is still being considered and won’t go into effect until the amendment achieves 80% support for two weeks.”
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Eyes on the prize: in November, “[Ripple] announced we surpassed 300 customers on RippleNet–up from 200 in January last year.”
In spite of these criticisms, Ripple is pressing forward.
Treacher explained that the company’s focus on tapping into the global remittance market as well as building relationships with regulators has allowed Ripple to continuously grow its customer base. “In the past 2-3 years, we’ve seen tremendous growth,” he said.
In November, “we announced we surpassed 300 customers on RippleNet–up from 200 in January last year,” Treacher said.
“We’ve also seen positive uptake of our On-Demand Liquidity (ODL) solution, which leverages the digital asset XRP as a bridge currency to eliminate the need for pre-funding in cross-border payments.”
Additionally, Treacher said that “in less than a year since the commercialization of ODL, we announced more than two dozen customers have committed to using the product, including established financial organizations such as MoneyGram, Viamericas, FlashFX, and Azimo.”
Ripple is also working on expanding its geographic presence. “We’re also focused on expanding operations to be where our customers and employees are,” Treacher explained.
“We opened new offices in Sao Paulo, Reykjavík, and Washington D.C. last year and expanded operations in Singapore–adding to existing locations in San Francisco, New York, London, Mumbai, and Dubai.”
This also means an increase in Ripple’s employee base: “to keep up with this growing customer demand, we’ve doubled down on hiring–particularly, technical talent,” he said, adding that Ripple’s growth has come at a time when “other companies in the space have slowed down growth or shut down completely.”
Last but not least, Treacher pointed to the fact that “[Ripple] also announced a Series C funding round in December 2019, which puts the company in a stronger financial position to execute against our vision and validates our long-term potential.”
Forming close relationships with regulators has been a big part of Ripple’s growth strategy
Treacher added that an important part of Ripple’s growth strategy has been to place itself on the front lines when it comes to building relationships with governments where the company is operating, or wishes to operate: “the other key factor for our success is that unlike many other market entrants, we’re working with regulators, governments, and central banks, not against them, which has also catalyzed our growth.”
Indeed, Brad Garlinghouse, Ripple’s chief executive, said in a February interview with CNN that he had made an effort to personally meet with regulators.
INTERVIEW PART I 👇🏼
"Once regulators understand you're not circumventing regulatory frameworks they get very comfortable very quickly," @Ripple CEO @bgarlinghouse explains why he's on a mission to educate regulators around the world. pic.twitter.com/2PMVvj3PZU
— Julia Chatterley (@jchatterleyCNN) February 17, 2020
“A lot of what I am doing […] is meeting with regulators, meeting with very senior people at banks and explaining to them how crypto can be used–specifically XRP–can be used to solve a real problem, not to circumvent regulation,” he said, adding that “once regulators understand you’re not circumventing regulatory frameworks, they get very comfortable very quickly.”
“[…] Once people understand that, they very quickly become disarmed–[‘crypto’] is no longer a bad word.”
The practicalities of building Ripple
Still, the company’s core mission revolves around a single mission: “despite this growth as a company, our vision and focus remains the same: eliminate the pains that exist in cross-border payments,” Treacher said.
What does this look like on a practical level?
“Through the use of blockchain, modern APIs, and digital assets, we are flipping today’s outdated, payments infrastructure on its head by enabling increased speed, lower costs and more transparency for cross-border payments,” he explained. “We make use of the digital asset, XRP, which was designed with a clear use case: cross-border payments.”
“Our partnership with MoneyGram is a good example of the potential financial institutions can unlock using blockchain and digital assets. 10% of MoneyGram’s transactions from the U.S. to Mexico today go through ODL–dramatically speeding up cross-border payments into Mexico. MoneyGram also transacts in Europe, Australia, and the Philippines through the partnership.'”
And what’s next for the company? “In 2020, we are focused on growing RippleNet–from the number of customers who join the network to the corridors in which they operate,” Treacher said. “Part of this includes continuing our laser focus on ODL…[which] currently has corridors into Mexico, the Philippines, Australia and Europe. We hope to further this expansion, opening corridors to APAC and EMEA by the end of this year.”
What are your thoughts on Ripple’s growth strategy? Do you believe that Ripple has adequately addressed concerns over centralization? We’d love to hear your thoughts in the comments below. Special thanks to Marcus Treacher and to the Ripple team.