The Final Stage of Globalization –Ripple’s “Internet of Value”
By Yanting Qian
On September 10th, 2016, the Co-founder and ex CEO of Ripple, Chris Larsen, gave a talk on “The Internet of Value” at Stanford University.
I watched his talk back then as the video came out on Ripple Insight and I thought that it was very impressive. As I look back to his talk again from today’s standpoint, I feel even stronger that there is something unusually great and inspiring in his idea.
Here is the original talk:
There are two main ideas in Larsen’s talk that I feel true:
“FinTech is more about diplomacy than it is about disruption.”
This statement makes great sense because “Trust” and “Network” are the essence of — I will not say the entire financial industry — but at least the entire payment system. It is not about who has the best technology but who has the most trust from the most people. Alipay, as I wrote about in the previous article, didn’t use any disruptive technology yet it has built an empire on HTML. Why? Because it has the most trust from the most people. Alipay originally established itself as a trust intermediary between buyers and sellers on Taobao.com; then it starts to connect millions of other businesses and individuals to each other. It is the “connection” that makes Alipay great, not the technology.
“The Internet of Value” will be the final fuel for globalization.
“Just as you can’t have fire without fuel, oxygen, and heat, you can’t have effective globalization without interoperability in goods, data and money. They all have to work together.”
Larsen said, “I do think that we are at the final stage of globalization. The globalization has gotten the bad rap lately, but not because it is a bad thing, but because it is an incomplete thing.” With Brexit and Trump elected, nationalism seems at its rise. It is easy to think that we have entered a new era, an era of isolationism. It takes courage to believe in globalization in the political situation today but it is, inevitably, an unstoppable process.
Larsen said that we already have network of networks for data (internet) and goods (logistics) but we don’t have a unified network for money, in other words, cross-border payments are so inefficient that we waste $2 trillion each year to move value around the world. If we could have “shipping containers” that allow interoperability among different payment networks, we could make value move faster and more efficient, and thus fuel globalization.
So, what does Ripple do?
Ripple offers banks (or potentially, individuals and merchants) a more efficient payment solution — with lower cost and higher speed, by introducing a payment protocol based upon a decentralized consensus ledger.
To make the explanation simple, in my understanding, Ripple adds on a layer underneath current payment systems. That layer is called Ripple Network, on which Ripple Consensus Ledger is shared. The most important part is, that the layer is powered by pure computer technology and is secured by technology, so manual reconciliation processes are saved and so do many other costs that could incur when navigating through different networks.
Why do I like Ripple?
Because of its existing impact.
Ripple, backed by Andreessen Horowitz and Google Ventures, has partnered with 50+ banks and institutions across the globe. It has brought the disruption alive through diplomacy. The resources that Ripple has access to are far more than other FinTech payment startups. Hopefully, more tech geniuses sitting in Silicon Valley will come to realize that it is not enough to change the world just by developing computer programs, especially in financial industry. Computer programs don’t go out of computers to install cables that enable internet.
XRP
XRP is the cryptocurrency that fuels the Ripple Network.
In 2017, XRP has 32x-ed its trading value, from $0.0065 on 1/1 to $0.21 today; In comparison, Ether has 20x-ed its value from $8.24 on 1/1 to $165.44 today, and Bitcoin has doubled its value from $972.95 on 1/1 to $2107.17 today.
Will the price go up or down? I don’t know. But two factors should be taken into consideration for XRP investment today.
1. Bitcoin price drives XRP
Many exchanges such as Bitstamp use Bitcoin as exchange intermediary from USD/EUR to other cryptocurrencies including XRP, so a huge part of XRP’s price today doesn’t reflect Ripple’s real value.
2. High XRP price is not good for Ripple’s growth
Ripple requires every account to have 20 XRP at minimum for the need of transaction cost. For every transaction, 1/100,000 XRP is destroyed as “transaction cost”. The amount is tiny for a normal user, but it can be extremely expensive for a hacker who wants to create tons of fake accounts and transactions.
Banks, unlike individuals, process millions of transactions daily so they certainly don’t want to pay high XRP transaction fees. It is Ripple’s task to demonstrate that XRP will remain stable at a low price so banks can find its cooperation with Ripple attractive.
Ripple’s future
The best case is, of course, Ripple being the largest global payment network. Money moves quickly, freely and safely without central authorities across the world. However, to scale Ripple network is certainly not easy. It involves dealing with regulations, updating its network, seeking more partnerships while controlling costs.
But, still, it’s on the way.
Source & Read More:
http://www.coindesk.com/ripple-pledges-lock-14-billion-xrp-cryptocurrency/
