Will Ripple Lead Crypto IPOs in 2020?
At Davos’s World Economic Forum, Ripple’s CEO, Brad Garlinghouse, predicted a large wave of crypto IPOs in 2020 and hinted that Ripple might take the lead. He said,
“In the next 12 months, you’ll see IPOs in the crypto/blockchain space. We’re not going to be the first and we’re not going to be the last, but I expect us to be on the leading side… it’s a natural evolution for our company.”[1]
IPOs and the Blockchain Industry
An IPO (Initial Public Offering) is the first sale of a company’s shares to the public. In an IPO, the company gains liquidity for disclosing its true state of finance. At a high level, it may sound like a simple venture, but in fact, only a few companies in the blockchain field have successfully launched their IPOs, and their results were not as optimistic as these companies had expected.
Nonetheless, as many experts have been supporting the predictions that both the crypto market and the blockchain industry will experience a new boom in 2020, some have started to speculate about an upcoming wave of blockchain IPOs for the year. Among all the possible blockchain companies that could land a successful IPO in 2020, Ripple is certainly one to keep an eye on.
Ripple: Crypto for Banks
Although cryptocurrencies are often perceived as a rising disruptor for the banking industry, Ripple is not aiming for radical disruption. It is said that Ripple was created not to oppose banks but for banks. Ripple’s primary mission is to facilitate cross-border payments. Instead of replacing the current system, Ripple is working to transform and update it with the so-called “internet of value.”[2] This visionary technology can be summarized in one clear goal: to transfer monetary values around the world as quickly and efficiently as other information travels on the internet.
SWIFT: a Legacy Cross-border Payment System
SWIFT is currently the most-used cross-border payment system. It is a huge, complicated, intertwingled network of banks across the world. In the SWIFT system, one cross-border transaction from any given bank to another usually has to go through numerous intermediaries. This setting causes transactions to be problematically
1. Slow — a cross-border transaction takes 2–5 days.[3] This delay imposes extra difficulties for globally connected SMEs (Small and Medium Enterprises), among other agents, who depend on fast flows of cash for their operations.
2. Costly — the transaction fee for an average cross-border transaction is $30–100.[4] This expense is particularly felt by international workers that need to send money back to their families in their home country since through frequent, small-sized transactions.
3. Prone to error — in the SWIFT network, a single cross-border transaction must be processed many times as it goes from an intermediary bank to the next. Since these intermediary checkpoints typically require manual, one-to-one approval, they are more prone to error than machine-based processes.
4. Secretive — without a shared and easy-to-use information system, it is significantly harder for SWIFT banks to ensure transparency in their multistep cross-border transactions.
RippleNet: a Blockchain-based Solution
In an attempt to solve the problems created by the outdated SWIFT system, Ripple developed “RippleNet” — a global peer-to-peer network for two functional groups: users and members.
“Network users” are sender and receivers of cross-border payments, such as SMEs and their customers. They are transitioning to RippleNet for more convenient, time- and cost-wise, cross-border payments. “Network members,” on the other hand, are the network nodes behind RippleNet’s optimized engines. They process and validate cross-border payments sent by network users.
Under RippleNet’s Byzantine Fault Tolerance consensus protocol, these network members share and maintain a giant, distributed ledger that keeps a record of every valid transaction. RippleNet’s consensus protocol is designed to be time- and cost-efficient, which is a primary competitive advantage in comparison to blockchains like Bitcoin and Ethereum. This way, by leveraging its underlying technology, Ripple believes that it can make the current global payment system faster, cheaper, and more trustworthy.
If you’d like to know more about how RippleNet works, here’s a brief video demo:
Why may Ripple want an IPO?
The company may be extra confident in its growth stage. As of today, over 300 financial institutions have joined RippleNet — including the Bank of England, HSBC, and American Express.[5] Last year, Santander, one of the world’s largest banks, also launched a financial mobile app powered by Ripple.[6] Investment-wise, Ripple’s reports look quite optimistic as well. In 2019, during its Series C round, Ripple successfully raised $200 million, reaching a total of $290 million in accumulative funding.[7]
Ripple’s investors, including early ones like Andreessen Horowitz, Peter Thiel, Lightspeed Venture Partners, and Google Ventures, are certainly looking forward to a successful Ripple IPO and the financial returns that come with it.
What Now?
As discussed in the introduction, an IPO is a hard moment for startup businesses to master. If Ripple’s IPO does not meet the expectations of the market and its investors, it may even face a premature stall. However, this is not the first time that Brad Garlinghouse hints to a potential IPO for Ripple, suggesting that the company is building the infrastructure to thrive.
Will Ripple lead a wave of crypto IPOs in 2020? That only time will tell, but we at BlockTrain will make sure to keep you posted.
References
[1] https://cointelegraph.com/news/crypto-goes-ipo-ripple-could-lead-the-blockchain-industrys-charge
[2] https://ripple.com/insights/the-internet-of-value-what-it-means-and-how-it-benefits-everyone/
[3] https://ripple.com/lp/sme-payments-whitepaper
[4] https://ripple.com/lp/sme-payments-whitepaper
[5] https://www.publish0x.com/xrp-community/full-list-of-ripple-customers-20192020-update-xmjwkg
[6] https://ripple.com/files/case_study_santander.pdf
[7] https://cointelegraph.com/news/crypto-goes-ipo-ripple-could-lead-the-blockchain-industrys-charge
Author: Zhou Yu, BlockTrain’s Business Development Intern
BlockTrain is a Global Blockchain Investment & Branding Advisory. BlockTrain’s services offer early-stage blockchain projects full support through fundraising, listing on top trading platforms, and branding globally via an extensive network of PR partners. BlockTrain’s competitive advantages extend to hosting global blockchain conferences and covering the industry’s latest trends and solutions through elaborated news and video interviews. Contact us at info@blocktrainmedia.com, or schedule a call with our BD Manager.
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