This week it became known that the trial against one of the largest players in the crypto-currency market, Ripple Labs, passed into the jurisdiction of the us Federal court. Hundreds of investors filed a collective lawsuit against the company, they bought XRP tokens from Ripple and lost money in the collapse of the course. Now they accuse the company of manipulating the market and demand to recognize tokens as securities. The amount of the claim exceeds $5 million. In the crypto-currency markets, against the background of news about the proceedings, there was a significant drop: the value of bitcoin fell by more than 10%, reaching a minimum since October 2017, the rest of the currencies lost up to 15%.
How Ripple surpassed Ethereum and gave investors billions
Ripple is quite an old system, its first version was launched by canadian programmer Ryan Fugger back in 2004. Alas, payment systems then did not create only lazy, and the Fugger project by 2010 stalled. However, a year later, two entrepreneurs came to Fugger. The first, Jed McCaleb, was the founder of the popular in the past file sharing eDonkey, and the second, Chris Larsen, created one of the services of microloans on the Internet. These three managed to agree, and together they tried their luck. Larsen became the project Director, while Fugger continued to improve the technology. The second breath came to a Ripple in 2013, when venture capital funds Google Ventures and Andreessen Horowitz realized that cryptobium passes them. Funds decided to put on one of the horses herd cryptocurrency and chose close to them in spirit the company Ripple.
Ripple became famous in the first week of 2018, when it came to second place in capitalization after bitcoin. But if bitcoin doesn’t matter who you make a transaction, the Ripple, the funds are transferred to those who you trust (approximately as “likes”). The Ripple system has already opened tens of millions of e-wallets, between which made transfers in the amount approaching $1 trillion. The number of corporate clients approached one hundred, including dozens of Asian banks. The capitalization of the Ripple (i.e., the dollar value of all issued cryptocurrency) at the peak was, according to various estimates, from $ 130 to $180 billion, and now-only $20 billion.
XRP has produced several new billionaires. The most famous of them is the hereditary rich man Matthew Taylor Mellon II. This is in honor of his ancestors, who served as Directors of the Treasury Department (the American counterpart of the Ministry of Finance), named Carnegie Mellon University. His great-grandfather, by the way, founded the oil company Gulf Oil. When Matthew bought the bitcoins, the family decided he had a drug problem. Under the pressure of the family “cue ball” had to sell. But Matthew again could not resist and bought cryptocurrency: this time XRP of $2 million. Some argue that he made a purchase while in a deranged state. For example, when the court heard his ex-wife’s lawsuit, the defense argued that Matthew had memory loss, manic depression, and insomnia. This brings to mind a line from “the humpbacked Horse”: “for a long time already But it is that only the bad treasure given. You well, knock yourself out, do not knock out two rubles.”
At the beginning of last year (2017) XRP cost $ 0.006, and at the end – $2.3. Matthew Mellon earned $1 billion Article in Forbes, paying tribute to hereditary financial genius, came out in late February, and in April, he left the hospital in Cancun, Mexico and went to the best of the worlds. In April, there were rumors that Mellon will make a film with johnny Depp in the title role (Depp looks really like Mellon). Then these rumors subsided.
Very wealthy and still alive brad Garlinghouse, the current head of Ripple. Its share in the company is 6.3% — at the peak of the company’s value it was equivalent to $9.5 billion.the State of the previous boss of the company, Chris Larsen, the owner of 17% of the company, was estimated at $5.19 billion: now it is $2.75 billion, and at the beginning of the year — as much as $17 billion then Larsen was included in the list of fifteen richest Americans. Something falls through the Jed Mccalebb, made famous by the bankrupt to the crypto currency exchange Mt. Gox. It is estimated that if he was transferred due at once, it would be 5.3 billion XRP.
Bitcoin is still almost 6 times more popular than XRP — its total capitalization is estimated at $ 110 billion, but the capitalization of the second most popular cryptocurrency — ether — $20.8 billion, in fact the same $20 billion, in which the XRP market is estimated. In the course of this year broadcast twice came from behind XRP second place in the ranking of cryptocurrencies. Actually, basically it is, and not even the tragic fate of billionaires, and attracted to Ripple Labs such interest.
Ripple co-founder Jed McCaleb “drains” his XRP tokens
Previously, the company was only interested in payment systems. The fact is that while bitcoin was solving internal problems (it is slow and inconvenient) and enjoyed the attention of the media and the General public, Ripple entered into partnerships with traditional payment systems, including American Express and MoneyGram, promising them to speed up and reduce the cost of payments. In fact, Ripple has captured the niche in which bitcoin’s current positions are weakest. After all, even the developers of the cue ball, as well as ether and other blockchain-based systems, do not promise banks and their customers fast and cheap transactions in the next year or two. It seems that cryptographic algorithms provide protection of transactions, but they do it out of hand slowly.
Until bitcoin solved the problem, the Ripple has entered into partnerships with the traditional payment systems, including American Express and MoneyGram
But XRP is not built on blockchain, but on proprietary technology. The payment system, developed by Ripple Labs, is often likened to the ancient system of Eastern transfers-it is called “hawala”. The system is based on mutual trust of a network of hawaladar brokers, whose shops were usually located in the bazaars. The document flow is almost zero — hawaladars minimize their costs, but take all the risks. Nobel laureate Douglas North would probably say that this system confirms his assumption that the Western economy is based on written rules, and the Eastern — on an honest merchant’s word.
“Hawala” embodies the dream of mutual settlements, beyond the control of the state
To some extent, the hawala system embodies the dream of mutual settlements beyond the control of the state. Ripple does this online, which is why XRP differs significantly from bitcoin and ether. Cue ball mined on their computers enthusiasts, called “miners”. In the case of Ripple miners no, but there are banks and there are market makers. In the same way as bitcoin and torrents system based on the architecture of peer-to-peer. This means that there is no master or “Central” server, and all user computers are equal.
However, the servers of the Ripple still make an exception — they keep a large Ledger, which is called the register of transactions. The thing about Ripple is that it’s all based on mutual trust. With Ripple, you can issue a currency named after yourself, and those who believe in your success can purchase that currency. Therefore, unlike bitcoin, the emphasis on anonymity in Ripple is not made, and if the counterparty requires to confirm the identity, it will not be perceived as undermining the principles. A new currency can be exchanged for traditional currency exchange offices that are called Ripple “gateways”. Just like bitcoin, the Ledger is available for all brokers on the Internet and transactions are signed with an electronic signature. You can transfer between the gateways and the usual (“Fiat”) money, and to ensure internal payments Ripple produces a special internal cryptocurrency — it is called XRP. The system is multi-currency and requires the creation of separate gateways for each currency — this process is called “rippling”, i.e. “reproduction” or “replication”.
The Ripple case came to the Federal level thanks to the efforts of the company’s lawyers. Their motives are clear: they did not want the provincial judge from San MATEO to strike a knockout blow to XRP, and the rest of the players. After all, so far, companies that produce cryptocurrencies and tokens, in fact, do not owe anything to buyers and, of course, want this to continue. The plaintiffs, on the other hand, intend to ensure that the case is heard in San MATEO. Experience shows that local judges, often elected, tend to win the sympathy of “ordinary people”, so favor the victims, not innovative companies. Especially when individuals (the total number of which, according to some, more than a thousand) lost their money because of the activities of patented financial adventurers-and among the founders of Ripple are: for example, Jed McCaleb, the former head of The collapsed in 2014 MT crypto — exchange.Gox.
Jed McCaleb (left) joined Ripple in 2011. Chris Larsen (right) joined the company in 2012
Perhaps there are reasons that could prevent a local judge from classifying XRP as a “security”? The fact is that in the United States the concept of “security” is interpreted more widely than in other countries — it covers almost everything that can be invested to make a profit. Of course, the judge can conclude that XRP tokens, like their fellow crypto-currencies, are exactly such tools. But then, releasing tokens, Ripple Labs was obliged to give customers all the information about themselves. Alas, this deprives the tokens of any attractiveness — the whole point was just to sell them, while maintaining confidentiality.
Unfortunate investors insist that the purchase of tokens equivalent to the purchase of shares, and the company Ripple manipulated the course
The plaintiffs sued Ripple for one simple reason — they bought the XRP tokens that Ripple Labs released, and these tokens depreciated in the fall of the course. Now unlucky investors insist that buying XRP is tantamount to buying shares, and Ripple has manipulated the rate. If the court finds the plaintiffs deceived minority shareholders, it will put Ripple Labs in danger of bankruptcy, which means that the company will have to go to the world and offer repayments. In total, the plaintiffs intend to sue Ripple $167.7 million. This story is fairly reminiscent of the misadventures of Elon Musk, who was accused by stock players of market manipulation. But the lawyers for the Ripple pay attention: the plaintiffs were aware that the tokens are not stocks and they do not give the purchasers any rights. What then can be claims?
Future of XRP
Of course, if there are cryptocurrencies that are still waiting for a miracle, it is Ripple. Bitcoin is exhausted, it has not started to be accepted in stores, and futures do not predict any movement. Votes that promised $60 thousand or at least $40 thousand. for bitcoin in 2018, long ago ceased. The owners of bitcoins accepted the idea that it would not be better than it was, and tried to transfer funds to other assets. In fact, the future of XRP is determined by one big idea: this cryptocurrency can serve as a means of payment, and bitcoin and ether can’t.
XRP is defined by one big idea: this cryptocurrency can serve as a means of payment, and bitcoin and ether can’t
Neither managers of Ripple Labs nor those who still hope to earn on cryptocurrencies are ready to entrust this dream to the judge from San MATEO. The market comes to the conclusion that the judge’s decision would not exactly promise crypto-optimists anything good. However, there is no confidence that Federal judges will come to the rescue, and if for the lawyers of Ripple Labs the transfer of the case to California is a local victory, the market players looked into the long term and have not yet seen anything joyful.
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