Last week something astonishing happened in the cryptocurrency world. The surge in the value of the cryptocurrency Ripple (XRP) catapulted the digital currency’s co-founder and CEO to fifth place on the Forbes list of world’s richest people, ahead of big names such as Mark Zuckerberg, Larry Page, Carlos Slim, Larry Ellison, and Michael Bloomberg.
If you’ve heard of Bitcoin, then you’ve likely heard of Ethereum and Litecoin. As I write this, there are 1,384 different cryptocurrencies in existence. One of the coins that has been most discussed is Ripple (XRP), which bills itself as a blockchain technology that handles financial transactions faster, cheaper, and with more opportunity for scalability than Bitcoin.
What Makes Ripple (XRP) Controversial?
One key difference between Bitcoin (BTC) and Ripple (XRP) is that all of the coins are already available, since Ripple is a pre-mined currency. Ripple launched with 100 billion coins, whereas Bitcoin has 21 million coins that will be available after 100 years of mining. Of the 100 billion coins, an estimated 61% of all coins are owned by the founders. The fact that the coins are pre-mined and the founders controlling the majority of the available coins makes Ripple unpopular in cryptocurrency circles.
Starting in December of 2017, the market value of Ripple increased by 1,400% based on the hysteria that Ripple was destined to be the next Bitcoin. Ripple went from $.27 per coin in mid-December, soaring up to $3.84 on January 4th.
Chris Larsen is one of the co-founders of Ripple and owns 17% of the parent company of Ripple (which owns 61% of all coins). Larsen has a personal stake of an additional 5.19 billion XRP.
The difference between Larsen and the rest of the billionaires club is that his $60 billion net worth is for the most part not liquid. If he were to have tried to sell even $1 billion worth of XRP last week, it would have flooded the market with coins and rapidly diminished the value. Even if Larsen were to try and sell $100 million worth of Ripple, it is likely to have a noticeable negative effect on an unproven cryptocurrency.
The other man who has become a billionaire from Ripple is the current CEO, Brad Garlinghouse, who owns a 6.3% stake in Ripple, as well as additional XRP tokens. He has a net worth of at least $9.5 billion, making him the 54th richest man in the world. He sits behind Charles Schwab on the Forbes list.
As I write this, the price of Ripple has declined to $1.50 (-31.23%) and was previously trading at around $2.00. Even at this price, Ripple’s founder is still worth over $15 billion. It was announced last week that Ripple is forming a partnership with payment transfer company MoneyGram. Together, Ripple and Moneygram intend to build a financial liquidity tool for banks using a new service they are calling xRapid. The announcement caused shares of MoneyGram to jump 13%, and Ripple increased 2.4%.
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