Launched in 2012, Ripple’s XRP token was to be “the next Bitcoin”—nay, a better Bitcoin. A crypto with the ability to settle transactions in four seconds flat would surely take the financial world by storm. In January, XRP soared to close to $4 per token and a market cap of $140 billion, placing its founders and largest individual holders of XRP on prestigious lists of the wealthiest people on the planet.

Since then, however, XRP has experienced a more or less gradual decline (worth $0.33 as of the time of this writing). But even in this crypto winter, XRP has managed to regain the number two slot on the rankings by market capitalization over Ethereum and Ripple executives continue to promise big things are around the corner. So as curious observers refocus their sights on XRP, it’s a good time to ask the question: What might most people not know about the “crypto” they call “Ripple?” Well, let’s start there.

1. Ripple and “Ripple” (XRP) aren’t the same thing

Contrary to the countless articles across the crypto media sphere that imply otherwise, Ripple isn’t synonymous with the (alleged) cryptocurrency XRP. It’s a bit like Bitcoin (uppercase) and bitcoin (lowercase) or Ethereum and ether—only Ripple (AKA “Ripple Labs Inc.”) is a full-fledged enterprise software company, complete with an executive team, marketing department, and board of directors.


The distinction is not insignificant—it is, in fact, central to the other oddities that surround Ripple and its XRP token. Think of it this way: there is no “CEO of Bitcoin” or “President of Ethereum” (despite attempts to crown “benevolent dictators for life”) and that makes Ripple very different in this world of “decentralized” money.

2. Ripple isn’t a cryptocurrency, and neither is XRP

Not even Ripple’s CEO Brad Garlinghouse considers XRP to be a “cryptocurrency,” but not for the same reasons you might think. “I don’t call this cryptocurrency. It’s not currency,” he famously told an audience at the Yahoo Finance Summit last February. But he meant that to mean that bitcoin really wasn’t one either. Instead, he posits that all cryptos are better pegged as “digital assets.” Fine. But that doesn’t make XRP, bitcoin, and ether the same thing either.

Ripple’s XRP token was “pre-mined,” meaning that, when it launched, all 100 billion glorious tokens were unleashed unto the world on day one. And by “unleashed” we mean XRP’s creators kept 20 billion tokens for themselves and “gifted” the remaining 80 percent to the company they founded, Ripple Labs (then known as “Opencoin Inc.”). How generous. To this day, Ripple holds roughly 60 percent of the total XRP supply, and all transactions on the XRP Ledger are validated by a group of “trusted” nodes centrally controlled by Ripple. Don’t call this cryptocurrency, indeed.

3. Most XRP is locked up in escrow

Naturally, the fact that a single entity controls the majority of the world’s XRP supply might make other holders a wee bit nervous. Understandable. What if Ripple decides to call it a day and dump its entire treasure trove on the market?

Ripple developed a solution: it locked up 55 billion XRP in an escrow account in May 2017. Since then, the company has granted itself 1 billion XRP per month to fund its banking-solutions enterprise and distributes tokens to its institutional clients as it sees fit. (Unused XRP gets sent back to the vault, and close to 53 billion tokens remain in escrow today.) The decentralization dream in action. But no matter. Centralization may actually be Ripple’s “secret sauce”—the reason its banking clients are attracted to the company’s technology in the first place, even if they have no need for the XRP token itself.


4. Banks want nothing to do with XRP

Ripple’s XRP token is often dubbed the “banker’s coin,” but that turns out to be a bit of a misnomer. While Ripple boasts that it now services more than 100 financial institutions, the vast majority of them have no use for XRP whatsoever. All but four of Ripple’s clients use the company’s xCurrent product, an alternative to SWIFT that allows banks to quickly settle cross-border payments, which does not require XRP.

The handful of Ripple customers that make use of xRapid—the one that actually needs XRP for settlements—are all non-bank financial clients. Garlinghouse told CNBC in June that he had “every confidence” that a major bank would use XRP by the end of year, but not one has yet stepped up to the plate. And the clock is ticking. If and when banks do decide to use xRapid, they have no incentive—and, as Ripple itself makes clear, no need—to ever hold XRP at all. Ripple insists, however, that there is benefit to holding XRP, and would like it very much if its founder, Jed McCaleb, would hold on to his.

5. The story of Jed McCaleb

Ripple was founded by Jed McCaleb, the creator of Mt. Gox. Yes, that Mt. Gox. But he’s not part of the company anymore. McCaleb’s departure from Ripple is a long and complicated mess of a story. Luckily, a Steemit user has done us the favor of summarizing the epic tale. (You’ll want to stick around for the comments at the end from Ripple CTO David Schwartz who responds to and disputes certain portions of the story.)

But here’s the gist: McCaleb left the company in 2013 under not-so-good terms and took his 9 billion XRP with him. The following year, he founded a competitor (clone) called Stellar by forking XRP. Shortly thereafter, McCaleb announced (threatened) plans to dump his vast XRP holdings, causing a 40 percent drop in XRP’s price. After some back and forth between Jed and his former company, they reached a deal on how much he’d be allowed to sell at a time—a deal which McCaleb promptly ignored.

A lawsuit ensued and Ripple and McCaleb eventually came to new, legally codified terms in 2016. Flash forward to September of this year and Jed appears to be up to his ol’ tricks, inexplicably “accelerating” his sell off, according to the Wall Street Journal, even though Ripple claims to hold custody and control over McCaleb’s XRP. Nothing quite like a scorned founder.

6. Ripple claims it didn’t create “Ripple”

In an even stranger development, Ripple has lately been aggressively pushing the narrative that the company did not create the XRP token—an apparent attempt to rewrite its very own creation myth.

Part of the reason could be a marketing strategy—the company is intent on users learning the difference between Ripple, the company, and XRP, the digital asset, and why their individual successes may not be as correlated as we all once thought. What’s more likely is that there are some fairly sizeable legal hurdles looming in Ripple’s road map which could be sidestepped if enough people believed they had nothing to do with XRP’s creation. But the argument is based largely on semantics and falls apart under scrutiny, as Preston Byrne very lawyerly deconstructed in a blog post last September. His conclusion? Ripple created XRP. End of story.

7. XRP is probably a security (maybe)

If we accept the non-revisionist version of Ripple’s history—the one we all knew and loved from before 2018’s bearish days—then a long time ago, in a cryptoland that feels far, far away, a startup company created and sold a token to fund its enterprise. Sound familiar?


Ripple, predictably, insists XRP is most definitely not a security. But enough people disagree that the company is now facing multiple lawsuits from investors who claim damages over the company’s alleged failure to register its security with the SEC and provide the various disclosures that come along with that. The SEC has yet to comment on XRP specifically, and Ripple recently filed a motion to move one of the class-action lawsuits away from a California court and into a federal one—where crypto lawyers say it’s more difficult to prove an asset is indeed a security.

But if Ripple didn't create the XRP token—and “there’s not a direct connection between Ripple the company and XRP,” as Ripple Director of Regulatory Relations told the UK Parliament in May—then why does it care so much how that completely unrelated token is classified by regulators? It's a real head scratcher.

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