Investing in Ripple’s XRP is More like “Buying a Share” in a Company: Asserts Finnish Crypto Exchange

XRP is increasingly gaining liquidity as more and more exchanges keep on adding this digital asset on their platform all over the globe. The most recent addition is on Finland-based exchange Coinmotion on customer demand,

“since You, our dear customer, have asked for it, we have offered you the possibility to buy and sell XRP on Coinmotion.”

However, Pessi Peura, the community manager at Finnish Bitcoin broker Prasos, the parent company of the crypto exchange Coinmotion in the latest post points out the reasons XRP is not a cryptocurrency.

To define the basics,

“Ripple is, at its core, a payment network with a virtual currency XRP used in that network, operated by Ripple Labs.”

“Heavily Centralized” XRP Is Not A Cryptocurrency

Starting with explaining the idea behind Ripple that is the payment network that acts as an intermediate between trades, he further shares,

“Ripple network would automatically connect all traders to each other with most optimized way possible, reducing the market friction. Everyone would get what they want.”

It further talks about the global adoption of Ripple by established companies and financial institutions to facilitate the financial transactions between them. However, Peura further notes,

“Even though hundreds of companies have stated in one way or another of being interested in Ripple, only little actual use is done and most companies and institutions are still just looking on to the subject.”

Moving on to the topic of XRP, it clears states,

“it is not cryptocurrency in the strict meaning of the word.”

Though it states that XRP shares many attributes with “actual” cryptocurrencies as it is based on open source code and can be traded peer-to-peer, XRP is different from others in the way that

“it is not based on the blockchain, it is not mined and it is heavily centralized.”

In order to secure transaction, Peura writes it uses

“HashTree, which is patented by Ripple Labs. In HashTree all the transactions and balances are combined to a single number, which servers compare to each other to reach consensus. This kind of system is faster than blockchain but far more centralized.”

He further stated that out of the pre-mined 100 billion XRP coins,

“61% are kept by Ripple Labs.”

Ripple Controls XRP

Peura explains that

“Ripple is developed by a single company,”

that means

“If the central organization, Ripple Labs, is compromised, it could affect the whole ecosystem.”

“Ripple Labs has also the control on how and when to release new XRP on the markets. This is strackly in contrast to how decentralized cryptocurrencies work: with Bitcoin everybody knows and agrees on how new bitcoin are minted. With Ripple it is the monopoly of Ripple Labs to make the decisions.”

Also, the fact that Ripple is aiming for bigger institutions, the author says, with large scale companies and banks often being conservative in adopting a new system,

“centralized system might seem less intimidating than a decentralized one.”

“Investing in XRP is more like buying a share on a company than investing in a cryptocurrency.”

However, in the end, he did point out that Ripple could help in bitcoin adaptation as

“it could make Bitcoin and other cryptocurrencies more liquid.”

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