Preston Byrne Reminds Crypto Community Ripple Labs Created XRP Coin
Remember That Ripple Labs Created XRP – No Matter How Much They Want You to Forget
So far, no major cryptocurrency has been declared a security. Certain cryptocurrencies like XRP, however, have a slightly higher risk than others at being declared a security.
In an effort to avoid having XRP declared a security, Ripple Labs has distanced itself from its XRP creation. The idea is to convince people that the value of XRP (the digital currency) has limited connection to the value of Ripple (the company). The idea is also to convince XRP users that the currency is decentralized and independent – just like BTC, BCH, ETH, and other top five cryptocurrencies.
Preston Byrne, an English lawyer, wants to make sure you don’t forget that XRP and Ripple are intricately connected to this day. Byrne published a blog post earlier today titled, “For the last time, Ripple Labs created XRP”:
“There has been a meme propagated in recent months by the folks over at Ripple Labs. That meme is that the token XRP has absolutely nothing to do with Ripple Labs the company and that the protocol that runs XRP is totally decentralized, à la Bitcoin. I disagree.”
The central battle here lies between a private company called Ripple Labs and a digital currency that company created called XRP.
Bloomberg Claims XRP and Ripple Are Totally Independent of One Another
Preston Byrne was motivated to write his post on Ripple and XRP after seeing a report from Bloomberg. In that report, Bloomberg discussed Ripple Labs and XRP as separate entities, saying that the two are totally independent of one another.
Byrne then points out that claims like this are repeated on Twitter by random people who are unusually committed to insisting that XRP is decentralized and independent.
One tweet from Darla Jemmason (@DJemmason) is particularly egregious in the eyes of Byrne. That tweet claims, among other things, that “XRP was not created by a company” and that “XRP is more decentralized than either BTC or ETH” and that “XRP was created and issued prior to company formation.”
Byrne spends the next thousand words of his article proving these points wrong.
Why the Debate Over Ripple Labs’ Connection to XRP is Important
Today, XRP is one of the world’s largest digital assets by market cap. Some people avoid using the term “cryptocurrency” to describe XRP because it lacks certain traits of other cryptocurrencies.
Whatever you call XRP, it has a higher chance of being labeled a security than most other digital tokens.
The United States Securities and Exchange Commission uses something called the Howey Test to define a security. If something is found to be a security, and the sale of that security wasn’t registered with the SEC, then the shares could be declared invalid and the issuer could face penalties.
The Howey Test essentially states that an asset will be considered a security if it was sold to investors with the anticipation that the security would grow in value as a business venture grew in value through no participation of investors.
If someone sells you a piece of paper for their orchard farm, for example, and claims that piece of paper entitles you to a 1% share of the orchard farm, then you would expect that share to grow in monetary value as the orchard expands – even though you’re not working at the orchard in any capacity. That’s what turns a piece of paper into a security – and that’s what violates the Howey Test.
Does XRP Violate the Howey Test? Should XRP Be Considered a Security?
In the years following the launch of XRP, Ripple Labs has been making every effort to distance itself from XRP. The idea is that if XRP is sufficiently separated from Ripple Labs, then XRP will not grow or fall in value based on the business decisions of Ripple Labs, making it much less likely to be considered a security – and much more trusted within the crypto community.
Byrne set out to determine – and provide proof – that Ripple Labs created XRP.
Did Ripple Create XRP?
There’s not much debate about this issue. Here’s what Byrne has to say about it after significant research:
“The documents say it all. In my opinion the answer is “yes, Ripple created XRP, they own most of it and it was issued after company formation.” Open-and-shut determination.”
Byrne cites evidence like the fact that Ripple Labs was incorporated between September 17-19, 2012 under the name Newcoin, Inc. in the State of California. The Founders’ Agreement was signed on September 17, 2012 by Chris Larsen, Jed McCaleb, and Arthur Britto.
These incorporation documents mention:
“what appears to be either a very slapdash IP assignment or a reference to an IP assignment which is taking place in some agreement that’s outside of the four corners of this letter….the assignment shows that the intellectual property in Ripple the software was to be transferred to Ripple Labs…and would thereafter be owned by Ripple Labs and not by Arthur Britto.”
The document also explains the open source nature of the software:
“There was, furthermore, an agreement, either here (if so, poorly drafted) or referenced here and agreed somewhere else more fully, that any further contributions by Britto or anyone of the other Founders to the Ripple software would be open-source. In exchange for that licence, Ripple granted a lifetime licence to Britto to build apps with the coin (no word on whether that licence is assignable or not).”
Furthermore, the document mentions the fact that the software is “anticipated” to create 100 billion credits. The documents describe something called “Ripple Credits”, which was obviously later re-branded to XRP.
Finally, the documents mention that on the official Ripple Credits ledger, 80% of the credits “shall be allocated to the company.” Here’s why Byrne says that’s important:
“Now, we are told that on that Official Ledger, 80% of the Ripple Credits ‘shall be allocated to the Company, as determined by the percentage share of all existing Credits set forth in the ledger created, approved and adopted by the majority of Founders as the Official Ledger.' So we know that of the software Ripple owns, that does not yet exist, in relation to which an official ledger is to be created, Ripple is to be allocated 80% of the tokens thereon for its own purposes.”
The First Ripple Transaction Occurred on January 1, 2013
The first Ripple transaction occurred on January 1, 2013. This is when the Ripple “Official Ledger” launched, with Ripple owning all of the IP in the software and also owning 80% of the tokens in the software.
It’s claimed online, however, that Ripple transactions pre-date the formation of Ripple Labs. As Byrne claims, that’s just not true.
Byrne then posts the transaction explorer of all transactions on the Ripple ledger from August 17, 2012, one month before Ripple Labs was incorporated, and January 1, 2013. There’s nothing on the explorer. On January 1, there were 18 transactions.
Yes, the blockchain technically existed before the formation of Ripple Labs, but no transactions appear to have taken place. The first XRP transactions occurred on January 1, months after Ripple formed as a company.
Is XRP an Independent Digital Asset?
The debate over whether or not XRP is an independent digital asset is contentious. Here’s how Byrne sums up his research:
“To conclude, all of this rather suggests to me that it may not be entirely accurate to characterize XRP as being fully independent from Ripple Labs, and certainly it is not accurate to say that XRP’s existence has always been separate from Ripple’s. The brand name is owned by Ripple. At one time, the software was owned by Ripple. A very large number of the tokens were, are, and will likely continue to be owned by Ripple.”
Is XRP Decentralized?
There’s also an important question of whether or not XRP is decentralized.
Some analysts claim XRP’s consensus mechanism is completely decentralized. Others argue the opposite.
Byrne doesn’t wade too much into this issue, instead choosing to quote two different tweets on the topic.
One tweet from @XRPTrump described Ripple’s consensus as “completely centralized.”
Another tweet from Peter Todd (@PeterKTodd) described Ripple as centralized.
Why Ripple is centralized in one tweet. https://t.co/Vace3agYov
— Peter Todd (@peterktodd) January 1, 2018
Byrne obviously disagrees with claims that Ripple Labs did not create XRP – and that’s why he wrote a blog post highlighting the numerous reasons why XRP and Ripple Labs have been linked since the very beginning.