01 June 2020
The threat of an XRP fork is looming over Ripple, the San Francisco-headquartered startup behind the third-largest asset on the cryptocurrency market.Disable Third Party Ads
Twitter user @Crypto_Bitlord, who has over 100,000 followers and claims to own XRP, is rallying XRP investors disappointed with the token’s performance to split from the original ledger due to Ripple’s alleged XRP dumping. The plan follows a moderately popular Change.org petition submitted by the same Twitter persona titled “Stop Ripple Dumping,” which has amassed more than 3,500 signatures over the last four weeks.
Crypto Bitlord’s comment to Cointelegraph shows that his plan largely appears to be a trolling scheme and has yet to take a concrete form. Nevertheless, there are other angered XRP investors out there, and they are taking Ripple to court.
XRP dumps: Not necessarily the main factor behind the token’s performance, but one that has enraged some investors
The situation started to escalate in early August, when Crypto Bitlord penned the Change.org petition. “The only logical explanation is that Ripple are dumping on us. And not small amounts either. Literally billions,” he wrote, addressing the potential reason behind the XRP’s lackluster performance in 2019. The token has shed more than 20% of its value this year, while eight of the other 10 largest coins are enjoying moderate or — in the case of Bitcoin (BTC) — major gains.
Ripple’s quarterly reports confirm that the company has been selling high amounts of XRP tokens to both fund its operations and invest in various firms that have the potential to stimulate the XRP ecosystem’s growth. Most recently, the company has tapped PNC, the United States’ eighth-largest bank, for its blockchain-powered cross-border payments solution, xCurrent. Currently, RippleNet — the wider global payments network formed by Ripple — has over 200 members, namely banks and payment providers.
Related: PNC Bank Using Ripple XCurrent — Is Interest in Blockchain Rising?
Ripple is estimated to own about 60 billion of the 100 billion XRP created (the entire token supply, which has been fully premined). At this point, just under 43 billion XRP are in circulation, as Ripple has been releasing 1 billion tokens from its escrow service each month. The company has reportedly locked up a total of 55 billion XRP in a series of escrow accounts set to expire in mid-2021. “It decreases over time, but the current amount (as of August 25, 2019) is approximately 57.0 billion,” a Ripple spokesperson told Cointelegraph, adding that “Approximately 88% of that is in time-locked escrows.”
The company’s representative then described the escrow system in more detail:
“In 2017 Ripple placed 55 billion XRP in a cryptographically-secured escrow account to create certainty of XRP supply at any given time. We use Escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use. We then return whatever is unused at the end of each month to the back of the escrow rotation. For example, if 500M XRP remain unspent at the end of the first month, those 500M XRP will be placed into a new escrow account set to expire in month 55. The XRP is then cryptographically locked and is inaccessible by anyone until the escrow accounts expires in 55 months, and thus cannot be sold into the market, and cannot increase supply.”
The Q2 market report, published in July, showed a quarter-to-quarter increase in XRP sales of around 48%, as the startup sold over $251 million worth of XRP during that period compared to approximately $169.42 million in the first quarter of 2019. “We project our programmatic sales will decrease by more than 80% this quarter,” the Ripple spokesperson told Cointelegraph, elaborating:
“Our approach to XRP sales has not changed, since the latest communication we released in the Q2 report. We sell XRP as a percentage of total volume, with the goal of minimizing market impact. As the industry came to recognize reported volumes from exchanges and aggregators were exaggerated or falsified, we publicly communicated that we changed our source for volume benchmarking to a more credible, reliable, and conservative source.”
Although Ripple stressed in its quarterly report that it decided to temporarily pause programmatic sales and place limits on institutional sales, the report and overall situation around the token have seemingly triggered investors like Crypto Bitlord to start campaigning. The latest 1 billion XRP monthly injection performed by Ripple’s escrow mechanism as per schedule — as well as some other Ripple-related transactions reported by live cryptocurrency transaction tracker Whale Alert — has also added fuel to the fire, as the injection appears to have been mistaken for another dump amid general resentment for the token.
The representative from Ripple told Cointelegraph that 800 million XRP “was moved from old escrow into new escrow contracts — meaning the unused money was put back into the queue and not into the market,” concerning the transactions highlighted by Whale Alert, adding:
“Ripple is a steward of XRP and a very interested party in its success. As such, we are aligned with the XRP community and focused on supporting a healthy XRP ecosystem. It would make no sense as a business to hurt the XRP Ledger by flooding the market.”
Around the same time Crypto Bitlord launched his petition, Peter Brandt, a U.S.-based commodities trader with a large online following, accused Ripple of price manipulation in a series of tweets.
“Will Ripple be able to manipulate the market to keep $XRP above .2400? A serious breakdown at this level, and .020725 is in the cards,” he wrote. Brandt then explained his use of language in the following tweet:
“I used ‘manipulate’ because it is exactly what Ripple has been doing since it introduced XRP.”
Further, he added:
“The chart pattern for many, many months has shown the distribution of XRP by Ripple — it has manipulated the price to hold support. But if support gives way Ripple will be forced to dump in a major way.”
Eventually, Ripple CEO Brad Garlinghouse took to Twitter to respond to what he described as fear, uncertainty and doubt — or FUD — surrounding Ripple and XRP, propagated by “questionable sources.” He wrote:
“XRP sales are about helping expand XRP's utility — building RippleNet &amp;amp; supporting other biz building w/XRP ie Dharma &amp;amp; Forte. Reality is we DECREASED our sales by volume Q/Q and since then the inflation rate of XRP circulating supply has been lower than that of BTC and ETH.”
Notably, experts are not rushing to blame XRP’s performance solely on the aforementioned sales, either. “As tempting as it might be to do so, it’s difficult to attribute the current lackluster performance of XRP to a single factor,” Juan M. Villaverde, the chief crypto analyst at Weiss Ratings, told Cointelegraph. There are other things surrounding XPR to take into consideration, namely the much-discussed Libra project. He elaborated:
“We suspect that another factor may be the mounting evidence that the XRP token is not actually being used by institutions for its intended purpose, a reality that’s starting to worry XRP holders. The fanfare revolving around Facebook’s Libra launch may also have been a drag. Indeed, many believe Libra could be a better vehicle for achieving some of the same goals Ripple has for XRP.”
John Todaro, director of research at TradeBlock, a provider of institutional trading tools for digital currencies, told Cointelegraph that XRP’s performance falls in line with the general downtrend currently experienced by altcoins, although the reported large XRP sells have indeed made the situation worse for the token:
“The main reason behind XRP's poor first half 2019 performance has just been alt coin market sentiment. While digital currencies broadly rallied with bitcoin at the beginning of the 2019 bitcoin bull run, they have since dislocated. Bitcoin has posted a strong 2019 performance, while large cap alts have slumped. XRP's underperformance, relative to bitcoin, is inline with other major alt coins, such as bitcoin cash. That being said, these continuous large sells by Ripple has stalled any positive price momentum XRP was garnering — and it's a sell pressure that many other digital currencies do not have to contend with.”
Potential fork: Whether a serious plan or trolling, it is not likely to succeed
On Aug. 26, Crypto Bitlord took his anti-Ripple scheme a step further. Specifically, the crypto enthusiast revealed that he is contemplating an XRP fork:
“I’m thinking about forking $XRP so we don’t have to deal with the founders dumping. — This will be a community effort. Retweet if you’re in.”
On Sept. 6, he somewhat confirmed the plan, tweeting a comment to his initial proposal: “it looks like we’re doing this.” When asked by Cointelegraph to clarify his strategy for Ripple One (the supposed project name), Crypto Bitlord said, “We aren’t exactly forking, more starting from scratch, removing the dodgy founders premine and s---ty banking integrations.” He then elaborated:
“From what I’ve read on twitter you can’t actually fork it. We can start from scratch and tweak some s---, but a fork is very difficult. From what I’ve read in my feed we basically gotta clone the github and make some simple changes. I’m pretty sure there’s a YouTube tutorial on how to do it.”
Crypto Bitlord limited the rest of his comment to Cointelegraph to obvious trolling.
Eyal Shani, a blockchain researcher at consulting firm Aykesubir, told Cointelegraph that XRP can be forked:
“You can just take their source code and start your own chain, the only problem is whether you can convince the Ripple validators to convert to your chain.”
“Any open, public ledger can be forked,” a Ripple representative confirmed to Cointelegraph. “Ripple has no way to control what software those who choose to use the XRP Ledger deploy on their computers and all of the XRP Ledger’s rules are enforced by that software.”
However, the success of a potential XRP fork is unlikely, even if Crypto Bitlord is being serious: “The hardest part about a fork is to ensure its stability by having a growing community around it,” Shani told Cointelegraph. The process would involve getting the new token listed on major exchanges, among other things.
Villaverde told Cointelegraph that in the case that the “XRP army” — the unofficial term used to describe the XRP token holders who are vocal on Twitter — gets behind the initiative, it’s still highly unlikely to succeed:
“Fact of the matter is these folks don’t have enough purchasing power to support the market price of the current XRP token, there’s no reason to believe they’d fare any better by simply forking the XRP ledger.”
Either way, Ripple will have to deal with angered investors in court — although that’s a different story
Meanwhile, Ripple could have a bigger fish to fry, as the company is still busy fending off a series of lawsuits from XRP holders. The initial complaint was filed in May 2018 by law firm Taylor-Copeland on behalf of its client, investor Ryan Coffey, who launched a class-action lawsuit against Ripple Labs, its subsidiary XRP II, and Garlinghouse himself. According to Coffey’s complaint, Ripple’s sale of XRP is a violation of U.S. securities laws, as the token has “all the traditional hallmarks of a security.”
At the time, Ripple spokesperson Tom Channick told Cointelegraph that, in his company’s view, XRP is not a security under U.S. law. However, he admitted that the final decision should be made by the Securities and Exchange Commission (SEC).
Coffey’s lawsuit was then combined with three similar complaints against Ripple and moved to federal court. On Aug. 5, an amended complaint was filed, containing new arguments against Ripple. The company has until Sep. 19 to officially address the allegations. Garlinghouse has previously referenced the lawsuit in a series of tweets while responding to FUD, but limited his comment to stating that “SEC guidance isn't issued by the Commission and isn't law, rule or regulation,” and noting that the United Kingdom and other jurisdictions have come out against a securities classification for the token.
On a separate note, Ripple has fallen out of the top 10 of LinkedIn’s list for the “50 Hottest U.S. Companies to Work for Now.”