Common questions and concerns about Ripple

XRP is pre-mined
Using the term "pre-mined" is a bit misleading, as Ripple does not involve mining to secure the network. All the XRP that that can ever exist (100 billion) were already created at inception. Mining is very costly in terms of energy and the environment, and is not very effective at distributing a currency fairly (i.e. due to mining cartels). 

 

Ripple owns 60% of all XRP
Ripple (the company) currently has custody of the majority of XRP. Having those XRP on hand gives Ripple the advantage of being able to incentivise the network to create growth, liquidity and new markets. Whilst other crypto markets move toward currency centralisation because of mining, the Ripple network is moving in the opposite direction, slowly distributing XRP each month. Once the escrow is completed, Ripple will only hold around six billion XRP (or 6% of the total supply) to use freely (see here)

 

Ripple can sell one billion XRP a month under the lockup
Under the terms of the escrow, 55 billion XRP are locked up, with one billion per month available to grow the network. There will be 55 individual lockup contracts of one billion XRP each; each contract will expire on the first day of every month. Whatever hasn't been spent at the end of the month will be put into a new escrow account at the back of the queue. However, this does not mean Ripple intend to sell one billion XRP per month. Currently (and for many years) Ripple has been distributing around 250 million XRP per month. (see here). Ripple has proven after many years it can distribute XRP in a responsible manner. The supply of XRP released has been almost exactly 3% per annum, much lower than bitcoin (see here)

 

Ripple can make as many XRP as they want (a.k.a printing money)
The maximum amount of XRP that can ever exist is 100 billion. This amount is established at the protocol level, and already exists on the ledger today. Soon Ripple will introduce a new amendment that ensures no further XRP can be created, even accidentally (see here). While it is technically possible at this point for Ripple to alter the protocol to create more XRP, once there are enough independent validators this will be impossible.

 

Banks won't use XRP
Banks may not yet use XRP, because the laws and regulations have not caught up to digital currencies. However, progress is being made, and already banks have started to hold digital currencies:

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"We got 12 banks to hold a digital asset for the first time ever"

The role of XRP is that of an intermediary currency, and banks may never need to touch XRP for it to play a part in a successful payment. There are significant cost savings to using XRP for payments, however it remains to be seen if banks will choose this option. Banks are under great pressure to increase profit, and XRP definitely increases profit.

 

Jed wants to crash the price/ suppress the price
Jed McCaleb was one of the founders of Ripple, but left the company in 2014. At inception he was allocated 8 billion XRP. After leaving he attempted to dump his XRP on the market, and a court case ensued. The aftermath was a settlement agreement where Jed's XRP were locked up and held in custody by Ripple (see here). The terms of the agreement are:

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• for the first year of the agreement Jed and the DAF will be able to collectively sell 0.5 percent of the Average Daily Volume of XRP for each day of the week, including weekends and holidays.* 
• for the second and third years of this agreement, Jed and the DAF will be able to collectively sell for each day of the week 0.75 percent of the Average Daily Volume.
• for the fourth year of the agreement, Jed and the DAF will be able to collectively sell for each day of the week 1.0 percent of the Average Daily Volume.
• for any time after the fourth year of the agreement, for each day of the week Jed and the DAF will be able to sell 1.5 percent of the Average Daily Volume.

Under the terms of the agreement, Jed is severely restricted from selling his XRP, and has very little impact on the market. The price of XRP also increased from $0.006 to $0.25, strongly suggesting Jed cannot manipulate the market.

 

The Inter-ledger Protocol (ILP) means a lack of focus on XRP / Ripple doesn't care about XRP
Ripple has reaffirmed its commitment to XRP many times. They are actively seeking new liquidity partners, adding XRP to exchanges (Bithumb, Coinone etc) and creating incentives for people to use XRP. It is here to stay. Ripple has several employees who are devoted solely to improving the appeal of XRP (such as the Head of XRP markets).

 

Ripple is intentionally keeping XRP stable/low. XRP is better for banks if it has low volatility
It is true that market makers and banks would prefer a stable currency. However banks still stand to save money even with high volatility (see here). 

 

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"We engage in distribution strategies that we expect will result in a strengthening XRP exchange rate against other currencies."

 

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"It is true that Ripple could become wildly successful as a software company and fail to make XRP a viable intermediary asset. We do face a lot of challenges. But we will try very hard since our XRP now has an apparent value of something like $9 billion -- we'd really like to materialize that value."

 

Also, Ripple has stated on several occasions they do not engage in short term price action. (see here)
Ripple and its investors are currently large holders of XRP. Even under lockup the company and its backers would like to see a asset under its control grow and return value to the company.
 

There's no incentive to run a validator/nobody is going to run them
Although the technical requirements to run a validator are low, it is not a trivial task if you want your validator to participate in any meaningful way. Validators need to show a history of accurate and on time validations. They need to be run by independent parties, regularly updated and kept secure. For these reasons, the list of validators is currently low. Also unlike bitcoin nodes, their is no financial incentive to run a validator.

However, validators are crucial for keeping the network healthy, and unlike other crypto currencies, only a small amount of  validating nodes are required to run the network smoothly. Because the owners of Ripple validators are driven by the desire to help the network and not strictly for financial reward, validators can be drawn from the wide range of industries: financial institutions, government agencies, and educational bodies. 

Interest in running a validator is increasing increase over time (see here)

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"We've been talking to our investors, exchanges, our customers, universities, and all kinds of other people and organizations. Companies that operate network infrastructure have expressed interest in running a validator both for publicity reasons and as a way of demonstrating the reliability of their infrastructure. Exchanges have expressed interest in running one to promote the health of the network."

 

Ripple can freeze funds using the Freeze feature
The Freeze flag is only available for non-XRP balances. If you own XRP, it cannot be frozen.

The early ledgers got lost
The ledger details before 32,570 were lost due to a bug. As of writing, Ripple has completed over 30 million successful ledger closes. The ledgers lost is under 0.1%, and do not affect the operation of the network moving forward.

 

The founders allocated too much XRP for themselves
The initial allocation went like this:
At inception, there were 100 billion XRP created.
20 billion XRP were given to the founders (Chris Larsen, Arthur Britto and Jed McCaleb)
80 was given to the company (Ripple Inc)

While 20% seems large, it is important to remember that a large portion has been donated to charity. Chris Larsen has committed 7 billion XRP to rippleworks (pledge details here). Jed McCaleb has also committed 2 billion to charity (see here).

Assuming the remaining 11 billion is still in the founders possession and not already sold or donated, they currently own 11% of XRP. Of that 11%, a large portion is locked up under the settlement agreement. For comparison, the unknown "Satoshi Nakamoto" is estimated to have around 1 million bitcoins, or around 4.7% of all bitcoins. It is also worth noting that there are no legal lockups, agreements, or other enforceable measures that prevent "Satoshi Nakamoto" from a sudden sell off or actions against the markets interests.

 

Ripple controls the only validators that matter 
In order for the network to become properly decentralised/distributed, it needs to reach a critical mass (see here). Once there are enough independent participants, it will be relatively trivial to extend trust across the network. However it vital that this process is done carefully and after third party validating nodes have been properly attested. 

Ripple has explained its plan to further decentralise the network (see here). The process is gaining momentum, with 55 validators now part of the network, and Ripple beginning to add independent validators to its UNL (see here).