Jump to content
Zaki

Why Ripple will fail.

Recommended Posts

Peace all,

Despite the title, I will always have a soft spot for Ripple. It was the first ALT-coin I invested in. I bought $100 worth of Ripple at 0.01 cent, and made a nice profit, since I only sold it recently.

From the very beginning, I was impressed with the amazing development team around Ripple, the skill, the competency, the vision. I thought their attempt at offering banks a replacement to the SWIFT payment system was spot-on and might very well catch on. I was impressed with the long list of banks associated with the protocol. Moreover Ripple has amazing scalability, can settle in 4 seconds etc. Really, comparing Ripple to SWIFT is like comparing a top-modern Ferrari to a horse carriage.

And yet, I have become convinced that Ripple won't make it in the long run.

Let's try to cut through the noise. There is so much hype, so much speculation in the space of cryptocurrency, and it's very hard not to feel one's head spinning. But at the end of the day, I think it all boils down to 2 basic questions.

1) Will cryptocurrencies actually replace FIAT (national currencies)?

2) If yes, what cryptocurrencies will become significant in the long run?

 

So let's start with 1). Of course, right now it's obvious that the majority of the world’s population doesn't yet pay attention to cryptocurrencies - actually they don't even really know what it is (which is sometimes hard to fathom for us who are crypto-diehards). Thus FIAT currencies and cryptocurrencies right now exist side by side. But is this going to last? I find that hard to believe. Cryptocurrencies allow us to transfer money to each other via the internet without a trusted third-party. And it allows us to avoid using national currencies, which are manipulated by our governments - more or less depending on whether we live in the US or Venezuela.

One may object that cryptocurrencies are also manipulated. Pumps and dumps, hype, FUD in circulation etc. True, but remember, I am trying to see the BIG picture here. Once the marketcap of a coin - we already start seeing this effect with bitcoin - gets large enough, volatility of course falls. It's harder for individual whales and other manipulators to really affect the price in a big market.

But "regulation will stop cryptos" is another objection. Well, how? Imagine that, say, the US government could really muster the political will to destroy bitcoin (a completely unrealistic scenario, because there are many in political circles who are upbeat and positive about cryptos), could they do it? Probably yes. It would cost the government a lot of – taxpayer’s - money and the cryptomarkets would take a nose-dive. But would that be the end of cryptocurrencies? Of course not - there would be a dozen other protocols ready to take over from bitcoin. How would the government stop those? They can’t. They would have to prohibit the internet and that’s only possible in a state like North Korea.

But there is also one more reason why cryptocurrency WILL succeed and one just has to look at the 3rd world to see why. Here you find 2-3 billion people who have no access to banking services. They must therefore sell their products at a local market using a sh***y local corrupt currency, that drops 20% every 2 months. Well, what do you think THEY are going to do when they discover cryptos? All they need is a mobile device and an internet connection and now they can trade with THE WHOLE WORLD. I know, they haven’t discovered this yet – or only in a few places – and the apps and platforms, which make this possible are still being developed, but don’t tell me it won’t happen! And remember, these people will not enter the cryptocurrency world because they hope that their favourite coin will rise by 376% within the next week and they will then be able to buy a Lambo. No, they are entering it to care for their families and get food on the table, to earn $6 more a month. And $6 is a lot of money when you only earn $1 or $2 a day!

So, in conclusion, I would say that cryptos will replace FIAT. It will take some time, there will be battles ahead, but I simply can’t see any argument against, because the tech is much, much better than what we have now.

So on to question 2) What cryptocurrencies will go on to be the dominant ones? Well, I think that in 10 or 20 years time, we will all look back on these early years and have a good laugh because such an odd mix of players dominate the space right now. Serious protocols (bitcoin, ethereum, ripple) mixed with ridiculous silly coins and downright scam coins. Add an overhyped market full of amateur investors (including yours truly) and deluded, hyped dreamers who pose as experts, while being completely unaware of what they are doing and you get.. well... what we have now. Mind you, I say all this with respect for all the participants in the cryptocommunity– even the scammers play their role in strengthening the systems in the long run.

But let’s face it – a lot of these protocols will not exist in 10 years. In fact many of them are already vastly overvalued. Those who will survive will be the ones who have a real use case. Bitcoin can be the coin for storing value, Ethereum for smart platforms etc. And Ripple, the coin for big banks to securely move large amounts of money worldwide at a fraction of today’s cost.  But hey, hold on a second. What big banks?

Right now we deposit money in banks because we don’t want to have cash lying around under our bed and so we can pay for products and services online. But with cryptos, we can safely store our money on the blockchain and pay peer-to-peer online without the use of a bank. The only possible conclusion: if crypto wins, banks are out of business.

Ripple says it safely will handle transfers between banks – and that they are better equipped than anyone to do just that. I believe them. But that won’t help Ripple much if the banks no longer exist.

And, mind you, I am not one of those conspiracy-theorists who believe bankers are greedy and corrupt and that’s all there is to say about the matter. In fact, most bankers are probably honest and hard-working. But how can they – as middlemen who have to be paid – compete with a system that can offer the same - or in fact better - services without a middleman?

I can’t see how that could possibly happen.

Will Ripple go up in price in the coming weeks and months? Maybe  - but it’s actually not the important question because the market is driven by a lot of irrational hype and speculation.

The real question is whether Ripple solves a problem that will exist in the real world in 5 or 10 years’ time.

I say no.

But hey, what’s your point of view? Am I wrong? And if so, why?

Best to all

 

 

 

Share this post


Link to post
Share on other sites

Thanks for posting - this is a great question I had not considered thus far. Here are my thoughts/opinions on how this will happen:

  1. Governments will create their own cryptocurrencies. They're already in progress. Govs like crypto because they realized it can mean perfect tracking and control. 
  2. Big banks, who are already working on blockchain upgrades, will be using those currencies - therefore the general population will too.
  3. This combo of gov power and regulation + gov and banks embracing crypto, to me, equates to... big banks will still be around in the future you speak of, and along with gov, have more financial control over the general population than ever.

Now, for the "woke" people like us early adopters of cryptocurrencies, I'm sure the situation will be a bit different. We may not use banks since we'd have some other store of value preferred. What do you think?

Share this post


Link to post
Share on other sites

Thanks for your post. I think you are right in general, except in my opinion you are making a grave mistake regarding your timeline. Banks or financial institutions are not going anywhere within 5-10 years. My guess is that perhaps in 70-100 years banks/financial institutions as we know them no longer exist. Therefore I think Ripple/XRP has a market to thrive in for the coming 10-20 years, this of course is if Ripple play their cards right. Anyway, good post, but check your timeline so you don't miss out on a potentially life changing investment.

Edited by Warg

Share this post


Link to post
Share on other sites

Banks will want to maintain their power and influence, so they will either adopt Ripple or build and support a system that's mostly independent of crypto community or like you say, perish, but I don't see the latter happening. Banks are not that stupid. They will find a way to get institutional money into the space and try to either dominate it or remain relevant in their own ways.

Sure, they will have to streamline and get rid of a lot of overhead, like brick and mortar banking branches, etc., but they will most likely reinvent themselves in this space. I don't think they will perish altogether...they have too much money.

Edited by enrique11

Share this post


Link to post
Share on other sites
Quote

But that won’t help Ripple much if the banks no longer exist. 

I took you seriously up until here. I don't agree with you simply because banks will continue to exist. I am sure, I can't prove it or back it with sources, but I am sure every generation prior to yours and/or mine had said the same thing.

Just like every kid in elementary school has been drawing flying cars since the 50s when asked to draw pictures of the future. 

The day will come when banks no longer exist and people are landing their cars, but not in my lifetime. 

Edited by LordVetinari

Share this post


Link to post
Share on other sites

Serious question, did people think banks and governments would fail when they came off gold standards? I wasn't around then and it would seem a reasonable thought. I think the growth of cryptocurrency might be similar? It is a big change but I think at the end of the day the average joe who uses plastic for most transactions anyway won't notice much difference day to day.

Share this post


Link to post
Share on other sites
24 minutes ago, PaulKim said:

Serious question, did people think banks and governments would fail when they came off gold standards? I wasn't around then and it would seem a reasonable thought. I think the growth of cryptocurrency might be similar? It is a big change but I think at the end of the day the average joe who uses plastic for most transactions anyway won't notice much difference day to day.

http? Oh the internet. Yea, I know what that is. 

Share this post


Link to post
Share on other sites

Couldn't they morph and become massive infrastructure players? Cold storage, crypto loans and servicing, admins of ICO's, etc.? There is a ton of misinformation with ICO's, investment banks could still market for these companies that are raising capital and clear up questions investors have...they would have to be a hell of a lot more tech savy, but the same function could still be there. Never say never.

Share this post


Link to post
Share on other sites

Banks are really on the move, don’t underestimate them ! They’re thinking about - and experimenting with new business models, to maintain a function as trusted advisor and the middleman. In the EU the PSD2 directive is the driving force behind so called “open banking or API banking”.  Dozens of experiments with blockchain.

They will find a way to survive, and get hold of crypto’s.

Share this post


Link to post
Share on other sites

@Zaki 

You're leaving already? You just got here!

But seriously, I appreciate your attempt to logically justify what's happening in the markets right now. 

I also think that you may need to do some reading to understand what it is that banks and fiat currency do in society and how dangerous an upheaval of that system would be. Banks do not exist simply to store your wealth. Are there greedy bankers? AB-SO-F'ING-LUTELY. Does that mean that the system is broken. No, it does not. 

A couple points to consider. 

1. Banks do not exist simply to store your wealth. As a matter of fact, one of their primary functions is to spend your money. You are debt on their ledger. 

2. Fiat currency has power via taxation, and taxation plays a controversial yet important role in our society. 

3. Fiat currency exists as a means to promote the trade of goods and services, which keep our economy rolling. If everyone were to do what they do with Bitcoin (not use it for anything), the world's economy would grind to a halt. Fiat is not designed or intended to be used to increase your wealth by hoarding it. Its designed to increase your wealth by spending it. 

4. Fiat currency is a representation of the power of the government that backs it. It's like flying a flag or maybe wearing a sort of logo, except you put your trust in that entity. 

5. Inflation/Deflation: while a hotly contested subject, I think that it is worth noting that in times of contention, people tend to hoard commodities they perceive have value. If we were to create a correlation with a commodity and a currency, we put ourselves at intense risk of volatility in our day to day lives. This allows us to profit from the creation of real value, not the fear someone will take our metal. In my opinion, the value of goods and services produced over the last 50 years dwarfs the "value" of gold. Gold doesn't do much. People do. 

 

 

Share this post


Link to post
Share on other sites

@Zaki

That's the best post I have read on this forum. Very well thought out and I echo your sentiments exactly. You've also actually pinpointed the major reason that XRP follows such a different growth pattern. XRP has always been a short to medium term play (couple of years) for me. I don't believe banks will really survive another 15 years. Things like this are just a sign of things to come: 

5a28129673ebc_ScreenShot2017-12-06at15_11_23.thumb.png.75f3323f2cdb0e768487da2cef6beca9.png

Edited by JA8

Share this post


Link to post
Share on other sites

 

 

@Zaki,  Hello and welcome.

I'm having a little trouble following the logic, though.  Cryptocurrency will replace fiat because (1) blockchain is trustless, (2) regulation can't completely stop bitcoin, and (3) the unbanked will use it?  Did I get that right?  I agree that digital currency will replace paper money but there is no guarantee it will not be fiat.  As previously stated hose in power tend to like to hold onto that power.  That bitcoin (and  ) may continue to exist despite regulation does not answer the question of crypto replacing fiat.  Governments could easily regulate bitcoin into a small player that still exits.  The solutions I have seen for the unbanked continue to use fiat.  The crypto acts as an intermediary for faster, more reliable payments.

Banks ceasing to exist in 5-10 years would not be evolution but revolution.  Again, as already previously stated, I think your time frame is way off.  If banks ceased to exist in the very near future, then there has been an economic meltdown and cryptos would not exist in that situation anyway.

As analogies, look to other industries that replaced.  Landlines barely exist outside of businesses, but AT&T still seems to exist.  And they re doing quite well.  That was a fairly rapid change (though the first mobile phones date back to the 70s IIRC).  Companies change with the ti tmes.  Following the introduction of automobiles horse and cart transportation was still being used in many areas 50 years later.  To carry that analogy forward, it was the faster and cheaper manufacturing techniques that lead to widespread adoption (I think you can see where that was going).

Banks do much more than hold people's fiat.  Even if fiat money ceased to exist it would not mean the end of banks.

Share this post


Link to post
Share on other sites

Hello everyone, this is my 1st post and I do own XRP.

Given the topic, I thought I'd post a link to a Bloomberg article that I read today entitled "...Latest Pick for the Fed Is No Fan of Paper Money":

It offers food for thought with respect to how the Fed may want to move away from paper currency, in order to control money, and towards a paperless money society in the future.  The main driver might be to make it easier to create a negative interest rate policy in a financial crisis or recession scenario.

"...The third option: currency cards, which would look like credit or debit cards but would represent real money, straight from the Fed. The Fed could control its value electronically. Goodfriend argues in the paper that “the public would likely find electronic currency an acceptable alternative to paper currency.” His main concern is that “electronic currency would require investment in banking, central banking and payment system infrastructure before it could be made available...”

https://www.bloomberg.com/news/articles/2017-12-05/trump-s-latest-pick-for-the-fed-is-no-fan-of-paper-money?cmpid=BBD120617_MKT&utm_medium=email&utm_source=newsletter&utm_term=171206&utm_campaign=markets

Edited by XRPmax
add quote from article referencing payment systems infrastructure

Share this post


Link to post
Share on other sites
28 minutes ago, noncomittal said:

If banks ceased to exist in the very near future, then there has been an economic meltdown and cryptos would not exist in that situation anyway.

Bitcoin was invented because Satoshi was anticipating an economic meltdown. I got into crypto originally because I looked at the central banking system, the stock market, various asset bubbles and interest rates going to zero, and I thought "There is clearly going to be an economic meltdown before long". 

Some cryptos will probably thrive under such circumstances, although I'd agree that many may not.

Edited by JA8

Share this post


Link to post
Share on other sites

There are economic meltdowns and there are economic meltdowns.  2007 was a pretty big one, but banks still exist today.  An economic meltdown that causes complete bank failure would have dire consequences.  That would mean no money flowing, no one getting paid.  In that situation stores wouldn't have food, electricity would fail, etc.  Crypto isn't going to save anyone if that occurs.  There is no current infrastructure to take over if banks completely fail in the near future.

That kind of failure is very, very unlikely.

Banks ceasing to be the same as they are now is a given.  In fact, Ripple's entire business model is based on it.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now


×