Ripple’s chief technology officer, David Schwartz, recently made some interesting statements during an exchange on Twitter. Most notably, Schwartz confirmed that XRP sales make up the majority of Ripple’s revenue.
In his response to the allegation that Ripple still sells XRP and that it accounts for 98% of the company’s revenues, Schwartz stated, “If you define ‘sell’ broadly, then yes, ‘selling’ XRP does account for most of Ripple’s revenue.”
He went on to explain that Ripple’s options essentially come down to selling or holding XRP, and that many people believe the company already holds too much.
The XRP Ledger (XRPL) is a decentralized cryptographic ledger that underpins the digital currency XRP. RippleNet, a network of financial institutions using Ripple’s technology for cross-border payments, does not currently use the XRP for liquidity.
However, Schwartz mentioned that proposals are in place to allow RippleNet to use on-demand liquidity (ODL), and proposals to enable it “all include new sources of liquidity” to be added to the XRP-based service.
During the exchange, ScamDetective5 suggested that Ripple could opt to burn a portion of XRP as a potential solution to the large holdings. Schwartz agreed that the option exists but added, “I don’t think Ripple would ever do it because it’s hard to imagine how it could be in Ripple’s interest.” He cited stellar’s (XLM) decision to burn tokens, which he claimed accomplished nothing beneficial.
In the thread, Schwartz also addressed other points raised by ScamDetective5, including the lack of Central Bank Digital Currencies (CBDCs) built on the XRPL and the XRPL’s current transaction per second (TPS) rate. He confirmed that no CBDCs have been built on the XRPL to date and that the live XRPL has not reached 1,500 TPS; however, he believes it could sustain approximately 300-500 TPS in its current configuration.
The discussion highlighted the complex and often controversial nature of Ripple’s business model and the XRP Ledger. As the company continues to face scrutiny, it remains to be seen how these revelations will impact the perception of Ripple and XRP in the wider cryptocurrency market.
Decreasing Ripple’s holdings of XRP could potentially impact the perception of the asset’s centralization, which may, in turn, affect the ongoing lawsuit between Ripple and the U.S. Securities and Exchange Commission (SEC).
The SEC alleges that Ripple’s sale of XRP constitutes an unregistered securities offering, and the centralization of XRP has been a significant factor in this determination.
Cryptocurrenciessuch as bitcoin (BTC) are considered decentralized due to the large number of independent miners and nodes participating in their networks. This has led to the SEC deeming the most decentralized of those assets commodities rather than securities, exempting them from securities regulation.
However, Ripple’s large holdings of XRP alongside its high degreee of involvement with the network have raised concerns about the level of decentralization in the XRP ecosystem, fueling the SEC’s allegations.
If Ripple were to decrease its holdings of XRP, it might weaken the argument that XRP is more centralized. By reducing its control over the asset, Ripple could potentially distance itself from the notion that it has significant influence over the price and distribution of XRP.
The company is no stranger to such strategies and cryptocurrency old timers remember a time when XRP was only the ticker of a token that used to be called “Ripple” and shared its name with the company.