Ripple: Avoid At All Costs


  • Ripple recently overtook Ethereum as the second largest cryptocurrency by market cap.
  • The payment protocol has some major benefits, but the currency XRP has some huge drawbacks.
  • This article will highlight some of the more questionable aspects of Ripple.

Though less dominant than ever, Bitcoin (COIN) still remains the market leader of cryptocurrency, but in its shadow much is happening. Recently, Ripple overtook Ethereum as the second largest cryptocurrency by market capitalization. Having only written about Bitcoin previously, I think Ripple deserves some attention at this point. This article will highlight why I think this cryptocurrency - unlike Bitcoin or Ether - should be avoided by investors and speculators.

What is Ripple?

Ripple is both a digital currency and a payment protocol, created by the company Ripple Labs. Here is explained in an easy way how the payment protocol of Ripple works. Basically, IOUs are exchanged between agents in a chain which is connected by trust. The currency about which we are talking right now, ripple (XRP), is a currency of last resort in these chains which is only used when trust is lacking: a counterparty-free currency. To avoid confusion, I will refer to the cryptocurrency as XRP in this article, to the protocol as Ripple, and to the company as Ripple Labs.

rippleIn Ripple, it is possible for users to make payments to each other by using crypto transactions in either fiat currency or in XRP. Ripple will keep track of debt obligations in fiat currency, but since the network has no real enforcement power, people need to trust each other to be able to do transactions in fiat currency over the Ripple network. When two nodes of the network trust each other, they can serve as a 'pathway' between other nodes in this network. This mechanism is called 'rippling'. For a nice video explaining this in the situation of banks, click here.

Ripple is used and experimented with by many banks and financial businesses such as American Express (AXP), Accenture (ACN), and Banco Santander (

This article was written by

I am a private investor from the Netherlands in my mid thirties. I have a very long term view and with my own investments I focus on an awkward combination of stable, dividend-paying investments, cryptocurrency, and growth. My favorite holding period is forever, but I am looking for interesting opportunities which might or might not become a success as well. I am writing for Seeking Alpha because I like to share my insights and enjoy the interaction about investing ideas. My writing is mostly about stocks I own, and others I am interested in.I try to approach every possible investment with a great deal of common sense. Every investment has bulls and bears, and I am always searching for a balanced view, which includes aspects of both. I also try to write balanced articles which provide new insights.On the picture you can see my cat, who sadly died a couple of years ago. I like to think that my investing mimics his behavior: most of the time not doing a lot, finding the best places to lie down (enjoying solid dividend-paying investments). But sometimes for a brief period of time he can become very agile and active, just like what I should do when I notice great investing opportunities (though I'm skeptical about market timing).

Disclosure: I am/we are long BITCOIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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