Ripple Labs, the company behind XRP, has given for free some 1 billion XRP, worth $270 million, to a company founded by the former CTO of Ripple.
Stefan Thomas joined Ripple in October 2012 and stayed there for close to six years until he went off to found Coil.
Coil can be described as Brave, but with XRP (or dollars) and with a chrome extension instead of a browser.
The idea there is people pay $5 to Coil, and then Coil distributes it to websites or youtubers probably based on views, minus costs and presumably some profits for Coil.
You can also write articles on Coil itself and get paid by how many people view it, with earnings here probably amounting to pennies if one goes by previous likewise experiments.
To increases those pennies, a grant has been given to this company by Ripple’s Xpring which says it deploys capital to drive adoption of XRP technologies.
“Xpring has partnered with Coil on a 1 billion XRP grant to bring consumers and creators alike onto Coil’s platform,” they say.
They provide no detail how exactly this grant works. We had a quick look at Coil and didn’t receive any free XRP when we signed up. Nor does it mention anywhere that there’s free XRP on offer.
What we were shown instead is that they expect us to make less than $270 a month as there’s a withdrawal limit of 1,000 XRP per month.
There’s the option of getting paid in dollars as well, with no limit there, making it unclear why XRP is limited.
They have a boosting program where “qualifying creators will periodically receive boosting payments on top of their regular earnings,” with this limited to content posted on the site itself.
Apparently they only paid $10,000 in boosting for May, with the start-up also receiving a $4 million seed investment from Ripple. Making it unclear just how much of this one billion is for the company and how much is for giving away.
“Free” Publicity as a Business Model?
This is just the latest “grant” by Ripple with this astonishing $270 million being quite a huge amount of money to pour into a start-up that doesn’t appear to have a unique value proposition as it’s difficult to see why people would pay this $5 subscription in the absence of major publishers signing up.
The chrome extension could have data value, but people usually get stuff for free in return for data and sometime they even get paid for it.
So if we ignore the “buddy” part, the only way this might make sense is if one accounts for the “free” publicity this “partnership” could create for XRP.
They’re very down there because XRP’s price is not performing well in part because Ripple sold $250 million worth of XRP below market during spring.
At the same time, David Schwartz, the current CTO of Ripple, sold some 3 million XRP in April, worth about a million dollars.
To keep this downwards pressure from falling off the cliff, Ripple basically pays “partners” to generate publicity and also pays the marketing by “partners,” like perhaps even banks.
“The Volume Rebate provides license and integration-fee rebates to RippleNet members once they’ve reached integration and volume milestones by certain deadlines. Depending on the volume processed, these rebates can cover anywhere between 50 to 300 percent of the integration fees and first year’s license fees,” Ripple said in October 2017.
Translated to plain english, that basically seems to say if it costs $1 million to try out some Ripple Network, you’ll be paid up to $3 million.
Apparently some 200 banks have taken them up on this offer, with their site stating RippleNet “makes it easy to connect and transact across its robust network of 200+ banks and payment providers worldwide.”
That may well explain where all this money is going to, with Ripple selling some $2.5 billion worth of XRP since December 2017.
That’s not even the beginning of it. Ripple has stated they pay banks to promote Ripple products, and thus by extension XRP. They say:
“The Adoption Marketing Incentive will match eligible customers’ marketing spend when they promote Ripple-powered products and services to their end-customers…
This incentive is available on a limited, first-come, first-served basis to financial institutions globally and can be earned through XRP or USD. Selling restrictions will apply to customers that elect to receive their rebate in XRP to support healthy XRP markets.”
So now we know why there’s a withdrawal limit on XRP, but not USD. Meaning presumably they’ve opted to be paid in USD because why would they want restrictions. Hence Ripple so keeps selling XRP to pay for these “marketing incentives” and “rebates.”
Monica Long, VP of Marketing at Ripple, said at the time: “Early reception of these XRP incentives in a test phase has been very positive.”
Ripple discloses how much XRP they sell, although sometime incorrectly, but not quite where this money is going exactly.
It’s unclear, for example, just how much was paid in “rebates” or how much exactly was paid in “marketing incentives.”
When they do disclose such costs in a proxy way, there is a tendency to overpay. MoneyGram is just the latest example. They paid $4.10 per share when it was publicly trading at $1.40.
Why? They presumably could have just bought it on the open market and so get perhaps even controlling say as shareholders. That, however, might have not been as flash and might have not gotten as much attention as getting the MoneyGram CEO to say: “Ripple is at the forefront of blockchain technology.”
Sure, so forefront plenty argue they don’t even have a blockchain at all, but sometime this money flushed about does go to good causes.
They donated $30 million to fund teachers’ school activities. A great gesture, with many teachers thanking Ripple.
There’s of course the appearance of Bill Clinton at some Ripple conference, with all of this seemingly designed to buy publicity, and thus make members of the public buy XRP.
Why they would, isn’t too clear because Ripple has some 50 billion XRP left to sell, but a string of announcements regarding RippleNet or Xrapid and all sorts of “partnerships” with ostensibly 200 banks using this thing, may have been one reason why they might have bought.
If such announcements amount to basically paid, then there certainly would be ethical concerns, but it isn’t clear whether there would be legal concerns.
The Securities and Exchanges Commission (SEC) has not yet stated whether XRP is a security, presumably because SEC has been a bit far too busy going after some food app tokenization of $10 million worth, so having little time for the billions of dollars sort.
Nor has CFTC stated much. Nor any advertising regulator. Investors however have taken Ripple to court by claiming it’s a security with the judge probably leaving it to a jury to decide.
If it is designated as a security, then there would be considerable disclosure requirements. Ripple would have to say, for example, just how much a bank may have been paid in “rebates” to try their product, or how much they may have paid for the bank’s marketing.
They would also have to reveal any information that puts someone like Schwartz at an advantage over XRP holders. In addition, if Schwartz knew Ripple labs was to sell $250 million worth of XRP and sold himself first, that would have been insider trading.
Likewise if he or anyone else at Ripple knew some 1 billion XRP was going to market and they sold prior to it being made public, that could have been insider trading too.
In addition there are countless of other regulations that though imperfect, try to prevent cheating.
The alternative is a commodity, like bitcoin or eth. Both however are far more decentralized than XRP which has a “permissioned” blockchain and no Proof of Work, nor Proof of Stake, but proof of what can be called something like: whether nodes that are already validating will allow you to validate as well.
Such nodes get no rewards as far as we are aware, with Ripple running many of them, giving them the ability to decide who can and can’t join the network.
It’s not too clear whether XRP would continue running if Ripple for some reason suddenly ceases to exist.
In bitcoin, there’s not even a foundation. It’s sort of, it “lives” by itself. While in Ripple, because of this permission requirement to ensure a malicious entity does not gain 30% (or so) of the network, Ripple might have to control that much itself.
You can fork bitcoin, as ordinary people have with all sorts of bitcoin flavors out there. However, if investors got fed up with all this Ripple selling and wanted to go to their own network where they burn that 50 billion XRP, it doesn’t look like they can quite do so because it appears you can’t fork XRP.
Defining decentralization is not easy, but the definition we have reached in the context of scalability is whether someone with ordinary resources can fork the network.
If they can’t, then it’s not decentralized because there would be no way of disagreeing with a decision and settling such decision in a manner that preserves your investment by so forking, with the market then deciding.
These technical aspects can give Ripple far too much influence over the network without even accounting the 50 billion XRP.
Hence everything that affects XRP seems to come mainly from Ripple, with no apparent grassroots community of coders that develop the technology.
In its absence, we’re left with just marketing, with a researcher claiming there’s a massive XRP shill army.