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In recent days, the price of XRP has pumped 40%. What is happening? Apparently, the market is optimistic that the company behind XRP, Ripple, will get a favorable outcome from the lawsuit that has been going on since 2020. Or at least, that the uncertainty will finally be over.
What is going on? In December 2020, the American Securities and Exchange Commission (SEC) started legal action against Ripple Labs for selling XRP as an unregistered security. What has happened this month is that both parties have filed motions for summary judgment. In non-technical terms, what they're saying to the court is: you guys have the information. You need to make the decision right now. We can't wait for a full trial.
It's this signal that the end to the uncertainty is coming closer, that the market apparently really likes. Or maybe some parties have inside information about a verdict? It is said to happen coming December.
The heart of the matter: is XRP a security?
The SEC - Ripple case is a lawsuit that could significantly impact the crypto industry as a whole, depending on its outcome. Why is this case so important? Since most crypto currencies were issued with ICO’s, where founders sell what is like shares in a company to early investors (and keep some for themselves), there are tons of crypto projects that have this looming danger of being considered an unregistered security.
The heart of the matter is whether XRP is a so-called security or not. If so, Ripple would have breached the securities laws. Issuing a security comes with all kinds of regulatory requirements, such as quarterly reporting. The SEC uses the so-called Howey Test to determine if something is an "investment contract" and would be subject to securities laws. An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
Bitcoin is not considered a security by the SEC, but instead a commodity. The SEC recognizes the fact that there is no ‘CEO’ of Bitcoin. The power over the Bitcoin network is sufficiently decentralized. Also, having Bitcoin doesn't give you voting rights on the protocol. Nor does it distribute profits to token holders. These things do occur in many crypto projects, and this makes holding coins in them somewhat similar to holding shares in a company: it gives you rights to vote or to 'dividend'.
On the other hand, there are many differences between securities and crypto coins. Owning a crypto token gives you no claim on a protocol's assets. Nor any claim on either current or future cash flows. Not in the same legal sense as proper securities. The SEC just cares so much because crypto's being securities would grant them huge power: it's their domain.
The crypto industry will follow this case with a lot of interest.
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XRP goes green: Ripple plans to become carbon-neutral in 2030
We all know the debate about whether mining is a sin to mother nature and if it is inevitable for blockchain technologies to achieve carbon neutrality. There is most likely no stronger movement in western society than the advocacy for taking climate change seriously and acting accordingly. While the Netherlands is mostly engaged in researching hydrogen as an alternative energy source, Germany decided to shut down its nuclear power plants even in the face of a severe energy crisis. This underlines how important this topic is. How is Ripple planning to become carbon-neutral and how does the XRP Ledger contribute to the fact?
What is Ripple (XRP) and how did it originate?
Ripple is a private software company founded in 2012 by Jed McCaleb and Chris Larsen in California. The unlisted company was first called OpenCoin, but later renamed Ripple. The company began developing the Ripple protocol in 2012, which is a decentralised peer-to-peer (P2P) network that offers banks and other financial institutions a payment protocol. XRP is the native token of the Ripple network and is issued and developed only by the Ripple company. Ripple's open source protocol is already being used by banks and other institutions.
What is the difference between Bitcoin and Ripple (XRP)?
Distributed ledger technologies are not all the same and they work in different ways. In fact, most of the technologies that have emerged over the last few years have been developed with the goal in mind to be different from other already existing projects. At the end of the day, if you like to achieve more speed or more security than the DLT solution that is already available, you have to do things differently otherwise you would end up in the same place. With the hype around Bitcoin, many other DLTs have emerged and this has caused a lot of confusion among many investors and especially beginners. Since Bitcoin was the first cryptocurrency on the market, other cryptos often get compared with Bitcoin. Sometimes this isn’t really helpful because one cannot compare things to each other that are very different at the core of their being. This is why in this article we are going to explore the difference between Bitcoin and Ripple instead of looking at the very few similarities.
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