Ripple Labs and XRP II LLC have reached a settlement with the R3 blockchain consortium after a drawn-out legal battle over the sale of 5 billion Ripple tokens (XRP) at USD 0.0085 each. The fact that such a large amount of XRP was offered to R3 at such a massive discount reveals the centralized nature of the company.
Apparently, Ripple Labs and XRP II entered into an agreement with R3 to sell up to XRP 5 billion any time before the end of 2019. R3 leads 200 blockchain and distributed ledger technology research firms and companies, and particularly explores the use of such technology for finance and commerce. XRP is a cryptocurrency for cross-border payments, which makes it a good fit for finance and commerce platforms.
Ripple had entered into this agreement to sell XRP 5 billion for only USD 42.5 million when price was closer to that level. Cryptocurrency prices rallied massively, and by September 2017 the deal no longer made sense. During the peak of the crypto rally, the XRP were worth USD 19 billion, and even now after a massive price crash during 2018 they are still worth USD 1.3 billion.
It would be catastrophic for the XRP market for this deal to go through as agreed, so it makes sense that Ripple Labs and XRP II tried to get rid of the deal. There are just under 40 billion XRP in circulation, and the injection of 5 billion into circulation could lead to a major price crash. It is unknown if the lawsuit settlement involved a large amount of cut-rate XRP entering circulation.
This situation highlights the centralized nature of XRP. While there are nearly 40 billion XRP in circulation, there are over 60 billion XRP under the control of Ripple Labs and the Ripple Foundation that are not yet in circulation. This is quite dangerous for investors, since these centralized Ripple entities could legally dump tokens at any time and suck all the money out of the market. This lawsuit is a case of how Ripple can sell billions of its tokens below market rate, which is damaging to its market.
While XRP has consistently been one of the top cryptos, currently #3 with a market cap of USD 10.6 billion, many crypto experts and enthusiasts don’t consider it to be a true crypto due to its lack of mining and centralization of coin supply.
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