- Industry insiders and network users have decried Ripple’s stake in XRP in the past.
- Blockchain expert downplays the concerns, praises Ripple for its transparency.
Ripple’s handling of its native token, XRP has always been the subject of significant controversy in recent times. Particularly jarring is the company’s decision to hold more than half the token supply in circulation.
Weighing in on the topic, Santiago Velez, the head of blockchain development firm Block Digital, gave some reasons why the firm’s stake isn’t much of a problem.
Ripple’s Transparency is Laudable
Velez’s comments came in an interview with Real Vision. Velez said it’s normal for people to have concerns about Ripple’s XRP holdings. But, he believes the company has done an excellent job of disclosing its token holdings. Most notably, he said that Ripple had put its asset into escrow accounts.
He particularly commended the blockchain firm for being transparent with its holdings. As Velez pointed out, Ripple doesn’t have an obligation to keep its assets in escrow or even disclose things like how many tokens it sells. Still, it does.
Despite the company’s commendable handling of the tokens, Velez also argues a drawback. He believes that holding so much in XRP puts other investors at a disadvantage. Ripple could decide to dump a massive chunk of its tokens on the market, causing a price glut that could wipe out investors’ wealth.
He further drew comparisons with Amazon. CEO Jeff Bezos owns ten percent of the firm’s shares, which amounts to about 53 million shares. If he decides to sell a large chunk, their prices would crash. But, it’s not a wise thing to do. However, Velez also pointed out the difference between XRP and Amazon is that the former has a fixed supply available. He said:
“The difference between [Amazon] shareholders is they could create new shares, they can do stock splits, things like that. Whereas with the total supply known, you can’t do that. All you can really do is play within that 99 or 100 billion XRP. That’s your maximum allowance.”
Comparing Bitcoin with XRP, Velez agreed that the assets have different value propositions. XRP focuses on facilitating payments, and its growth largely depends on how much adoption it gets in that sector. Bitcoin, on the other hand, is mostly used as a speculative asset, and in recent times, a hedge against inflation.
No concern here
Velez isn’t the only one going out on a limb for Ripple. Some company officials have also pointed out that these concerns are unfounded.
Last week, the company’s chief technology officer David Schwartz explained that network validators could force the company to make certain decisions, even if it agreed with them or not. In a Twitter thread, Schwartz praised the democratic nature of the Ripple network, explaining that validators could pretty much force the firm to burn its entire supply of tokens.
Amendments on the XRP Ledger require an 80 percent approval rating from its validators. If they stay above that mark for two weeks, they are automatically activated. For example, validators recently voted to implement the checks amendment, allowing users to write checks for each other for an agreed-upon amount of XRP. The checks can be redeemed at a later period. While Ripple didn’t particularly support the amendment, it passed anyway.