We’ve shared our vision of an Internet of Value in which money moves like information moves today. Key to realizing that vision is lowering the cost of payments, especially in emerging markets. Financial institutions can use XRP, the native digital asset to the XRP Ledger, to exactly that end if XRP is highly liquid.
To build XRP liquidity, we have been mindful over the years about how we distribute XRP. Our goal in distributing XRP is to incentivize actions that build trust, utility and liquidity. We engage in distribution strategies that we expect will result in a strengthening XRP exchange rate against other currencies. We have a proven track record of doing just that. Despite this four-year track record we have heard concerns in the market about uncertainty surrounding our ongoing XRP distribution. The root of this uncertainty is the notion that Ripple might one day sell its 61.68B XRP in the market at any time - a scenario that would be bad for Ripple! Our self-interest is aligned with building and maintaining a healthy XRP market.
Today we are permanently removing that uncertainty by committing to place 55 billion XRP into a cryptographically-secured escrow account by the end of 2017. By securing the lion’s share of our XRP, investors can now mathematically verify the maximum supply of XRP that can enter the market.
Here’s how the escrow will work:
The<a href="https://ripple.com/insights/ripple-continues-to-bring-internet-of-value-to-life-new-features-increase-transaction-throughput-to-same-level-as-visa/"> recently launched Escrow feature</a> in XRP Ledger allows parties to secure XRP for an allotted amount of time or until specific conditions are met. For example, Escrow allows a sender of XRP to put conditions on exactly when a payment can be completed, so the payment remains cryptographically locked until the due date.
We’ll use Escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use. You can expect us to continue to use XRP for incentives to market makers who offer tighter spreads for payments and selling XRP to institutional investors.
We’ll then return whatever is unused at the end of each month to the back of the escrow queue. For example, if 500M XRP remain unspent at the end of the first month, those 500M XRP will be placed into a new escrow account set to expire in month 55. For comparison, Ripple has sold on average 300M XRP per month for the past 18 months.
XRP’s rate of supply assuming 50% is used per month.
“Within the $50 billion digital asset market, XRP has already grown tremendously in volume and market capitalization, and this pivotal development comes on the heels of Ripple’s significant customer traction with financial institutions. The lockup provides a level of predictability about XRP supply that is favorable for market demand,” says Spencer Bogart, Head of Research at Blockchain Capital.
XRP is the only digital asset with a clear use case - it’s the best digital asset for payments. While bitcoin has virtually reached its limit to process transactions (and continues to decline in market share), XRP is faster, more efficient and more scalable. Designed for enterprise use, XRP can be used by financial institutions for on-demand liquidity for cross-border payments. Payment providers and banks using XRP will gain greater access to emerging markets and much lower settlement costs, and this is why we remain committed to increasing XRP liquidity and continued decentralization of its ledger.
"We partnered with Ripple because of their strength bringing financial institutions together. Ripple's lockup of its 55 billion XRP with a cryptographic supply schedule is a clear signal that they are serious about building and maintaining a long-term, healthy ecosystem for XRP based applications," says Mike Belshe, Co-founder & CEO of Bitgo.
To learn more about XRP, visit the XRP Portal.
