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Ironically, this could increase the exchange rate for XRP. Ripple controls a large block of uncirculated token that it sells. With this legal action, I suspect

by aazaa 6y ago

Ironically, this could increase the exchange rate for XRP. Ripple controls a large block of uncirculated token that it sells. With this legal action, I suspect that supply will no longer be entering the market. Unlike Bitcoin, which issues new currency units through mining, XRP is issued by Ripple. The case against Ripple appears to revolve around this point: is the XRP token a security?

spottybanana 6y ago
XRP is a security, so is Ethereum, as both have been issued to collect initial funding. Bitcoin is not a security because it hasn't been issued to collect funding. To me the distinction is very clear and simple. However if I really needed money I still would probably issue an ICO and claim it is not a security because there is a big possibility that it will go unnoticed as SEC goes only after the bigger fish.
- agency 6y ago
  The SEC disagrees re: Ether https://www.axios.com/sec-official-ether-is-not-a-security-928bd2ee-0891-4903-a12e-4457e617b4c7.html https://www.axios.com/sec-official-ether-is-not-a-security-9...
  - polyomino 6y ago
    Ethereum does not follow the SEC's definition of "decentralized": If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract. https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 However, in Ethereum's case, it is designed to literally implode due to ice age if Vitalik doesn't intervene. The SEC was probably not cognizant of this fact when they made their statement. https://ethgasstation.info/blog/what-is-ethereums-ice-age/ https://ethgasstation.info/blog/what-is-ethereums-ice-age/
    - bhaak 6y ago
      The existence of Ethereum Classic disproves your assumptions of Vitalik's unlimited power over the course of the development of Ethereum.
      - polyomino 6y ago
        the existence of Ethereum classic doesn't affect the governance of Ethereum in the same way that stellar does not make a difference to the governance of ripple.
        bhaak 6y ago
        Stellar is more like LTC as McCaleb took Ripple's code and forked it. But Ethereum Classic and Ethereum share a common blockchain history and it proves that the community doesn't always follow blindly the proposals of the Ethereum devs. That event (a part of the community splitting of on a hardfork and forming Ethereum Classic) has affected the governance of Ethereum ever since. Not directly, but indirectly. Every hardfork is now checked for contentious changes very thoroughly. The last major change that didn't make it because of that was the proposed change to the mining algorithm (granted, ProgPOW had other problems as well).
      - xorcist 6y ago
        Ethereum Classic is completely irrelevant to the wider Ethereum ecosystem. There is no real world use. It probably wouldn't even exist without Grayscale.
        crazydoggers 6y ago
        You’re missing the point. The point is that the chain can fork at anytime. If the community doesn’t like the difficulty bomb, they fork it. Ethereum classic is an example of that happening. It so happens that the consensus of the majority decided to stick with Ethereum rather than classic. But still no single person or entity gets to decide.
vmception 6y ago
Thats a good point, if demand remains the same. But otherwise this document spells out everything that Ripple/XRP critics have been trying to drill into XRP Army conscripts for half a decade. That Ripple is in the business of selling XRP and uses ambiguity between the context of “ripple” and deflection to say there are third parties using enough XRP to make it scarce in the future. When this was never happening, and to this day is not happening. The complaint mentions a third party that paid to get XRP this year to use a Ripple Labs product. They bought the XRP from Ripple to the tune of $70mm and immediately sold it on the public markets. I think the illusion is shattered with this complaint. But XRP should be able to retain its transfer usage, just back at 2013 price levels.
ArtWomb 6y ago
For an illiquid commodity like gold, I could see this being true. But in the crypto markets, participants have plenty of other choices. More likely is the "fire sale" scenario that was so wonderfully depicted in the film "Margin Call". Early investors are willing to unload at pennies on the dollar just to survive another day ;) Looks like CrossTower has already de-listed XRP from its exchange. Incredible how fast information gets digested in crypto markets! https://thecryptoreport.com/an-sec-victory-in-ripple-case-would-render-xrp-untradeable-market-pros-say/ https://thecryptoreport.com/an-sec-victory-in-ripple-case-wo...
- Scoundreller 6y ago
  XRP holders: So, what you're telling me, is that the music is about to stop, and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism. You: I’m not sure that I would put it that way, but let me clarify using your analogy. What this model shows is the music, so to speak, just slowing. If the music were to stop, as you put it, then this model wouldn't even be close to that scenario. It would be considerably worse.
- jeffbee 6y ago
  Gold futures are very liquid. They are as liquid as stocks. Any commodity future is much more liquid than any crypto.
PragmaticPulp 6y ago
If history is any indicator, the fundamentals don't actually matter. The only things that matter are hype, and people buying/selling according to what people think other people are going to do. Nearly every crypto-related story comes with narratives that it's good for the exchange rate for various reasons, but ultimately the price goes up (temporarily) because people expect other people to expect the price to go up and want to get ahead of it.
- dheera 6y ago
  Yes, so much this. Fundamentals never mattered in crypto. The true winners of crypto will be the ones who can come up with better models of human nature and hype, and all the factors at play, and leverage that to their success, just like the true winners at casinos are those who can learn to count cards, except with crypto they won't be able to kick you out. It's also a market where market manipulation and insider trading is fair game, and that needs to be modelled in as well. It's an interesting time we live in, and it's an interesting anarchic economy with its own interesting set of problems to solve.
  - pas 6y ago
    Not even centralization? What happens if the SEC simply confiscates the servers? Wouldn't trading simply cease completely rendering all XRP instantly useless?
- drcode 6y ago
  I still think there's a pretty clear correlation between technical innovation of cryptocurrencies and their market cap, even though there are certainly exceptions to this rule (ripple being the prime exemplar)
- WJW 6y ago
  In the short term, the market is a voting machine. In the long term, it is a weighing machine. If there is "real" value there it will be reflected in the price and if there is not, that will be reflected in the price as well. The problem is that humans are impatient and even "short term" may be a couple of decades before it all shakes out.
boh 6y ago
Or XRP can just evaporate since the infrastructure required to actually distribute it will no longer be available once the company goes bankrupt (having to pay the various fines and lawsuits that follow).
- PragmaticPulp 6y ago
  Ironically, the underlying cryptocurrency infrastructure has little to do with the exchange rates. Most traders aren't actually moving cryptocurrency around so much as trading numbers back in forth inside of the exchanges. I suspect that speculators would continue to trade XRP as long as they're allowed to do so on exchanges, but most exchanges are smart enough to start delisting currencies when they get in trouble like this. It's truly fascinating how little the underlying technology of cryptocurrencies matters to the exchange rates and how they're traded.
  - boh 6y ago
    Markets don't actually move the tokens from one wallet to another, the network specific to the currency has to do that. Since Ripple is centralized, if the company goes out of business, the network does too. You will not be capable of trading it at all if that happens.
  - nullc 6y ago
    There have certainly been altcoins trading where during periods where there were literately zero reachable nodes running on the internet for them. Fun fact: Ripple actually lost some of the early history of their ledger! Everything before block 32569 was lost.
  - Animats 6y ago
    Most traders aren't actually moving cryptocurrency around so much as trading numbers back in forth inside of the exchanges. Yes. That's why Coinbase got out of margin trading. They claim the SEC made them do it. But all the SEC did was to say that "delivery" meant delivery to the customer's wallet, not an entry on Coinbase's books. Coinbase was willing to exit margin trading rather than actually pay out.
bhaak 6y ago
Jed McCaleb, one of the founders of what would become Ripple, has still a few billions XRP left (https://cointelegraph.com/news/ripple-co-founder-jed-mccaleb-sold-a-billion-xrp-and-has-47b-left https://cointelegraph.com/news/ripple-co-founder-jed-mccaleb...) and he is selling as fast as he is allowed to (http://jedmccaleb.com/blog/my-settlement-victory-with-ripple/ http://jedmccaleb.com/blog/my-settlement-victory-with-ripple...).
ehmmmmmmmm 6y ago
That would be kind of cool in a sense, because it would do exactly the opposite of what the SEC would want. The SEC may then start to realize that they don't have the power to control the crypto market, and that it's going to blow up on them every time they try to attack. The higher price could also be used to fund better lawyers and lobbying against the SEC. Not necessarily in support of Ripple specifically, but I do think having something that can actually challenge the SEC and reduce them to tears is a good thing. There are lots of things about the capital economy that could use change.
- shawnz 6y ago
  I don't think the SEC wants to control what users can do here, only prevent entities like Ripple from trying to conduct scams. So I think this action actually benefits everyone exactly as intended.

by aazaa 6y ago

spottybanana 6y ago

XRP is a security, so is Ethereum, as both have been issued to collect initial funding. Bitcoin is not a security because it hasn't been issued to collect funding. To me the distinction is very clear and simple. However if I really needed money I still would probably issue an ICO and claim it is not a security because there is a big possibility that it will go unnoticed as SEC goes only after the bigger fish.

agency 6y ago
The SEC disagrees re: Ether https://www.axios.com/sec-official-ether-is-not-a-security-928bd2ee-0891-4903-a12e-4457e617b4c7.html https://www.axios.com/sec-official-ether-is-not-a-security-9...
- polyomino 6y ago
  Ethereum does not follow the SEC's definition of "decentralized": If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract. https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 However, in Ethereum's case, it is designed to literally implode due to ice age if Vitalik doesn't intervene. The SEC was probably not cognizant of this fact when they made their statement. https://ethgasstation.info/blog/what-is-ethereums-ice-age/ https://ethgasstation.info/blog/what-is-ethereums-ice-age/
  - bhaak 6y ago
    The existence of Ethereum Classic disproves your assumptions of Vitalik's unlimited power over the course of the development of Ethereum.
    - polyomino 6y ago
      the existence of Ethereum classic doesn't affect the governance of Ethereum in the same way that stellar does not make a difference to the governance of ripple.
      - bhaak 6y ago
        Stellar is more like LTC as McCaleb took Ripple's code and forked it. But Ethereum Classic and Ethereum share a common blockchain history and it proves that the community doesn't always follow blindly the proposals of the Ethereum devs. That event (a part of the community splitting of on a hardfork and forming Ethereum Classic) has affected the governance of Ethereum ever since. Not directly, but indirectly. Every hardfork is now checked for contentious changes very thoroughly. The last major change that didn't make it because of that was the proposed change to the mining algorithm (granted, ProgPOW had other problems as well).
    - xorcist 6y ago
      Ethereum Classic is completely irrelevant to the wider Ethereum ecosystem. There is no real world use. It probably wouldn't even exist without Grayscale.
      - crazydoggers 6y ago
        You’re missing the point. The point is that the chain can fork at anytime. If the community doesn’t like the difficulty bomb, they fork it. Ethereum classic is an example of that happening. It so happens that the consensus of the majority decided to stick with Ethereum rather than classic. But still no single person or entity gets to decide.

vmception 6y ago

Thats a good point, if demand remains the same. But otherwise this document spells out everything that Ripple/XRP critics have been trying to drill into XRP Army conscripts for half a decade. That Ripple is in the business of selling XRP and uses ambiguity between the context of “ripple” and deflection to say there are third parties using enough XRP to make it scarce in the future. When this was never happening, and to this day is not happening. The complaint mentions a third party that paid to get XRP this year to use a Ripple Labs product. They bought the XRP from Ripple to the tune of $70mm and immediately sold it on the public markets. I think the illusion is shattered with this complaint. But XRP should be able to retain its transfer usage, just back at 2013 price levels.

ArtWomb 6y ago

For an illiquid commodity like gold, I could see this being true. But in the crypto markets, participants have plenty of other choices. More likely is the "fire sale" scenario that was so wonderfully depicted in the film "Margin Call". Early investors are willing to unload at pennies on the dollar just to survive another day ;) Looks like CrossTower has already de-listed XRP from its exchange. Incredible how fast information gets digested in crypto markets! https://thecryptoreport.com/an-sec-victory-in-ripple-case-would-render-xrp-untradeable-market-pros-say/ https://thecryptoreport.com/an-sec-victory-in-ripple-case-wo...

Scoundreller 6y ago
XRP holders: So, what you're telling me, is that the music is about to stop, and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism. You: I’m not sure that I would put it that way, but let me clarify using your analogy. What this model shows is the music, so to speak, just slowing. If the music were to stop, as you put it, then this model wouldn't even be close to that scenario. It would be considerably worse.
jeffbee 6y ago
Gold futures are very liquid. They are as liquid as stocks. Any commodity future is much more liquid than any crypto.

PragmaticPulp 6y ago

If history is any indicator, the fundamentals don't actually matter. The only things that matter are hype, and people buying/selling according to what people think other people are going to do. Nearly every crypto-related story comes with narratives that it's good for the exchange rate for various reasons, but ultimately the price goes up (temporarily) because people expect other people to expect the price to go up and want to get ahead of it.

dheera 6y ago
Yes, so much this. Fundamentals never mattered in crypto. The true winners of crypto will be the ones who can come up with better models of human nature and hype, and all the factors at play, and leverage that to their success, just like the true winners at casinos are those who can learn to count cards, except with crypto they won't be able to kick you out. It's also a market where market manipulation and insider trading is fair game, and that needs to be modelled in as well. It's an interesting time we live in, and it's an interesting anarchic economy with its own interesting set of problems to solve.
- pas 6y ago
  Not even centralization? What happens if the SEC simply confiscates the servers? Wouldn't trading simply cease completely rendering all XRP instantly useless?
drcode 6y ago
I still think there's a pretty clear correlation between technical innovation of cryptocurrencies and their market cap, even though there are certainly exceptions to this rule (ripple being the prime exemplar)
WJW 6y ago
In the short term, the market is a voting machine. In the long term, it is a weighing machine. If there is "real" value there it will be reflected in the price and if there is not, that will be reflected in the price as well. The problem is that humans are impatient and even "short term" may be a couple of decades before it all shakes out.

boh 6y ago

Or XRP can just evaporate since the infrastructure required to actually distribute it will no longer be available once the company goes bankrupt (having to pay the various fines and lawsuits that follow).

PragmaticPulp 6y ago
Ironically, the underlying cryptocurrency infrastructure has little to do with the exchange rates. Most traders aren't actually moving cryptocurrency around so much as trading numbers back in forth inside of the exchanges. I suspect that speculators would continue to trade XRP as long as they're allowed to do so on exchanges, but most exchanges are smart enough to start delisting currencies when they get in trouble like this. It's truly fascinating how little the underlying technology of cryptocurrencies matters to the exchange rates and how they're traded.
- boh 6y ago
  Markets don't actually move the tokens from one wallet to another, the network specific to the currency has to do that. Since Ripple is centralized, if the company goes out of business, the network does too. You will not be capable of trading it at all if that happens.
- nullc 6y ago
  There have certainly been altcoins trading where during periods where there were literately zero reachable nodes running on the internet for them. Fun fact: Ripple actually lost some of the early history of their ledger! Everything before block 32569 was lost.
- Animats 6y ago
  Most traders aren't actually moving cryptocurrency around so much as trading numbers back in forth inside of the exchanges. Yes. That's why Coinbase got out of margin trading. They claim the SEC made them do it. But all the SEC did was to say that "delivery" meant delivery to the customer's wallet, not an entry on Coinbase's books. Coinbase was willing to exit margin trading rather than actually pay out.

bhaak 6y ago

Jed McCaleb, one of the founders of what would become Ripple, has still a few billions XRP left (https://cointelegraph.com/news/ripple-co-founder-jed-mccaleb-sold-a-billion-xrp-and-has-47b-left https://cointelegraph.com/news/ripple-co-founder-jed-mccaleb...) and he is selling as fast as he is allowed to (http://jedmccaleb.com/blog/my-settlement-victory-with-ripple/ http://jedmccaleb.com/blog/my-settlement-victory-with-ripple...).

ehmmmmmmmm 6y ago

That would be kind of cool in a sense, because it would do exactly the opposite of what the SEC would want. The SEC may then start to realize that they don't have the power to control the crypto market, and that it's going to blow up on them every time they try to attack. The higher price could also be used to fund better lawyers and lobbying against the SEC. Not necessarily in support of Ripple specifically, but I do think having something that can actually challenge the SEC and reduce them to tears is a good thing. There are lots of things about the capital economy that could use change.

shawnz 6y ago
I don't think the SEC wants to control what users can do here, only prevent entities like Ripple from trying to conduct scams. So I think this action actually benefits everyone exactly as intended.