The ledger XRP trades on supports several different types of assets. XRP is the native token. It has no counterparty and no backer. The token was created out of nothing, but it when it was created, it had no value. Its value was created by years and years of hard work by over a hundred people.
You're right about Ripple or the Ripple protocol not creating ex nihilo money but aren't the Ripple IOU (which I don't know how they're called) aren't those IOU back by anything and possibly fiat currency?
The public ledger XRP trades on does support non-native assets that are effectively IOUs backed by fiat. It has a built-in exchange system to allow these assets to be traded for each other or for XRP and to allow cross-currency payments.
More fundamental than this, who runs the ripple network?
Who runs bitcoin? Whoever wants to run a server runs one. Whoever wants to run a validator runs one. Network governance is by the stakeholders, more or less like it is in bitcoin. Right now, Ripple is the largest stakeholder, but we are working as hard as we can to change that and we expect the recent growth to bring in new stakeholders.
Will the ripple network still be running if Ripple Inc goes bankrupt?
Good question. I don't know. We have no secret sauce. Others could keep running it if they wanted to. But nobody could force them to. I suspect exchanges are making enough money now that they might keep it going without us. It's hard to say. Over time, XRP will become less and less dependent on Ripple. But we're still in the building phase and it's still our baby, at least for a little bit longer.
Can Ripple Inc create more ripple than exist today whether or not they've gone bankrupt?
Not without doing something comparable to what you would have to do for bitcoin miners to raise the block reward. We would have to build broad community support and risk (and probably cause) a hard fork.
No system can prevent a supermajority of people from changing the system. They can, if all else fails, just build a new system and declare the old system dead. The minority can, of course, if they want continue using the old system.
There is, of course, no code in rippled currently to permit the creation of new XRP, just as there is no code in any bitcoin implementation I know of that lets you raise the block reward. If some small group of people introduced such code, everyone else would just ignore them.
This is a very enlightening answer. Thank you.
The recent price rise still remains pretty incomprehensible in the light of the first 2 quotes I provided in my previous comment.
As I understand and because of your position in Ripple Inc it is understandable that here and now is not the place for you to very seriously discuss this matter.
Thank again for enlightening me on the rest David.
I too find the recent price rise nearly incomprehensible. I don't believe everyone's just buying because everyone else is buying because if that were true, the first serious pullback should cause a crash. We've had 12 pullbacks inside this rally.
I do think XRP was severely undervalued for a very long time. The price and volume was low enough that it wasn't worth most people's trouble to even learn about it. Once the price and volume reaches a certain level, people think "what is this XRP thing?" and then they do become more educated.
I think another possibility is that, for almost any coin, we can imagine two possible outcomes: one in which nobody uses the coin because nobody else uses it and one in which everyone uses the coin because everyone else uses it. The rally makes that second outcome more likely for XRP. So, in a sense, the rally can be its own rational justification.
I think we had a perfect storm. Ripple had a lot of good news at the same time there was a huge surge in the entire sector. At the same time, bitcoin is being increasingly perceived as having governance issues and transactions are expensive and take a very long time. So once the value and liquidity was there, people could see XRP as working just like bitcoin, but faster, cheaper, and more reliable.
I don't pretend to know that's what happened though. As I said, I do find it nearly incomprehensible.
I don't know exactly the cost of transaction on the Ripple network and how this plays out in regard to the price rise to really begin to make sense of it.
I do get your point on the fact that the first pull back which should create a crash but nonetheless we cannot ever be sure that market sare always rational on short period of time.
But thanks again for your further comment. It was very friendly and pretty unexpected.
You're welcome. I definitely agree that it's very hard to draw any conclusions. I have heard good arguments that these markets are almost never rational and good arguments that it's almost impossible for these kinds of markets not to be rational. I tend to lean towards believing they're mostly rational due to the wisdom of crowds putting their own money at risk. But honestly, it's just a gut feeling.
I agree. There's been so much money put in Ripple at this point it would be wild to think those very large investors haven't given it all the thoughtful consideration those kind of investments need.