Author: insights4vc Source: substack Translation: Shan Ouba, Golden Finance

In the past week, the price of XRP It increased by about 60.96% from $1.46 to $2.35, with a market value of more than $130 billion. This article will provide a brief analysis of Ripple’s (the company behind XRP) historical development, ecosystem, and recent developments in the tokenization and regulatory engagement of real-world assets (RWA).

Ripple was founded in 2013 as OpenCoin and later renamed Ripple Labs. As a pioneer in blockchain technology, Ripple focuses on cross-border payments and decentralized finance (DeFi). The core of the Ripple ecosystem is XRP Ledger (XRPL), a distributed ledger developed by David Schwartz, Jed McCaleb, and Arthur Britto in 2011 to provide efficient, scalable, and secure global payment solutions that fit in with Ripple's modern financial foundation Vision for the facility.

Latest developments in XRPL

•RWA tokenization breakthrough: November 2024 On the 25th, Ripple announced its cooperation with Archax, the first digital asset exchange regulated by the British FCA, to use XRPL to tokenize Abrdn’s 3.8 billion pound USD liquidity fund. This marks the launch of the first money market fund token on XRPL, further solidifying its leadership in the tokenization of real assets.

•Deepening Regulatory Engagement: On December 2, 2024, WisdomTree joined Bitwise, 21Shares, and Canary Capital in applying to the U.S. Securities and Exchange Commission (SEC) to launch spot XRP Exchange Traded Funds (ETFs). This trend reflects XRP’s growing appeal among institutional investors, as well as the widespread adoption of tokenized financial instruments.

The State of XRP: Q3 2024 Review

Ripple’s quarterly report reveals key developments for XRP and the broader crypto market:

•Legal status clear: Court rules that XRP is not a security, allowing it to be relisted on U.S. and other international exchanges. The distinction between Ripple and XRP is widely recognized.

•Surge in institutional interest: Grayscale launches XRP trust product, while Bitwise, Canary and 21Shares have filed for XRP ETFs. This shows that institutional confidence in XRP continues to rise.

•Macroeconomic impact: The Fed’s 50 basis point rate cut triggered a rally in risk assets, and the crypto market rallied in response. Additionally, the launch of a U.S. Ethereum ETF attracted $552.2 million in inflows.

•Regulatory environment: The SEC appealed part of the ruling in the Ripple case, but admitted that XRP itself is not a security. At the same time, countries and regions such as Japan, the United Arab Emirates, and Hong Kong have adopted friendlier crypto regulations, in stark contrast to U.S. enforcement actions.

•Global expansion: Ripple gains regulatory approval in Dubai and drives crypto innovation through strategic investments and advocacy.

With crypto ETFs leading market growth and the U.S. presidential election approaching, regulatory clarity and industry maturity will be key to the future development of digital assets.

Core Team Members

•CEO: Brad Garlinghouse

•Co-founder and Executive Chairman : Chris Larsen

•XRP Ledger CTO: David Schwartz

•XRP Ledger United Founder: Arthur Britto

•Chief Financial Officer (CFO): Jon Bilich

•Chief Legal Officer (CLO): Stuart Alderoty

•Former Co-Founder: Jed McCaleb (now Stellar Co-Founder)

Ripple Labs, Inc. (XRP) Financing Overview - Total Funding: $294.5 Million

Financing rounds:

1. Undisclosed round

Date :April 11, 2013 Day

Financing amount: Undisclosed

Investors: Andreessen Horowitz (a16z), Lightspeed Venture Partners, Vast Ventures

2. Seed round

Date: May 14, 2013 Japan

Financing amount: Undisclosed

Some investors: GV (Google Ventures), IDG Capital

3. Seed round

Date: November 12, 2013

Amount of financing: US$3.5 million

Some investors: Core Innovation Capital, Camp One Ventures, IDG Capital, Hinge Capital

4. Series A financing

Date: December 3, 2014

Amount of financing: US$4 million

Some investors: Santander

5. Series A financing

Date: May 19, 2015

Financing amount: US$28 million

Some investors: IDG Capital, Blockchain Capital, Digital Currency Group (DCG), Core Innovation Capital, RRE Ventures, CME Ventures

6. Expansion of Series A financing

Date: October 6, 2015< /p>

Amount of financing: US$4 million

Part of the investors: Santander, CME Ventures, Seagate Technology

7. Series B financing

Date: September 15, 2016

Amount of financing: US$55 million

Some investors: SBI Investment, Accenture, Santander, CME Ventures, Seagate Technology, Hinge Capital

8. Series C financing

Date: December 20, 2019

Company valuation: US$9.8 billion

Financing amount: US$200 million

Partial investment By: Tetragon Financial Group Limited,SBI Investment, Bossanova Investimentos, Route 66 Venture

Token Economics

XRP is the native asset of XRP Ledger (XRPL), created in 2012, with a fixed total supply 100 billion, all pre-mined.

•Of which, 80 billion will be allocated to Ripple Labs and 20 billion will be allocated to the founding team members.

•In order to stabilize the market and manage holdings, Ripple deposited 55 billion XRP into escrow accounts in 2017, releasing up to 1 billion XRP per month, which is expected to be released The cycle is 55 months.

•Unused XRP will be re-locked and the release time will be extended. As of December 2024, Ripple still holds approximately 37.24 billion XRP in custody.

Ripple’s stablecoin RLUSD

Ripple originally planned to launch the stablecoin RLUSD on December 4, 2024, but it is currently delayed pending regulatory approval. Ripple is working with the New York State Department of Financial Services (NYDFS) to meet strict regulatory requirements and maintain high levels of operational standards.

RLUSD overview:

•First announced: April 2024

•Asset-backed: Fully backed by U.S. dollar deposits, short-term U.S. Treasury securities, and cash equivalents.

•Goal: As an enterprise-grade, compliance-first stablecoin, RLUSD is designed to complement Ripple's cross-border payment solutions and operate in conjunction with XRP.

•Market Outlook: With the stablecoin market expected to grow to more than $2.8 trillion by 2028, RLUSD is considered important to this rapidly expanding field Contributors.

Key Indicators (December 5, 2024)

XRP Ledger: Detailed Overview

Different from traditional Proof of Work (PoW) or Proof of Stake (PoS) blockchains, XRPL adopts a federated consensus model. No mining or staking is required for validators to agree on the ledger state. Consensus protocols are designed to increase efficiency, reduce latency, and reduce computational overhead, allowing for fast transaction finalization.

Validator Network and Unique Node List (UNL)

The XRPL network consists of more than 109 validators distributed around the world. A subset of these validators make up the Unique Node List (UNL), which is critical to reaching consensus. UNL consists of 31 trusted validators, including entities such as Arrington XRP Capital, Bifrost Wallet, Ripple Labs, and XRPScan. While any entity can operate a validator and issue UNL, the default UNL is heavily influenced by Ripple Labs and the XRP Ledger Foundation.

Centralization problem:

Reliance on a default UNL curated by an influential organization raises Questioning the centralization issue. Critics argue that the selection process of trusted validators is not entirely permissionless and could undermine the decentralized spirit of blockchain technology. However, proponents stress that users can autonomously modify their UNL, allowing for a degree of decentralization based on personal trust preferences.

Consensus Process

The consensus process in XRPL occurs through iterative rounds, in which validators propose and agree on a set of transactions to be included in the next ledger version. The process includes:

Proposal phase: the verifier submits the proposed transaction set.

Voting phase: Validators adjust their proposals based on proposals received from their UNL peers.

Consensus: Once majority (usually 80%) agreement is reached, the transaction set is applied to the ledger.

Ledger verification: The verifier publishes signature verification information containing the new ledger hash value to confirm the consensus.

This mechanism ensures that all participantsNote the state of the ledger and the order of transactions without the need for resource-intensive mining activities.

Transaction speed, fees and account reserves Transaction speed

There are significant differences in transaction speed and capacity across different blockchain platforms. XRP processes transactions in 3 to 5 seconds and supports a throughput of approximately 1,500 transactions per second (TPS). Solana achieves sub-second transaction speeds with a maximum capacity of up to 65,000 TPS. In comparison, Bitcoin takes over 10 minutes per transaction and processes 5 to 6 TPS, while Ethereum processes transactions at 13 to 15 TPS.

Transaction Fees

XRPL has extremely low transaction fees of approximately 0.00001 XRP per transaction. This low cost makes it economically viable for users who make frequent transactions and small payments, in line with the ledger’s goal of facilitating efficient value transfers.

Trust limits and reserve requirements

One ​​unique aspect of XRPL is the use of trust lines for token management. To activate a new XRPL account, users must reserve at least 10 XRP. Additionally, an additional 2 XRP is required for each unique token type held in the wallet. These reserves serve as an anti-spam measure, preventing ledger bloat and blocking malicious activity.

Trust line function:

Bilateral agreement: The trust line acts as a link between two accounts Bilateral credit agreement that defines the balance and trust parameters of each token.

Consent-based token receipt: they ensure that no account can impose tokens on another account without consent, thus maintaining user ownership of the assets received control.

Transaction control: Trust lines can implement functions such as freezing assets, requiring authorized transfers, and setting a "no ripples" flag to prevent unexpected balance adjustments.

Ripple Mechanism

Rippling in the XRP Ledger (XRPL) facilitates efficient net settlement by adjusting token balances between interconnected trust lines, thereby bypassing Direct involvement of the issuer. Users can control this feature:

Enabled: Ideal for intermediaries such as market makers to enhance liquidity.

Disabled: buildRecommended for users seeking to prevent accidental balance adjustments.

This flexibility ensures that web engagement is tailored to user needs.

Hooks for enhanced functionality

Hooks are lightweight WebAssembly (WASM) code that enable programmable functionality such as transaction automation, compliance checks, or payment modifications . Hooks are deployed on the Xahau network (XRPL’s sidechain) to enhance programmability while maintaining mainnet stability.

EVM compatible sidechain

Developing sidechains compatible with the Ethereum Virtual Machine (EVM) aims to:

Attract Ethereum developers and dApps.

Achieve cross-chain asset transfer through bridging solutions such as Axelar.

Currently in beta, this sidechain uses XRP as gas, positioning XRPL for broader blockchain interoperability.

Native AMM integration

XRPL’s automatic market maker (AMM) can conduct decentralized token transactions and liquidity provision directly on the ledger, supporting:< /p>

Liquidity pool for token pairs.

Participate in decentralized finance (DeFi) without external dependencies.

This native AMM enhances XRPL’s appeal in the DeFi ecosystem.

Detailed explanation of XRP ledger consensus protocol

The consensus mechanism is the backbone of the decentralized payment system and can Ensures all participants agree on the state of the ledger without the need for centralized control. The XRP ledger consensus protocol emphasizes efficiency, security, and resilience to failure modes.

Main features

Ledger protocol: Ensure consensus on the latest status and transaction sequence.

Decentralization: It operates without a central authority and avoids single points of failure.

Robustness: progress can be made even if participants change or misbehave.

Safety first: Prioritize correctness and stop the process of validating incorrect transactions when an interruption occurs.

Efficiency: Avoid the energy-intensive processes typical of Proof-of-Work (PoW) systems.

Double-spending prevention

To prevent double-spending, XRPL orders transactions in a deterministic manner. Only one of any conflicting transactions will be verified, eliminating the need for centralized dispute resolution.

Ledger structure

Each ledger version includes:

Current status: account balances and objects .

Transaction set: Transactions applied to previous ledgers.

Metadata: details such as cryptographic hashes and ledger indexes.

This structure creates an immutable history, with each ledger containing the complete current state for quick verification.

Trust-based verification

Participants form a unique node list (UNL) and trust the verifier not to act maliciously. This trust model underpins the security of the system: validators only influence those who trust them.

The consensus process includes:

Proposal: The verifier submits the transaction set.

Polling: Validators adjust proposals based on input from their peers.

Consensus: Absolute majority agreement applies to transactions.

Verification: The verifier signs and publishes the new ledger.

Fault tolerance and security

Validator failure: Handle up to 20% of failed validators; if failure exceeds 20% but still below 80%, stop to Ensure completeness.

Resistance to Sybil attacks: The impact of trust-based and manual UNL selection limits the impact of false identities.

Invariant checking: reject transactions that violate the rules, e.g. Unauthorized XRP creation

Adaptive fee mechanism

Validators dynamically adjust transaction fees and reserve requirements to balance accessibility and network protection. Key parameters include base transaction fees, account reserves, and owner reserves, and decisions are reached through median voting.

Enhance Active: Negative UNL

To maintain progress during interruptions, Negative UNL temporarily excludes unavailable validators, adjusts quorum thresholds, and reintegrates them upon recovery.

Ripple: Regulatory and Legal Developments

Ripple has faced regulatory challenges throughout its operating history, reflecting the complexities of navigating the ever-changing legal landscape for blockchain and digital assets

Key milestones. :

May 2015 5th: Ripple was fined $700,000 by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) for violating the Bank Secrecy Act, including operating as an unregistered Money Services Business (MSB). Ripple agreed to implement compliance measures and enhance its protocols. .

June 13, 2016: Ripple received an award from the New York State Department of Financial Services. BitLicense, becoming the fourth company to obtain this license

September 2017: Blockchain company R3 filed a lawsuit against Ripple, demanding execution for $0.0085. Agreement to buy 5 billion XRP. Ripple countered that R3 was speculative as XRP's value soared. The dispute was settled in September 2018 under undisclosed terms. style="text-align: left;">February 2020: The Financial Times reported that Ripple’s main partner MoneyGram received 5,000 from Ripple before adopting an XRP-based liquidity tool. million. Ripple is offering these tools for free and offered a total of 89 in Q4 2019.$00,000 subsidy. XRP sales are considered the main driver of Ripple’s profitability.

December 22, 2020: The U.S. Securities and Exchange Commission (SEC) charged Ripple and its executives Christian Larsen and Brad Garlinghouse with an unregistered securities offering involving XRP $1.3 billion raised. Ripple disputed the charges, and a court later limited the SEC's access to the defendants' extensive bank records.

July 2023: A U.S. District Court rules in a landmark ruling that XRP sold in programmatic trading on cryptocurrency exchanges does not constitute Securities under the Howey test. However, institutional sales and financings involving XRP can be considered securities. Judge Analisa Torres issued the ruling after two years of litigation.

October 2023: The SEC drops its lawsuit against Ripple executives Garlinghouse and Larsen, marking a partial resolution of the case.

June 2024: Ripple reveals that its legal defense against the SEC has exceeded $100 million, highlighting the financial strain of prolonged regulatory scrutiny.

Conclusion

XRP’s recent market capitalization surge to $50 billion reflects renewed interest, but concerns remain about its long-term institutional adoption and regulatory challenges . Ripple’s advancements, including tokenized financial initiatives and ETF applications, demonstrate progress but also face obstacles, particularly in navigating complex legal and global frameworks. While the SEC’s ruling clarified XRP’s status in some cases, uncertainty remains, highlighting the need for cautious optimism about its role in the evolving financial ecosystem.