The relationship between Ripple and its digital currency, XRP, has been the subject of much debate and confusion. While Ripple is adamant that it functions independently to XRP, it currently holds roughly two-thirds of the total supply.
Now, things have become even more complex after a recent tweet by Cory Johnson, Ripple’s Chief Market Strategist, that equated the company’s relationship to XRP as akin to global energy giant Chevron’s relationship to oil, a naturally occurring resource.
Ripple’s relationship to XRP is akin Chevron’s relationship to oil. We have a lot of it, we believe it’s a superior technology and we support its many uses — for billions of reasons. But we don’t have all of it, we don’t control it and we aren’t it.
— Cory Johnson (@CoryTV) October 4, 2018
It is difficult to understand this comparison on a few different levels.
Chevron (CVX) is not the creator of oil but instead leverages a number of different approaches to strategically acquire land resources for extraction. For instance, the company is constantly purchasing deepwater leases and conducting well exploration projects across the United States and abroad. When Chevron does strike oil (or gas) on these lands, they do in fact “control it.”
Additionally, in order for oil to gain commercial value to become a “superior” asset, it must go through significant multi-step processing to produce the company’s various end products. All of these activities carry with them significant operational costs, which amounted to more than $95 billion in 2017 alone.
Now, saying that a pre-mined cryptocurrency that is instantly granted value based on speculation (this qualification can be applied to most cryptocurrencies) at relatively minimal operational costs is equivalent to the energy industry is misguided at best.
The continued lack of clarity from the Ripple team has had ramifications on an institutional investment level, as a recent survey showed that 28% of institutions believe XRP makes the least sense of any cryptocurrency and, notably, no institutions surveyed picked it as their favorite cryptocurrency.
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.