In an effort to improve its native digital asset’s liquidity, Ripple has committed to placing 55 billion XRP, valued at $22.5 billion at current prices, in a cryptographically secure escrow account at the end of the year, CEO Brad Garlinghouse noted in a blog.
Ripple has recognized the need to address concerns that it will eventually sell its 61.68 billion XRP as it seeks to strengthen XRP’s exchange rate against other currencies.
A Controlling Stake
By securing the largest share of its digital asset, Ripple allows its investors to verify the maximum XRP supply that can enter the market.
The escrow feature enables parties to secure XRP for a specific time period or until certain conditions are met. An XRP sender can place conditions on when a payment completes. The payment stays locked cryptographically until the due date.
The escrow will be deployed to create 55 contracts of 1 billion XRP that expires the first day of every month through 54 months. The XRP becomes available for use by Ripple as each contract expires. Ripple will use XRP as incentives to market makers offering tighter payment spreads and for selling XRP to institutional investors.
Ripple will return unused XRP at a given month’s end to the back of the escrow queue. Should, for example, 500M XRP be unspent at the end of the month, 500M XRP goes into a new escrow account that expires the next month.
300M XRP Per Month
On average, Ripple has sold 300M XRP per month for the last 18 months.
Spencer Bogart, Blockchain Capital’s head of research, said XRP has already expanded tremendously in volume and market capitalization within the 450 billion digital asset market.
Bogart underlines it as a pivotal action, on the heels of significant client traction with financial institutions.
“The lockup provides a level of predictability about XRP supply that is favorable for market demand,” Bogart said.
A Clear Use Case
Garlinghouse claims XRP is the only digital asset with a clear use case, and is the best such asset for payments. Bitcoin, by comparison, has reached its limit for transaction processing and is losing market share. XRP is also faster, more scalable and more efficient.
Ripple is also designed for enterprise use and can be used by institutions for on-demand liquidity for cross-border payments.
Banks and payment providers that use XRP will secure better access to emerging markets at lower settlement costs, Garlinghouse noted. This is the reason Ripple is committed to decentralization of its ledger and to improving XRP’s liquidity.
Mike Belshe, CEO and co-founder of Bitgo, said Bitgo partnered with Ripple due to its strength in bringing financial institutions together. He said locking up 55 billion XRP with a cryptographic supply schedule signals its commitment to creating a healthy ecosystem for XRP applications.
Ripple recently displaced Ethereum to rank behind bitcoin in the list of the world’s largest cryptocurrencies by market cap.
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