Why Ripple needs so much XRP
Jul 10, 2018
Whenever I hear the term "Lightning Network", I have to chuckle. It reminds me of when I put fire stickers on my wagon as a kid, thinking it would make that death trap go faster; hell it looked like it was going fast even when not moving! But, no matter how many stickers I put on it, nothing would prevent my getting absolutely rekt every time I'd spin out halfway down the hill. I'm sure my parents bought it for me thinking I would kill myself. I hope they like the nursing home I picked out for them.
When you think of currency inflation, typically what comes to mind is stuff gets more expensive to buy, which is true and significant, but that's because most of us sit well below the top of the economic pyramid, largely living check-to-check, and we all know that income lags behind cost of living so any increase in prices means less in our savings account. Inflation sucks!
Governments already print cash at a constant rate, leading to a minimum rate of inflation, but when you compound that with rabid money printing during economic crisises, now we have set in motion even further latent inflation that takes years to reveal itself! Oh how we wish we could just keep our money forever and not have it lose value..
It's easy to say that inflation is a bad thing, a means to keep the pressure on the workforce to keep working harder and harder. Why would the government do this to us? Well, it's not entirely 'to' us that they create inflation, there are other good reasons that do benefit us. For one, it gives the government more money to stimulate the economy with (creating jobs), it also helps the government control its spiraling debt, but here's a very important aspect that probably gets overlooked the most: it discourages money hoarding.
What I mean by this is, inflation incentivizes spending, because otherwise money loses value over time. Think about this for a minute. I know it's normal to want to be able to lock away value forever, but hoarding money just creates scarcity and makes money more valuable than it needs to be. Without inflation, if someone, like the 1%, kept all their cash in a safe, they would actually be 'profiting' just by keeping it, so this type of passive investing would discourage their spending, which suppresses economic growth. This makes the rest of us work harder for the remaining circulating cash (aka making it more valuable), magnifying the divide between the rich and poor.
Inflation gives the government the means to 'take' value away from hoarders. Without inflation, wealth rapidly accumulates at the top and effectively creates an upside-down pyramid; which is unsustainable because it literally translates into slavery of the lower classes in the most literal definition. Without inflation, our economies inevitably become a pyramid scheme. Virtually all governments issue their own fiat currencies and they control those currencies with inflation. It works, and like it or not, we need it.
Admittedly, all currencies exhibit the same potential for being classified as a pyramid scheme, but what undoes this perception (at least legally) in the context of fiat, is that the government can inflate away the value of these concentrations of fiat, effectively taking wealth away from hoarders and giving it back to the government, and theoretically the people. The option to inflate for the greater good is what differentiates a currency from a pyramid scheme.
Let me put it in sparkling neon for you:
Inflationary assets = sustainable
And then came...crypto.
4 million Bitcoins lost. 2 million stolen. 21 million maximum coins. Millions of anonymous accounts. Demand increasing, scarcity continues to accelerate.. Every time Bitcoin goes up in value, another exponential wave of value moves up the pyramid ranks with nothing to stop it; it's PROFOUNDLY deflationary.
I remember when Bitcoin first hit $1000 in 2013; it seemed impossible, scary even, that sooo much value could be sitting in the hands of early adopters. I was actually relieved when it crashed so hard, because it really meant that $1000 was too insane to be sustainable with the degree of lopsided Bitcoin ownership.
Fast forward to today, even post-crash, and Bitcoin is now miles above scary. Years of drug-cartel infusion, whale market manipulation, and money laundering, has positioned some Bitcoin holders into what I believe is the most concentrated centralization of wealth of any self-purported "decentralized" asset paradigm ever created. And there's nothing we can do about it. Most Bitcoins are in very few hands.
Many claim that exchanges constitute the 4% of Bitcoin addresses holding 96% of Bitcoins, but that's ignorant. Cartels do not hold their coins on exchanges. Neither do long-term investors. It's a small fraction of that 4% that could be attributed to exchanges, and even 'within' those exchange accounts, you can be guaranteed the whales own the lion's share of exchange-listed Bitcoins as evidenced by the market manipulation we're all aware of. I'd wager that the reality of Bitcoin distribution would make the normally perverse fiat distribution chart (e.g., the 1%) almost seem relatively reasonable.
The truth is, without inflation, there's no way to redistribute Bitcoin funds equitably. It becomes, in the truest sense of the term, a pyramid scheme. There is no incentive to spend Bitcoins, not only because of the high costs, unpredictability of transfer times, and never-ending heists, but also because the most profitable Bitcoin use case has proven itself to be hoarding, by far.
However, mathematically speaking, Bitcoin has a date with fate. It can only go so high before the early-adopters become trillionaires, and this imbalance implodes. The top-heavy Bitcoin has to fall over eventually, and once it starts teetering (or has it?), there will be a huge rush for the heavy-holders to cash out.
Let me put it in glittering laser for you:
Deflationary assets = pyramid scheme
And that brings us to XRP
XRP is also deflationary, right?... Or is it? On the surface, it's easy to say, well, it has 100 billion coins, and no more will ever be created, and coins are constantly being lost and burned, so it's deflationary! Tada! Here's your cookie.
But, interestingly enough, more than half of the total supply remains locked up. Many people cry up and down that it's Ripple's greedy stash for them to profit from, but those in the financial industry immediately recognize what that lockup represents: economic policy.
It's a bit deceiving, because the escrow amount is also a finite supply, and only appears to be about 5 years worth, but here's the thing, Ripple doesn't spend everything that comes out of escrow each month, so the rate of consumption is nowhere near the maximum potential, and lots of it just gets re-escrowed, but more importantly, they'll spend less and less of each month's allotment as XRP becomes more valuable, effectively stretching the escrow into infinity if necessary. Don't think for a second there wasn't some very intentional calculations that went into determining how much XRP, how often, and for how long they need to operate as the XRP 'feds'.
Not only is it Ripple's specific targeting of banks to be major XRP holders (similar to how the government allocates freshly printed money to banks when it inflates fiat currency), but it's Ripple's ability to 'dictate' the rate of XRP distribution that allows them to somewhat emulate 'inflation' for XRP; in effect, dampening the force of hoarding by flooding the market with new XRP at rates commensurate with the goal to suppress centralization of XRP.
This requires slow price appreciation, and very targeted distribution. Put another way, the beneficial function of 'inflation' has been reinvented into the act of intelligently distributing the escrow. No other coin's creators, NONE, have demonstrated this incredible foresight and economic wherewithall demonstrated by Ripple, Inc.
Some would argue that Bitcoin's PoW mining awards acts in a similar fashion of inflation, however, Bitcoin's regular cadence of new coin infusion statistically mostly lines Chinese miners' pockets, is also insufficient to act as any meaningful inflation, and is too automated/predictable to act as a form of economic policy, no more than a perpetually open faucet can control how much water is in the swimming pool.
Without the equalizing effects of inflation, Bitcoin will implode with mathematical certainty; the signs of cataclysmic Bitcoin whale fear-dumps are all around us; the upside down pyramid is too top-heavy.
Meanwhile, XRP will avoid a similar demise because Ripple will inflate away systemic risk of hoarding, just like the feds inflate us out of outright slavery. The only sustainable coins will be those that can disrupt concentrations of wealth from falling into the hands of the few, and only Ripple has this problem already figured out.
Of course, this 'war-chest' approach isn't popular within the greedy self-serving Bitcoin maximalist simpleton tribe. Most of these troglodytes can't understand a single detail of Ripple's overarching strategy, instead focusing on vaporous buzzwords like 'centralization' to chastize XRP, even though every promised virtue that Bitcoin failed to materialize can easily be accomplished with XRP; literally everything. Such incredibly ignorant people, standing on the Titanic screaming, "Yer boat sucks!!"
Alas, surely Ripple knew from the beginning how maligned they would be by the crypto-verse when putting out a coin while hanging onto such a large share, but really, none of that matters because the people complaining the loudest about XRP's centralization are the least influential in the big picture. I can't wait to hear them after XRP does accomplish true decentralization in the coming months.
Bitcoin maximalists are still playing with Lightning crayons while hundreds of banks line up for a taste of Ripple's tactical nuke. Like the gods on Mount Olympus, the world of high finance has few portals visible to common people, but it's literally everything else outside your field of view, the 99% of big business we don't see. They have already said no to Bitcoin, and they've already said yes to Ripple. They don't communicate that well to us, but we'll feel it soon enough. The greatest upset in crypto history is unfolding right before our eyes, folks. It will be dramatic. I will be naked.
Release the Kraken..
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