Ripple, a developer of enterprise blockchain technologies for payments, has taken the 28th spot on CNBC’s Disruptor’s list. It’s the first time the company has appeared on it. The ranking caps several years during which a who’s who of venture capital funds have invested in Ripple stock — pushing the valuation to about $10 billion.
The founding of Ripple is a complicated story. The roots go back to 2004 when computer programmer Ryan Fugger started a project with the not-so-modest goal to bring about a new kind of global financial system. In his vision, it would be a decentralized system, beyond the control of sovereigns. The first core piece of technology was RipplePay that leveraged the internet to help extend credit.
While this was gaining adoption, a group of software developers and tech entrepreneurs — Jed McCaleb, David Schwartz and Arthur Britto — began the development of OpenCoin, a sophisticated platform to improve bitcoin transactions. Verification was not based on mining but instead on the feedback from a global community of users.
To ramp up the operations, the founders recruited Chris Larson to served as CEO. He was certainly a good choice, a pioneer in fintech who created E-Loan in 1997 and eventually took it public. He also co-founded Prosper, which was the first peer-to-peer lending platform in the U.S.
In 2012, Larson would merge RipplePay and OpenCoin. It would ultimately form Ripple. The focus would be on the development of XRP, which is essentially a settlement and remittance network for cryptocurrencies.
How Ripple Works
While the overall global financial system has seen much innovation, the global payments piece of it is still quite antiquated. The problem is that there are a myriad of differing systems. As a result, payments are often expensive, slow and often unreliable.
But this is where Ripple comes in. Its platform makes the process as easy as sending an email, kind of like PayPal (NASDAQ:PYPL). This is possible because of sophisticated applications of blockchain technology. There is also a messaging system that helps to streamline the process.
Ripple has been aggressive in attracting buy-in, with more than 300 providers in a network that spans across over 40 countries.
One of the marquee customers is Banco Santander (NYSE:SAN), the global bank with 140 million retail and commercial customers. Using Ripple, the company has built its own global payments system, called One Pay FX. It allows for instant to same-day low-cost payments. By comparison, the traditional approach can take anywhere from three to five days. One Pay FX has been launched in six countries and payments are available in over 20 countries.
Yet perhaps the most important relationship is with MoneyGram International (NASDAQ:MGI). It’s actually the first money transfer operator to use blockchain at scale. All in all, this is a major validation of the Ripple platform, showing proof of how it could transform the payments industry.
Invest in Ripple stock?
Back in December, Ripple raised $200 million in a Series C round of financing. The lead on the deal was Tetragon Financial (Other OTC:TGONF) and there was participation from SBI Holdings (OtherOTC:SBHGF) and Route 66 Ventures. At that point, the total market capitalization of XRP tokens made it the third-largest cryptocurrency market capitalization behind bitcoin and Ethereum.
Even though the blockchain industry was slumping at the time, Ripple was bucking the trend. For 2019, there was a 10x growth in transactions. The company also announced Xpring, an open developer platform that allows for the creation of apps to send and receive payments in any currency and on any network.
So might there be a chance for anyone to invest in Ripple via an IPO? Perhaps so. The market for new offerings is particularly hot right now and Ripple’s market opportunity is massive, as the momentum continues to be strong.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.