Ripple May Beat the SEC Allegations, but Then What?

If technical analysis has anything to say, Ripple (CCC:XRP) is getting ready to make a big move. However, with litigation still pending, it’s anyone’s guess whether that will be a move upward or downward.

A close-up shot of an XRP token with the logo and Ripple in raised text.
Source: Shutterstock

For the time being, it appears that things are looking up for Ripple so let’s be positive and assume that they come out of these proceedings with a slap on the wrist.

 That would be bullish for XRP, which is the altcoin used by the XRP ledger (XRPL).  

The question then becomes: what’s next for Ripple? In my opinion, the answer to that is more significant than the outcome of the lawsuit.

And that’s the question I’ll try to shed some light on in this article.  

Ripple Is Moving into Unchartered Territory 

I see XRP as having a high degree of utility as a conversion tool. However, it raises questions about what else it can do. What would justify a higher value?

Ripple seems to believe that it will find its added value by becoming a vehicle for smart contracts as Ethereum (CCC:ETC) has done.

In June, Ripple’s Chief Technology Officer David Schwartz proposed that Ripple introduce federated sidechains. As CoinDesk reported this would “enable implementation of smart contracts adjacent to the XRP Ledger.” 

That’s both interesting and potentially damaging. I only say this because Ripple had a benefit, at least to me, with its simple, easy-to-define platform. Simply put, it allows individuals and institutions to transfer money across borders and have those transactions settle almost immediately.

The company’s XRP coin acts as a validator/converter (my words) to add trust to transactions.

In trying to become something else, I’m concerned that it will lead to this simplicity getting lost in translation. And Schwartz inferred as much when he wrote that Ripple has resisted smart-contract capabilities because it might compromise its focus on payments.  

However, Schwartz acknowledged that there is significant demand from developers to develop smart contract capabilities on the Ripple ledger.

That demand stems from the growth in decentralized finance (DeFi). As Schwartz writes federated sidechains would allow developers to experiment and specialize on the XRP ledger (XRPL) that acts as its own blockchain. 

“[I]magine the potential to branch out into new functionality by slimming down the XRPL’s features to a specific subset for a particular use case—or even creating a private, parallel network for a permissioned blockchain,” Schwartz wrote. “Federated Sidechains could very well make this a reality.”

According to Schwartz this would allow the XRPL to remain lean and efficient.  

Should You Buy XRP? 

At this point, it’s important to restate that Ripple is the company that operates the XRP ledger. XRP is the altcoin for the network. The value of the altcoin is tied to its use cases.  

So from that standpoint, these federated sidechains could use XRP as their primary asset. Users could seamlessly move XRP from the XRPL to a sidechain and use it just as they would on the main ledger.   

Ripple both fascinates and frustrates me. The first time I wrote about Ripple, I felt the true value is in the company, not the coin.

Ironically, that’s kind of the argument that the company is making to fend off the SEC lawsuit. In the company’s argument, the coin merely facilitates what already existed before.  

Ultimately, I’m not sure what value that gives to the altcoin. There doesn’t appear to be much reason why another form of XRP couldn’t be created. but I wouldn’t take that sentence to the bank.

I just think that to justify a significantly higher price, Ripple needs to address the question of what’s next.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

Article printed from InvestorPlace Media,

©2021 InvestorPlace Media, LLC