Let’s be honest, Ripple and XRP are never far from controversy. 2018 was one of the biggest year for XRP, which currently sits in second place by market cap, ahead of Ethereum, a rival that has proved hard to surpass over the past 12 months. During 2018, Ripple, the company behind the XRP token have been involved in a number of lawsuits that accuse Ripple of selling an unregistered security in XRP. Some investors believe that due to the way XRP is managed, it is a security token and therefore should be regulated by the United States Securities and Exchange Commission (SEC). As it stands, the SEC are still not clear on exactly how XRP should be recognised and therefore, many of these lawsuits are still ongoing.
To help refresh the image of XRP, last year Ripple underwent a rebrand of XRP. Prior to this, the token was more widely known as ‘Ripple’, so, Ripple rebranded and created a new logo for XRP in order to affirm that XRP was their token and not a share of Ripple’s company, which is what a security would be, in essence. The rebrand was designed to make it clear to the community that XRP was just a small part of the Ripple project, which as we know is more focused on building blockchain solutions for banks and industries that are working on an international scale. Products such as xCurrent, xRapid and xVia. The majority of these products have no association with XRP, which is why Ripple found the rebrand necessary.
What’s the real problem
The real problem within all of this is that Ripple still own a large amount of XRP. XRP is not a mineable cryptocurrency, therefore all of the tokens already exist, the majority of which are owned by Ripple. Now, this is spread across a number of holders in order to encourage decentralisation but the fact of the matter stands that Ripple, in theory control a huge share of XRP.
There's more though, this isn’t just causing problems with how the community see XRP and with how the SEC are eventually going to categorise XRP, it also makes Ripple vulnerable to what is being called a ‘Hostile Takeover’, a move that could in turn see a huge majority of XRP tokens move into the control of a lone entity, without any illicit hacking or illegal activity.
A recent article by BTCManager goes on to explain what makes this possible, in light of recent reports that suggest Valor Foundation, a non-profit company from San Francisco could be lining up to execute such an attack on Ripple:
What is a Hostile Takeover?
According to BTCManager, Andy Bromberg, the President of CoinList discussed this idea back in March 2018 and provides the following example of what a Hostile Takeover will look like:
“A company that launched a competing cryptocurrency to an existing project would first need to incentivize miners to mine their token. Next, the company would need to alert existing holders of their target cryptocurrency about the launch of their new network that will be created out of a fork of their cryptocurrency and convince them of the benefits of joining its new user base and community. Then, the company would fork the code of its target cryptocurrency and simultaneously create an incentive pool.”
“The funds in the incentive pool would then be airdropped to holders of the old cryptocurrency as a reward for burning their old tokens. The more old tokens would be burned by a user, the more of the new token they would receive. That way, the more users who join the new network, the more users of the old network are incentivized to follow. Finally, the company conducting the hostile takeover could sell accumulated holdings of the old cryptocurrency to deliver the final blow to its takeover target.”
A move like this could then go on to gain such mass, that the new cryptocurrency could go on to take over the old network, totally running the original crypto project into the ground.
So, now we can see how a takeover might be possible, we want to explore what role the Valour Foundation have in this. Valour are allegedly looking to raise millions of dollars in order to drive down the price of XRP by establishing a debt instrument scenario. After the price is driven down, Valour would attempt to fork the XRP code and then distribute their tokens to willing XRP holders. The last step would be to incentivise XRP holders to then sell their tokens in exchange for the new Valour token. This all comes from reports that suggest Valour want to become the biggest players in the remittance space, wiping out XRP would be a huge step towards achieving this.
David Schwartz, the CTO at Ripple has tweeted in response to this:
“This is amusing. A hostile takeover of the XRP Ledger is not technically possible nor does this plan make economic sense.”
Is this possible?
Generally speaking, it could be possible to implement some damage in this way however the economics of it are shocking, it would cost Valour so much money that generally speaking, such an attack wouldn’t be worthwhile. In all honesty, we don’t think Valour are actually planning a hostile takeover of XRP and if they do, we are pretty sure the XRP community won’t buy into any incentives that try to get them to sell up. The XRP community are more determined than that and seem to be very devoted to their investment, this is something that could prove to be a very good thing in the future.
For now, this is nothing to worry about, but the idea makes for a very interesting discussion and therefore this could be something people are talking about for months to come.
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