'Goodbye to Ripple' - Postscript


So now, something more of an actual blog.

When I finished my ‘Goodbye to Ripple’ article, I posted it in three places. First twitter, then on reddit and finally xrpchat.com. The latter two were where I posted my initial ripple valuation article in what feels to me now like ages ago. Even though I knew I wouldn’t be making many friends for saying so, I felt an obligation to share my reversal forthrightly in all those places.

When I didn’t get any emails notifying me of a forum response from xrpchat, I assumed no one really cared – but I was happy to stumble across the thread today. (I had thought my email notification was turned on). On the whole, there was a really nice discourse (with a few ad hominems thrown in for spice) that I’m bummed I missed. If anyone’s interested though,I have a couple of thoughts. i'll post this link as a response to that thread forum.

I have no animosity towards ripple. I think it’s actually very cool, and clearly hugely valuable. To be able to create a multi-billion dollar business from scratch is amazing. There are clearly some incredibly talented and I’m sure cool people working at Ripple. But my question is one of valuation – why $9 billion, and not $4 billion? Or $1 billion?  Show me the math. Exactly how does it all translate into the XRP coins themselves needing to be worth more than they are currently worth?

Most people (not all) have conceded that Ripple is not about being ‘money’, but a functional tool. In that case, we ought to value it on that metric – how much value is being created, and to where does it accrue?

Let’s use some numbers.

$207 trillion annual market size
assume evenly distributed, that’s about $500 billion moving a day.
There are 86,400 seconds in a day. Again, assuming smooth distribution if XRP was 100% used as transfer medium in the market, every 5 seconds (on average) it would have to move about $30 million. If we assume it needs that FULL balance to be held in 15 different currencies, that’s a required market float of 30million x 15 = $450 MILLION (that’s million with an M). Heck – let’s say that we’re off by an order or magnitude somehow and multiply by 10. Now we’re back to billions - $4.5 billion – or less than half the current capitalization.

Is there a fault in that example? I honestly don’t know. I just spent 5 minutes working it out and have had a couple of glasses of wine. My point is, talking about value being created and that same value accruing to the benefit of the actual coins is talking about two very different things. It’s the same thing as a company you might love, but whose stock is awfully priced.

There may still be possibilities for Ripple to justify its current value. If people want to believe  - that’s great. I would never tell someone to not go with their gut or intuition. You might be right. Lots of things could happen – even some I don’t want to mention because I don’t want add to the creation of new (possibly half-baked) hopes on a coin (and then feel obliged to explain myself) that I’m less focused on these days.

So to respond to one of the bloggers, maybe it’s not goodbye ripple, but a shift in the conversation. If any of you folks are interested, the coin I’m focused on now is Monero, and I wrote a 60 page tome (but I swear it feels like 30 when you read it!) on my blog about money and bitcoin, and now a monero piece. In any case, I wish you all good luck.

Izzy

Comments

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