Multiple technologies are coming of age right now that stand a good chance at destabilizing and reshuffling global economic power as we understand it. More and more, artificial intelligence is being seen as a bellwether for the health of a nation’s technology investments. And blockchain isn’t far behind, now that most of the governments of developed countries are planning to use less thoroughly regulated and more decentralized currencies to their advantage.
The Trump administration has not, unsurprisingly, been immune to this high-tech one-upmanship. Hot on the heels of China’s Bitmain securing its place as the miner of half the world’s cryptocurrencies, the White House is looking for ways to improve its own crypto clout in the globalizing world. Their answer might be a new national standard for cryptocurrency protocol that puts Bitcoin — and China — back in their “place.” It might mean the adoption of Ripple-led XRP as the nation’s de facto cryptocurrency.
What’s XRP, and Why Now?
To put it most simply, XRP is a blockchain-based protocol that stands as a key rival to Bitcoin. It functions differently in key ways, as we’ve seen, while offering most of the same advantages — namely, that it’s more secure, creates trust between business partners and speeds up critical financial transactions and money transfers.
The White House hopes that by publicly backing the XRP protocol, they can encourage additional buy-in and recapture some of the 80 percent market share of the cryptocurrency mining scene currently enjoyed by China. Their goal, in part, is to side-step the problem of eating into China’s current lead in crypto supremacy by backing a protocol that doesn’t require mining to begin with.
In other words, where persons and states who own the required equipment can create Bitcoins, each of the 20 billion “Ripple coins” that currently exist were created in 2012, when the protocol first launched. Make no mistake — the dissemination and distribution of this currency has been very much a systematic and “centralized” process over the last several years. In fact, widespread adoption of this currency at the national level would look far more like the workings of a central bank or Federal Reserve than the picture most consumers have in mind when they think of “cryptocurrency.”
China, for their part, doesn’t seem to be pursuing the dream of a truly decentralized and democratized currency either. The current administration has outlawed the mining of bitcoins by third parties. The result is another prong in the ongoing trade war America and China have found themselves waging lately. It’s obvious that the political and economic power structures in these two nations are the ones weighing their options and interests here — not private citizens interested in a more stable currency for a more stable world.
China’s Bitmain Technologies is based in Beijing and has ridden the success of multiple acquisitions toward its market dominance. It counts several other companies as subsidiaries, including AntPool, BTC.com and Hashnest. Bitmain commands about half of the world’s Bitcoins currently in circulation, while XRP controls about 60 percent of the current XRP supply.
America’s PR push to secure Ripple and XRP as the dominant force over China, Bitcoin and Bitmain has been quite vocal — and has delivered mixed results so far. At its “Swell” event in San Francisco, former president Bill Clinton along with economists and other keynote speakers couldn’t provide enough positive buzz to prevent XRP’s stock from dropping 13 percent while the event was still in progress. It has since stabilized.
As mentioned above, Ripple itself owns about 60 percent of the XRP tokens currently in existence despite enjoying control of just 10 out of the 150 official validators associated with the currency. This has led to many experts raising questions about the currency’s real versus its perceived “decentralization.” But also of note is the currency’s greater inherent environmental friendliness compared with Bitcoin. XRP isn’t mined with electricity-hungry appliances the way Bitcoin is, leading some to believe that XRP is a more sound long-term choice for a national cryptocurrency standard — especially if that country has ambitions of eventually turning the tide on manmade climate change brought about by reckless energy consumption.
The American Dollar in the Balance
As mentioned above, former President Bill Clinton’s speech in favor of XRP at the Swell conference didn’t win over very many hearts and minds. It’s only adoption by a larger portion of the population, and a larger stable of established business partners, that can do that. When Ripple brought three new financial partners aboard — MercuryFX, Cuallix and Catalyst Corporate Credit Union — Ripple’s stock price rose by 100 percent.
So, when the White House gave a public indication that it was eyeing Ripple as the United States’ answer to China’s current cryptocurrency hegemony, what was the result?
Even though Ripple company leaders are reportedly in active talks with the Trump administration, little has been made public about what the parties discussed or what it might mean for Ripple’s future. However, adoption of this Bitcoin alternative continues apace. In addition to the three major financial partners named above, Ripple and XRP also partnered with Santander to build a cross-border currency exchanged based on blockchain technology. The result is a faster way to send money across borders at a time when currencies are in greater flux than ever.
It’s this more agile, capable and timely exchange and conversion of currencies that is likely driving the Trump administration’s desires to position XRP as a viable international contender for Bitcoin’s current market share. Amid talks of the American dollar “collapsing” — or at least falling out of favor in some parts of the world as America’s default dominance seems to wane overall — is the rise of state-sponsored cryptocurrencies.
To put it another way, China is just one of several international voices that is actively looking for a way around the U.S. dollar as the de facto trading currency — especially as the dollar’s value continues to grow unpredictable and as the second-place currency, the euro, experiences debt crises of its own.
Cryptocurrencies are currently one of the best ways forward as major countries look to money itself as the key to global dominance. Whether their approach capitalizes on or actively erodes the natural advantages of cryptocurrency is an open question at this point. Both the Chinese practice of clamping down on mining and the American approach of backing a less “open” protocol seem to miss the point of blockchain entirely. They secure the interests of entrenched powers at the expense of the public.