Is Ripple Cryptocurrency A Scam?

Introduction:

Ripple is a currency exchange, remittance network and real time gross settlement system which is backed by XRP tokens. It is a US based company created by Ripple Labs Inc. Ripple network is built upon a distributed open source internet protocol which supports XRP tokens as a cryptocurrency and commodity. Initially, the first release of Ripple was in 2012 having a secure instant and zero fee financial transactions.

A consensus process that allows for payments, exchange and remittance based upon a distributed ledger called XRP ledger. The network does not depend upon Ripple  company, its consensus depend upon companies, ISPs and MIT. The XRP tokens which are backbone of Ripple network are currently the second largest cryptocurrency by market-cap.

Companies like UniCredit, UBS and Santander are using Ripple network and banks also has started to adopt Ripple as payment settlement network. Ripple targets to compete the current widely adopt payment network swift.

Concept:

An open source protocol used by Ripple is “basic infrastructure technology for inter-bank transactions and neutral utility for financial institutions and systems“. Ripple is required two parties for the transaction to occur: first a regulated financial institution “holds funds and issues balances on behalf of customers”, secondly, market makers and traders to provide liquidity for the token. Consensus process for the network allows remittance, payments and exchanges in distributed process.

In Ripple network, payments are made by transactions cryptographically signed in either fiat currencies or XRP token. Which means that people who are using Ripple network will either have a choice to use a stable fiat currency or a more volatile XRP token, but the small or negligible transaction fee of 0.00001XRP will be used for transaction.

XRP:

Native currency of Ripple XRP can be divided into six decimal places, with smallest unit called drop. One million drops equals to one XRP. Maximum supply for XRP token is one hundred billion with circulating supply approx. forty billion and remaining sixty billion is held by Ripple company.

Unlike BTC, XRP tokens can not be mined, which means all of the supply of XRP are created initially from which Ripple company mint tokens every month. Company sells their minted tokens to the market buyers and financial institutions as a investment to their company.

Conclusion:

Xrp has been criticized by the Community for being  pre-mined, Team monthly mints the tokens and sell in secondary market for the project costs. The idea behind ripple is great for replacing decades old SWIFT for the cash transfers internationally. But mostly people have doubts with the value related to XRP price, as its use-case in the Ripple Company is very limited as compare to value. Value for any asset comes from the demand of that asset. Where as we do not see that billion dollar demand from the end users for XRP token which is a subsidiary of Ripple company. Hence idea behind ripple is great but XRP token value is questionable. There are already rumors that SEC will rule out XRP token as Security token instead of Utility. This will make things worse for token investors.