As we had predicted about a week ago, there will indeed be an XRP lockup. The Ripple team will put 55 billion XRP in escrow to remove any doubts regarding the total supply. This means over half of all created XRP will be unavailable to the market. Even though this is positive news, not everyone sees it that way. The blind hate toward Ripple and XRP has never been stronger than it is right now.
People who have been following XRP will know the price has exploded these past few weeks. However, there have always been rumors about the founders being able to “dump” their coins at any given moment. This has always cast a gloomy shadow over XRP’s chance of success, butt hat will no longer be a determining factor. The Ripple team wants to stabilize the XRP exchange rate against other currencies moving forward.
It is worth noting the Ripple team holds 61.68bn of the 100bn supply in their own accounts. Knowing such an amount could be sold in the open market at any given time causes an uneasy feeling. To address this concern, the team will lock up 55 billion XRP in a cryptographically-secure escrow account by the end of this year. It is unclear what the exact date is right now, but it is a safe bet this amount will not be circulating across exchanges this year, or anywhere in the next 54 months.
What The XRP Lockup Means For Everyone
To be more specific, the team will create 55 contracts of 1 billion XRP each through the Ripple Consensus Ledger Escrow service. Every contract will expire on the first day of every month, for months 0 to 54. Any expiring contract will make the locked up amount for that contract available to the Ripple team. This XRP fund will be used to incentivize market makers to offer tighter spreads. Additionally, some funds will be sold to institutional investors.
Should there be an unused portion of that month contract’s balance left over, it will be put back in the escrow queue for another 54 months. Considering how Ripple sold an average of 300 million XRP per month as of late, it is expected over half of every escrow contract’s balance may be returned to the queue at the end of each month. That is, unless the demand for XRP among institutional investors keeps going up.
It is unclear how this decision will affect the XRP price until the lockup actually happens, though. Right now, there is a circulating supply of over 38 bn coins already. Even though the XRP price has risen sharply, these are still the early days of what this digital asset could be worth. Predicting the future is impossible, although this move to lock up over half of the total supply is a smart move. There will always be people who think Ripple should not exist in the first place, even though it is a digital asset with a use case. It is not a cryptocurrency by any means, despite the Ripple Consensus Ledger slowly becoming more decentralized in a way.
Header image courtesy of Shutterstock
