Ripple is one of the most talked-about phenomena in the cryptocurrency world, and its profile reached new heights in Q4 2017, both because of its own conference (in the same place and the same time as that of SWIFT, the organisation Ripple aims to take down), its own PR machine, and the price of its XRP currency – rising from USD0.25 on 10th October to USD2.25 at the end of the year.

But because XRP is a “commodity” and not a form of money, the monetary authorities take no position on it. Because XRP is not listed on a regulated stock exchange, Ripple is able to talk about it and deal in it in a way that is beyond the scope of investment regulators.

People part with real money (in a fiat currency) to acquire XRP, but XRP cannot be spent in shops: it is not legal tender.

As such XRP – and Ripple – float in the ether (though not in the ether-eum).

There have been many conflicting versions of the valuation of XRP and Ripple itself, which the paper attempts to unravel.

However the key point is the price volatility of XRP: attractive to third-party investors, and unattractive to core service users.

As it stands, Ripple was the big story of Q4 2017: in 2018 we may find out whether any of it is more than a story.

In our estimation the company is caught on the horns of a dilemma: XRP could have value as a payment settlement medium if it demonstrates price stability against fiat currencies. By offering it up as a rival cryptocurrency to Bitcoin, Ripple has hooked XRP to the volatility of Bitcoin. The two pathways are mutually exclusive. One pathway or the other needs to be dropped.

You can download the full paper here