The XRP custodial system might have been used differently than announced. The discrepancies in these figures are equivalent to more than US $90 million
According to the Blockchain analysis and statistics company, CoinMetrics, the evaluation of Ripple’s supply program and custodial system reveal several inconsistencies regarding its release of new XRP and its reports on the subject. The total difference is of about 255 million XRP.
CoinMetrics conducted this research, whose report was published on May 16th, after adding XRP statistics and information to CM Network Data Pro, making sure to know the characteristics and peculiarities of its Blockchain and the records of its transactions.
The research allowed checking irregularities concerning the total amount of circulating XRP in the market and the process through which more XRP have been added to this figure. A crucial element in all this is the guarantee deposit (escrow) system, released by Ripple in March 2017.
The tool allows blocking a certain amount of XRP for a stipulated period of time or until certain conditions are complied with. Then, the company announced the blocking of 55 billion XRP owned by Ripple in this escrow, to manage the cryptocurrency’s circulation in the market.
“We will use the escrow to establish 55 one-billion-XRP contracts expiring on the first day of each month, from months 0 to 54. […] Then we will return what is unused at the end of each month. For example, if 500 million XRP remain unused at the end of the first month, this amount will be placed in a new escrow account expiring in month 55,” said Ripple
However, these figures do not match the records within the XRP Blockchain.
Irregularities in Custodial Deposits
First, the “custodial tail” (the difference between the billion XRP released and the amount spent) is implemented differently than announced. Similarly, Ripple has reported the release of up to 200 million less than what is reflected within the Blockchain.
There are 255 million XRP, equivalent to more than US $90 million, according to current market prices.
Ripple publishes reports on its custodial activity, but CoinMetrics explained that on two occasions (Q3 2018 and Q1 2019) Ripple reported the wrong amount of XRP returning to its custodial scheme. In both quarters it omitted reporting 100 million XRP, hence that difference of 200 million.
Besides, other actors (probably related with Ripple) also released 55 million XRP from an unknown deposit address, disconnected from Ripple’s main deposit account. The total amount of circulating XRP has been altered, with a release of tokens different from what was programmed.
A total of 17 custodial contracts have been exchanged and another 43 created, for a total of 17 billion XRP released from the same unknown address and 13.2 billion XRP returned to the custodial scheme for a net release of 3.8 billion XRP.
However, these irregularities do not seem to have particularly affected the cryptocurrency’s price. Currently, the assessment of XRP has suffered, as a consequence of the general correction process undergone by the crypto asset market.
On May 18th each XRP had a price of US $0.37, representing a fall of 10.23 within 24 hours, and its main exchange markets were BW.com, Upbit and ZBG, mainly against Korean Won and USDT. Recently, the crypto asset has had a volume of US $3,550,595,297.
Expert cryptocurrency users and novices need to consider all this information to decide whether to invest in XRP. Blockchains might provide wrong information that might lead them to avoid their crypto assets, but they have the last word.
By Willmen Blanco