How ripple plans to take on bitcoin

Bitcoin rival Ripple is suddenly sitting on billions of dollars worth of cryptocurrency Bitcoin rival Ripple is suddenly sitting on billions of dollars worth of cryptocurrency
11:08 AM ET Fri, 26 May 2017 | 00:45
Blockchain start-up Ripple is in a precarious position for a 5-year-old company.

The business is still in its very early days but suddenly has billions of dollars worth of cryptocurrency on its balance sheet.

Ripple, which built a digital payments network for real-time financial transactions, is also the creator and biggest owner of Ripple XRP, a digital currency that has increased in value by 40 times this year.

There's a total of 100 billion XRP in existence, each priced at about 26 cents. The $26 billion of total value is second among cryptocurrencies, behind bitcoin, which is valued at $41 billion.

Ripple owns about 61 percent — or $16 billion worth — of XRP.

If that were factored into the company's valuation, Ripple would be worth more than all but four U.S. start-ups — Uber, Airbnb, Palantir and WeWork.

XRP is surging alongside bitcoin and ether as well as smaller digital currencies like dash and monero. They're all benefiting from the growing interest in blockchain, a distributed electronic ledger that makes all transactions trackable. Unlike other cryptocurrencies on the market, XRP is tied to — and majority-owned by — a single company.

That's led to concern among XRP investors and enthusiasts that Ripple will one day decide to capitalize on its massive stake and flood the market with currency. Some venture investors would surely welcome cashing in on some of that value after pouring about $94 million into the company.

But for people with thousands (or millions) of dollars wrapped up in XRP, the fear of a sudden excess of supply has been unsettling, particularly considering the volatility of the currency. The price fell 13 percent late in the day on Thursday and double-digit daily moves are normal.

Global banks including Bank of America, RBC and UBS are also customers. While bitcoin is the more established cyptocurrency, it's primarily used today as an investment vehicle and has run into big latency problems with handling transactions.

Ripple and ethereum have emerged as the early leaders in enabling business arrangements, with Ripple trying to build the digital payments standard for the financial sector.

"Some of those banks are all in and some are still in the early stage running a pilot," Garlinghouse said. "We have real customers touching real production systems. We're the only company you can say that about in our space."