It is important to understand that XRP is not Ripple and that Ripple is not XRP. And this is something very important not only for Ripple but also for the cryptocurrency community in general.
XRP vs Ripple
The first thing that we need to mention is that XRP is an independent digital asset, according to The Hatch Agency, a PR firm that represents the technology company behind Ripple. And Ripple itself marks the difference.
Ripple is a technology company that provides financial solutions for sending money around the world, while XRP is a digital asset that has an open source blockchain technology behind it.
Ripple explains about that differentiation:
“Ripple is a software company that uses XRP and the XRP Ledger in its product, xRapid. It does not control the digital asset or technology. Ripple does own 60 billion XRP (approximately 55 billion is locked up in escrow).”
At the same time, they mark that the XRP Ledger cannot be owned by a single entity, which means that it is not centralized. Instead it exists independently of any other person or business, including Ripple.
Moreover, there is an important difference between who uses Ripple and XRP. Ripple is used by Financial Institutions while XRP is used by those who build on the XRP Ledger or list XRP on their exchange.
But why is that such a key differentiation? The Securities and Exchange Commission (SEC) did not include Ripple, or XRP, on the recent statement about Bitcoin and Ethereum and their status. Both currencies, Bitcoin and Ether have been classified not as securities, but why wasn’t the XRP token mentioned there?
If the SEC rules out that Ripple is a security, then XRP could fall in the markets ad start a legal trouble for those responsible if Ripple does not pass the Howey Test. One of the most important things to take into account is centralization. But another important comment has been made by David Schwartz, who said that the protocol can work without XRP. So if he said so, the XRP token exists just to inflate Ripple’s valuation in the market.