In a recent development, Ripple’s Chief Technical Officer (CTO), David Schwartz, has addressed the ongoing controversy surrounding the company’s prefunding approach for its cryptocurrency, XRP. Schwartz took to Twitter to provide clarity on the matter, which has been the subject of intense scrutiny in recent times.
Previously about a few days ago, the purpose and nature of XRP sales were debated on Twitter after industry expert ScamDetective5 tweeted that XRP was made for retail sales.
Ripple enthusiasts and detractors discussed the topic, with Ripple’s CTO David Schwartz clarifying that XRP was created to distribute as widely as possible and generate revenue if necessary.
However, ScamDetective5 noted that legal counsel suggested Ripple shouldn’t control the token’s distribution before its launch in 2012, indicating that Ripple’s original plan may have been altered.
Ripple’s XRP Nostro/Vostro Pre-funding Strategy Debated
This time, ScamDetective5 suggested that opening a RippleNet account and pre-funding multiple DAE accounts could solve the issue. Ripple’s CTO, David Schwartz, chimed in and explained that the idea behind pre-funding is to make payments to any ODL destination market from just one account.
He added that pre-funding in just one account also means that customers can hold assets in one form and pay in another.
Another Twitter member asked if Ripple pre-funded these accounts and if customers could draw down on them as per the purchase agreement. ScamDetective5 replied that pre-funding was only an option if customers used Ripple’s line of credit, otherwise, they would need to fund it themselves.
The member then suggested that Ripple’s line of credit solved the problem, but ScamDetective5 disagreed, stating that it just shifted the responsibility for a fee.
Schwartz explained that Ripple could pre-fund in XRP at a near-zero cost, making it cheaper for them to do so. However, there is some non-zero risk that customers may not pay them back for the XRP.
Schwartz used the example of a customer who keeps a lot of money in a bank that goes bankrupt, illustrating the risk that Ripple takes.
Nevertheless, the Twitter debate shows the complexity of the payment industry and how Ripple is attempting to provide a solution to Nostro/Vostro prefunding. However, the risk involved in pre-funding and credit must be considered.