Jackson Palmer, a product lead at Adobe and the creator of Dogecoin, said that the recent slump of major cryptocurrencies–including Bitcoin, Ethereum, Bitcoin Cash and Ripple–is attributable to the drop in their user activity.
Ripple is Processing Fewer Payments Than in 2016
Ripple (XRP), the most valuable bank-tailored public blockchain network, was the best performing cryptocurrency in 2017, demonstrating a staggering 38,000 percent yearly increase. In fact, $1,000 invested in Ripple in January 2017 was worth $350,000 by the end of last year.
In a recent interview, Ripple CEO Brad Garlinghouse expressed his optimism toward the rapid growth rate of the Ripple blockchain network and revealed that the Ripple network is adding one major bank per week.
“It’s been an incredible 2018 for us. We’re now signing up one bank to a production contract per week. We announced that we signed the largest bank in Kuwait, the National Bank of Kuwait, so if [Ripple] continues to build momentum and the dynamic there is the network effect. The more participants, the more value in joining. So we’re seeing that momentum build.”
As a liquidity network, similar to the global banking system SWIFT, the Ripple network can only process large-scale, borderless transactions if major banks are already on its network and using XRP to transfer money. Major financial institutions need to be on the Ripple network and process billions of dollars on a daily basis for Ripple to evolve into the global financial network for regulated institutions.
However, as the cryptocurrency market initiated the third worst correction in its history, the transaction volume and blockchain activity of Ripple plunged.
This week, Palmer revealed that the transaction volume of XRP is currently lower than its volume in 2016 when the value of XRP was less than 5 percent of the price this month.
Ripple (sorry, XRP) is processing less payments per day than it was in 2016. pic.twitter.com/qLeihMUtiD
— Jackson Palmer (@ummjackson) August 8, 2018
Since December 2017, the transaction volume and activity of most public blockchain networks have declined substantially, including Bitcoin and Ethereum. Understandably, as the value of major cryptocurrencies plummeted, fewer investors began using them to transact.
Many cryptocurrency investors have criticized Palmer for using the transaction volume metric to measure the adoption of digital assets, but as Palmer said, if transaction volume cannot be used to measure the success and the adoption of networks that are primarily designed to settle transactions, then there exists no other metric to prove the adoption of cryptocurrencies. According to Palmer:
“People in my mentions inform me that a network built for processing transactions actually processing some transactions is not a suitable measure for adoption. This broken logic explains a lot about why these markets are so fragile.”
Not the End of the World
Businesses within the cryptocurrency sector and multi-billion dollar conglomerates are currently leading collaborative efforts to improve the usability of crypto, as seen in the Starbucks, Microsoft and New York Stock Exchange partnership.
Moreover, because the cryptocurrency sector largely depends on a well-established pattern of bubble-crash-build-rally, the next rally in the crypto market will most likely allow the transaction volume to increase once again.
But, it is important to acknowledge that the demand for digital assets has declined significantly in the past nine months as well as to understand that transaction volume is a crucial metric to evaluate the adoption of cryptocurrencies by the mainstream.
Cover Photo by Jeremy Bishop on Unsplash
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