Value of Ripple XRP holding explained in details

Recently I found very interesting text on the value of Ripple XRP holding. Here it is:

Here is how the market will ultimately value XRP.

1. Consider Ripple to be in the Payments business, and look at Visa/MC’s market size, assume some shrinking of the overall market size due to improved efficiency. Then further reduce the market size with some assumption about how much of the Payments business flows through Ripple (maybe only international), and divide that value by their XRP holdings.
   a) Look at SWIFT and do a similar comparison as the Visa/MC one.

2. Consider Ripple to be in the software business and you have to look at their non-opensource products, which are Ripple Connect & Stream both of which should be looked at with a different SAAS business model.
   a) “Ripple Connect is a plug-and-play module that processes international payments for banks.” …So you would probably value this with some kind of Annual licensing fee + support and implementation consulting fees.
   b) “Ripple Stream is an interface for market makers to submit bid/ask offers to the Ripple network” …So you would probably value this as a data stream like a Bloomberg terminal.
   Regarding how this would impact XRP value, I would view both as part of a Distribution Plan, but designed in a way that they can make money from accomplishing the Distribution of XRP. I say this because to use both Connect & Stream the bank user would need to hold some inventory of XRP to pay transaction fees. A successful distribution plan for XRP should improve it’s Utility value.

3. Consider Ripple to be in the business of operating a “Market for Float”. In this situation Ripple looks more like the NYSE which operates a Market for Equity. Rather than selling access to a Trading Desk on the floor like the NYSE, Ripple can sell XRP to ILP-Connectors or RCL-Market Making banks. They have an XRP “incentive” for Market Makers which they have been working on for some time…. To get to a dollar value of XRP in this scenario could also go many routes. They can control supply to a degree.

   In this scenario Ripple could, if they wanted to, require Banks that desire to participate in the network by running a validating node to support Ripple Connect, to pay to be included to the network’s core UNL. This would be an additional potential source of Revenue, but I think they will externalize this revenue for a number of reasons. One of which being that they have spoken of “a role” for a company that would verify quality of validator operators (like getting an SSL cert), and maintain an ongoing rating of validator’s system reliability. The “fee” banks pay could simply be a certification fee, which includes an audit of their system to verify the quality of their validating node.

It is the 3rd of these considerations for XRP’s value, the creation of a “Market for Float”, that I believe sets the upper limit on XRP’s value.

The Visa/MC option gives you some comparison to the business model which industrial age companies used to serve the Payments market.

The Software option really only improves the likelihood of both XRP’s adoption in the financial industry, and assuming licensing & consulting revenue is there, extends Ripple Inc’s runway to withstand the time it will take to prime the pump on creating a “Market for Float”, which is a chicken & egg problem.