The Shaky World of Digital Assets
Once upon a time, a new treasure called Bitcoin appeared in the world. People were thrilled by its amazing technology, but there was one big concern. Like a fragile boat on a rough sea, its value fluctuated wildly several times a day. One day you could be rich, and the next day poor. In this anxiety, people desperately cried out, “Can’t we use this amazing technology with peace of mind? Is there a safe harbor even in the storm?”
Answering that desperate call, a new hero named Stablecoin appeared, bearing the name ‘stability.’
1. The Long-Awaited Wish of Digital Currency: Seeking ‘Stability’
Stablecoins came with a simple yet powerful promise: “Don’t worry, my value will always be stable like 1 dollar!” Thanks to this promise, people could trade digital assets, buy goods, and store value without fearing their assets would halve overnight. But each hero proved their ‘stability’ in different ways.
Three Knights, Three Promises
There were three main types of stablecoin knights in the world.
First, the knight wielding a strong shield called ‘Fiat Currency’ (Fiat-Collateralized) The most trustworthy and easy-to-understand knight. He promised, “One coin I hold is equivalent to one dollar resting in my vault.” Tether (USDT) and Circle (USDC) are these knights. People trusted his simple and strong promise, but sometimes doubted, “Does he really have the promised amount of dollars in the vault?” Transparency was his only Achilles’ heel.
Second, the knight wearing magical armor called ‘Cryptocurrency’ (Crypto-Collateralized) This knight used a more complex magic. He took other cryptocurrencies (like Ethereum) as collateral and lent out stablecoins worth much less than the collateral’s value. Even if the collateral’s value dropped a bit, the magical armor (over-collateralization) absorbed the shock and protected his value. MakerDAO’s DAI is this magical knight. His method was transparent but too complex for beginners to easily understand.
Third, the knight wielding an invisible sword called ‘Algorithm’ (Algorithmic) The most innovative and daring knight. He declared he would maintain his value solely through a clever algorithm without any collateral. When too many coins flooded the market and value dropped, he burned (burned) coins to increase scarcity; when value rose too much, he issued new coins to balance it. Terra’s UST was the protagonist.
The Collapse of Faith in an Instant: Lessons from the Terra-Luna Incident
The algorithmic knight UST’s popularity soared. People were enthusiastic about his existence maintained only by trust and code without collateral. But in 2022, when a massive market storm hit, his invisible sword shattered into pieces.
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As value wavered, the sister coin ‘Luna’ was issued infinitely, turning into worthless paper, and eventually both coins disappeared into the ‘death spiral.’ This event left a huge lesson worldwide: “No matter how innovative, trust without solid collateral can collapse in an instant.” This tragedy raised voices demanding stricter rules and transparency in the stablecoin world.
[Table 1] Comparative Analysis of Stablecoin Types
| Type | Collateral Asset | Stabilization Mechanism | Major Examples | Advantages | Disadvantages |
|---|---|---|---|---|---|
| Fiat-Collateralized | Fiat currency (USD, EUR, etc.) | Issuer holds reserve funds | USDT, USDC, RLUSD | Simple, intuitive, easy to understand | Centralization risk, reserve transparency issues |
| Crypto-Collateralized | Other cryptocurrencies (ETH, etc.) | Over-collateralization and forced liquidation | DAI | Decentralized potential, censorship resistance | Collateral volatility risk, complex mechanism |
| Algorithmic | None | Supply adjustment via algorithm | UST (former) | No collateral needed | Structural vulnerabilities, very sensitive to market shocks |
2. The Innovator Changing the World’s Money Paths: Ripple
While stablecoin knights fought for ‘value stability,’ another innovator sought to solve a completely different problem. His name was Ripple. His goal was to pave a new path for the old, slow, expensive, and complicated ‘international remittance.’
The Tangled Old Path: ‘Nostro-Vostro’
Imagine sending money from Korea to the U.S. You have to go through multiple banks tangled like a spider web. Banks had to lock up huge amounts of money in foreign banks in advance because they never knew when money would flow. This old method made international transfers take days and fees balloon like a snowball.
The Ultra-Fast Maglev Train: XRP and ODL
To solve this, Ripple created a very fast digital asset called XRP. And laid down the ultra-fast rails called ODL (On-Demand Liquidity) for XRP to run on.
ODL’s principle is simple. Korean won at the departure station instantly converts to XRP, which rides Ripple’s rails to arrive in the U.S. within seconds. At the arrival station, it converts immediately to dollars and is delivered to the final destination. Thanks to this, international remittance that used to take days now takes only seconds with nearly free fees.
Winning the Fight Against the Giant: The Meaning of the SEC Lawsuit
But Ripple’s journey was not smooth. The giant called the U.S. Securities and Exchange Commission (SEC) blocked the path, claiming “XRP is an unregistered security!” After a long legal battle, Ripple effectively won. This victory was not just Ripple’s alone. It set an important precedent that “the nature of digital assets depends more on how they are sold than on the asset itself,” establishing a new milestone for the entire crypto world.
3. Ripple’s New Weapon: The Armor of Stability, RLUSD
Having won the war, Ripple realized that no matter how fast the ‘spear’ (XRP) was, it needed a ‘shield’ to block attacks from market volatility. Especially to attract corporate and banking clients who want stable transactions, it was essential.
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So Ripple introduced its own stablecoin knight, RLUSD.
The Perfect Harmony of Spear and Shield: XRP and RLUSD
RLUSD follows the path of the ‘Fiat-Collateralized’ knight. 1 RLUSD is perfectly pegged to 1 dollar held in Ripple’s vault. Prioritizing transparency and regulatory compliance, it became a ‘shield of stability’ trusted by corporate clients.
Now Ripple wields two powerful weapons:
- XRP (Swift Spear): Provides liquidity across borders and ensures fast remittance.
- RLUSD (Solid Shield): Maintains stable value without volatility, handling practical transactions like corporate payments.
These two assets do not replace each other but perfectly complement each other in their roles, making the Ripple kingdom stronger.
[Table 2] Comparison of XRP and RLUSD Roles within the Ripple Ecosystem
| Feature | XRP | RLUSD |
|---|---|---|
| Asset Type | Cryptocurrency | Stablecoin |
| Value Stability | High market-driven volatility | Pegged to USD, stable |
| Primary Use | Liquidity provision, intermediary currency for international remittance | Predictable transactions, corporate payments, e-commerce |
| Role in Ecosystem | Enhances speed and cost-efficiency of international remittance | Provides stable value storage and practical payment method |
4. Who Will Take the Throne of Future Digital Finance?
The digital finance world is entering a new era. Not only private stablecoin knights but also powerful competitors called CBDCs (Central Bank Digital Currencies) issued directly by national kings (central banks) have emerged.
Private Innovation vs. National Trust
CBDCs wield absolute stability guaranteed by the state, while private stablecoins rely on innovation and flexibility to quickly respond to market needs. These two may compete but are likely to evolve into a ‘hybrid model’ complementing each other in their domains.
[Table 3] Key Feature Comparison: Private Stablecoins vs. CBDCs
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| Feature | Private Stablecoins | Central Bank Digital Currency (CBDC) |
|---|---|---|
| Issuer | Private companies or decentralized protocols | Central banks (government) |
| Purpose | Price stability, efficient transactions, DeFi innovation | Financial stability support, enhanced monetary policy effectiveness |
| Value Stability | Pegged to specific assets (fiat, physical, etc.) | Digital version of fiat currency, state guaranteed |
Ripple’s Dream: Connector of Future Finance
In this complex future landscape, Ripple aims to take a very wise position—not to become the ‘king’ but the ‘core infrastructure provider’ connecting all paths.
Ripple envisions playing the role of a bridge enabling smooth communication and transactions among various countries’ CBDCs and diverse private stablecoins in the upcoming CBDC era. Having both the swift spear (XRP) and the stable shield (RLUSD), Ripple is perfectly positioned for this opportunity.
Two Paths Ahead for Ripple
Of course, Ripple’s future is not all rosy.
- Positive Scenario: Ripple rises as a global financial hub based on regulation and trust, becoming essential infrastructure bridging the CBDC era.
- Negative Scenario: Ripple is outpaced by powerful competitors like PayPal’s PYUSD or falls into unforeseen regulatory traps and fades from the market.
To meet these challenges, Ripple is deploying smart strategies such as offering tailored solutions to institutional clients, partnering with central banks worldwide, and acquiring tech companies.
Conclusion: A Guide for Wise Travelers
So far, we have journeyed through the turbulent waves of the digital asset world with stablecoins seeking ‘stability’ and the innovator Ripple paving new money paths.
The Terra-Luna incident reminded us of the importance of ’transparent collateral,’ and Ripple’s SEC lawsuit victory showed how crucial ‘regulatory clarity’ is for industry growth.
Now, Ripple is evolving beyond a simple cryptocurrency by equipping itself with two wings: XRP’s ‘speed’ and RLUSD’s ‘stability,’ becoming a core infrastructure provider for future financial systems.
What should we, the wise travelers watching this exciting journey, remember?
- For investors: Don’t be shaken by short-term price swings. Look at the long-term vision and growing real-world use cases of the technology. When choosing stablecoins, always verify how transparently and securely their reserves are managed.
- For entrepreneurs: Instead of sticking to a single technology, focus on flexible infrastructure that can connect and utilize various digital assets like Ripple.
The new era of digital finance has already begun. We eagerly anticipate the future map that Ripple and stablecoins will draw amid these waves of change.