In my previous post, I described how Ripple has expanded to Japan by means of investment projects and partnerships with big financial players and banks. Today I want to talk about China, which IMO is the most progressive and open-minded towards blockchain technology adoption and implementation.
On 02/04/2019 from an escrow wallet of Ripple were sent 1 billion XRP to an unknown address and contained a mysterious memo: Crawl...Walk...Run...;)
In the second half of 2020 and Brad Garlinghouse (CEO Ripple) made the following tweet:
This could be considered as inside information IMO. But let's have a look at what is going on in China today. It is widely known that China is the first country to release CBDC (Central Bank Digital Currency), the digital Yuan and according to this news article, the DiDi company started testing the digital Yuan. DiDi company was formed by merging two other big transport companies: DiDi taxi and Kuaidi Dache taxi which surprisingly were big competitors. How two big competing companies merged, I will explain further.
Nowadays DiDi company is the largest transport company in China and is big enough to compete with giants like Uber. Let's dig a bit deeper, Co-Founder and CEO of DiDi is Wei Cheng, who prior to creating this company was working in Alibaba Group as sales manager for the northern region of China. Later he moved to China's largest online payment platform, Alipay,(!) where he was promoted to regional manager. Liu Qing is in the composition of directors of DiDi. Before she worked for 12 years at Goldman Sachs Asia (!).
In 2015 DiDi created partner relationships and invested in transport companies like Grab, Lyft, and Ola which are analogs of Uber. The reason for this is to make agreements on investments and develop new technologies, in other words, to create a monopoly. If we look at the company Lyft we will see that the major shareholders are The Vanguard Group, JP Morgan, Alibaba Group, and BlackRock, big players who already are Ripple's partners. Looking at the shareholders of Grab and Ola doesn't make sense as they are part of the internal agreement and are playing with the same rules. In 2016 DiDi buys a share of a direct partner of Ripple, Uber. In 2017, SoftBank, (which I talked about in my previous post) invested $5 billion in DiDi in order to help it develop and speed up the progress in this niche. In other words, in order to dominate in the transport industry. In 2018 their app was translated to English and Visa and MasterCard payments were added, additionally DiDi created new partnerships with numerous transport companies around the world.
How come and DiDi had such great success in so difficult times? Turns out that its development was supported by BIG guys, namely Tencent, Baidu, and Alibaba Group. For those who don't know: Tencent is the largest investing organization in China which specializes in HiTech. It owns the service WeChat. Baidu is a search engine, Google's analog. I think Alibaba doesn't need an introduction. Now Tencent is Ripple's partner and implements its technology. Alibaba is the key partner of Ripple because it sells absolutely everything and in fact, they created the transport company DiDi to reduce the costs of logistics, thing which in the future will help them to save a lot on delivering their orders.
Now if we look at Alibaba and who is behind, we will see that in the first place is the same SoftBank and in fourth place is BlackRock. The search engine Baidu entered the blockchain consortium of Hyperledeger in 2017 in order to support the development of distributed networks with giants like Accenture, IBM, and JPMorgan Chase. In 2019 Ripple joined the Hyperledger consortium and now it is supported by Accenture and JPMorgan. Too many coincidences? I don't think so. If we return to the creation of the transport giant DiDi we will find the following: Coatue Management LLC is leading a consortium of investors buying about $600 million of shares in the combined Didi Dache-Kuaidi Dache business. I checked this hedge fund and found that it sponsoring the project AXONI, some of its other sponsors are WellsFargo, Goldman Sachs, CitiGroup, and JPMorgan. AXONI is positioned as a competitor to R3 and Ripple but in fact, it is just a mechanism, part of a bigger process. Axoni offers distributed ledger technology as well as bespoke smart contract development and analytics tools. It is designed to work with DTCC (The Depository Trust & Clearing Corporation), banks, and financial institutions. For banks, in particular, Goldman Sachs projects that the clearing and settlement of cash securities — equities, repo, and leverages loans— using blockchain tech could save $12 billion a year in charges and fees.
Do you understand what this means? In fact, Brad Garlinghouse gave us a piece of "inside information" that in China Ripple slowly stands up its feet and begins walking! It begins walking due to big companies that start using it and the big partnerships that Ripple has. China is the world's factory and there is a huge payment market, from big companies like DiDi to retail buyers from AliExpress. Let me explain to you how this is going to work. Imagine that you are the owner of a big marketplace that makes sales every minute and distributes the products around the world and you have a log of your profits and expenses. your goal as a businessman is to make more money either by increasing your production and sales or by decreasing your expenses. At some point, you will reach the maximum sales volume and you will start looking where to save more on expenses. To help you with this comes the creation of DiDi, its rapid development, and the absorption of competitors. Now the transportation-logistics problem solved what to do with the enormous bank commissions and fees? Here comes Ripple. It can process payments in seconds and you will save 99% of the money that you used to spend on fees. Additionally, with the help of API, you add Ripple to your transport company to send out the orders shortly after the payment confirmation. It will be easy to do now because you have the local digital currency (CBDC) and XRP will be the middle currency between the digital Yuan and the other currencies coming from abroad.
As I said in the beginning behind Alibaba are big companies like Vanguard, BlackRock, SoftBank that partner with Ripple. We are witnesses of how Ripple makes its first steps in China. Cheers to Brad for this insight!
