- A past statement from Ripple’s CTO, David Schwartz, prompted queries from the XRP community about investor lockups and their alignment with Ripple’s incentives.
- Schwartz revealed that investor lockups were terminated a while ago due to their inability to achieve the desired results.
A historical post from Ripple’s Chief Technical Officer (CTO), David Schwartz, resurfaced recently, sparking a renewed interest in the XRP community. The old post was shared by a community member known as “RealXRPboy” and has drawn attention to Ripple’s past strategy of using investor lockups.
Unraveling the Ripple Lockup Strategy
The post by Schwartz lists 10 points that encapsulate Ripple’s vision. One notable line reads,
“Anyone who gets XRP from us as part of a deal with a lockup has their incentives aligned with ours. They want the long-term price of XRP to go up too.”
Previously, this lockup option was made available to institutional buyers who might buy XRP. In the simplest terms, token lockup refers to a practice that restricts the transferability of tokens for a set duration. During this period, investors cannot sell or transfer their tokens obtained via airdrops, initial coin offerings (ICOs), or sale events.
The main purposes of a token lockup are twofold. Firstly, it aims to stimulate long-term investment in a project or company. Secondly, it intends to prevent a sudden influx of tokens into the market, which could potentially destabilize prices.
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However, the XRP community was intrigued by Schwartz’s comment in the post and sought further clarification. Responding to these queries, Schwartz explained that the practice of investor lockups was discontinued some time ago. The reason for this was the failure of this strategy to yield the anticipated results.
“We stopped using lockups a long time ago. They don’t really work the way I initially hoped they would,”
In light of this revelation, it’s worth noting that Ripple implemented a notable lockup strategy in 2017. During that year, Ripple secured 55 billion XRP in time-based escrows to forestall a potential market flood of tokens, which could have led to a drop in XRP’s price. These escrows ensured a steady and predictable increase in the supply of circulating XRP.
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