Table of Contents
Founded in 2012 by Chris Larsen and Jeb McCaleb, Ripple is a virtual payment system for financial transactions, and a cryptocurrency network, with its crypto token being called the XRP. According to the company, Ripple runs on an open-source, P2P (peer-to-peer) decentralized blockchain network, and it’s designed to offer solutions that the crypto networks that came before it failed to deliver. As per market cap, XRP has remained among the top 10 cryptocurrencies around the globe since 2017.
There have been debates and controversies surrounding Ripple for years now. Ripple states that the XRP ledger is fully decentralized- as Ripple CTO David Schawartz put it, “…by design, the XRP Ledger is also—if not more so—decentralized than both Bitcoin and Ethereum.”
However, it’s been questioned time and again if Ripple truly is as decentralized as it claims to be.
To understand whether Ripple really is decentralized or not, let’s first take a look at how the system works.
Understanding Ripple
Crypto giants like Bitcoin or Ethereum use proof-of-work algorithms to maintain decentralization, a practice that has always been applauded for making the crypto networks truly decentralized by giving individuals on the blockchain (known as miners) the power to mine coins and get rewarded once they succeed in adding blocks to the chains. With time, however, it has become clear that the PoW system can become centralized too, where only a handful of miners could seize the power to control the network. Ripple has cited this as a primary reason it did not choose to walk that road.
What Ripple has done instead is deploy a consensus algorithm for assured decentralization of the platform. The consensus protocol lets a number of users, known as validators, have the ability to verify, record and validate transactions and account balances. For all transactions occurring on the Ripple blockchain, history and relevant data are recorded and uploaded on the blockchain for everyone to see. And since the data is not linked to any individual account or institution, the power gets distributed instead of being confined to only a small group of people.
Plus, the protocol increases the probity of the system by putting a stop to double-spending (the risk of a holder copying a digital token and using the copy for a transaction instead of the original.) Even if a node on the network tries to send an identical amount of money through multiple getaways, the system would keep only the first one and have all the others deleted. A poll is conducted to decide which transaction was made first and the one the majority of nodes vote for is kept. So what can be gathered from all that is that no centralized authority figure or institution controls the workings of the system, and therefore Ripple claims to be decentralized?
Aside from this Ripple also boasts of expedited transactions and lower transaction fees, which does prove it a better-suited payment system for small, day-to-day transactions when compared to its contemporaries. Since the XRP ledger can process transactions without the need for miners, it saves a lot of time and computing power, thus lowering transaction costs and allowing quick completion of transactions. The consensus protocol also comes with a system called fee escalation, which helps it keep the fees in check.
Is Ripple Truly Decentralized, Though?
There have been countless arguments surrounding Ripple’s decentralization ever since its inception. Critics have brought forth so many accusations that even the company felt the need to prove and justify itself across its various social media accounts and blogs. It’s only natural for one to be wondering what the basis of these accusations are.
- Ripple Created XRP and Owns Most of the XRP Supply:
XRP was created by ‘Newcoin’ back in 2012, a corporation that changed its name to ‘OpenCoin’ a month later. In 2013, the company then proceeded to rename itself again and move to California, and this time it was called ‘Ripple Labs’. Finally in 2014, the company joined forces with a corporation in Delaware also named Ripple Labs, and that is the very same Ripple we know today.
In 2013, about six months after the network began its journey, a trademark was filed by OpenCoin. However, Ripple owns the trademark today, and as the company itself claims, it did, in fact, create XRP. The company and its partners also hold and control the majority of the XRP supply.
- Ripple Controls the Consensus System
The consensus protocol works on the basis of trust, as each node on the XRP ledger has to put their faith on a certain number of validators on the network. Out of every group of a thousand or so nodes, 33 validators are selected who finalize transactions, and these 33 validators make up a list called the UNL or the Unique Node List that’s delivered to every node so that they can pick which validator to trust. What Ripple does is issue a recommended UNL list, and while supposedly the nodes can choose to ignore Ripple’s list, to date there have been only a precious few validators who have managed to earn that spot despite not being chosen by Ripple.
- Unlike Other Cryptocurrencies, Ripple Can Print More XRP
The Ripple ledger began with 100 billion XRPs, but there’s no finite supply of XRP, so hypothetically Ripple can print more tokens by making a code change in the software. And while this makes Ripple a trusted and steady system for all payments and money exchanges, it does make you question how decentralized it really is if its circulating supply can be changed by the company.
It’s undeniable that Ripple’s virtual payment protocol is useful and allows easy, comfortable, and secure transactions. But with all the evidence out there that provides solid proof of Ripple being a centralized network, after all, the constant claims Ripple makes of being decentralized (as can be seen in this article by the CTO of Ripple, David Schwartz) are potentially misleading, to say the least. Will they ultimately bring forth its downfall or continue to elevate its market status, remains to be seen.
