A just published report from Bitcoin developer Peter Todd has exhibited a number of concerns in the Ripple protocol.
The report has arrived at a time when Ripple Labs, the creator of the aforementioned protocol, has joined hands with multiple renowned corporates and financial institutions to innovate their global finance endeavors. The company has also received around $37 million in seed funding for expanding its cross border payment operations across the globe, a step that has further attracted firms like Commonwealth bank, Western Union and Fedor Bank towards utilizing the Ripple Protocol.
But Peter Todd’s report doubts the protocol’s ability to address the needs of such institutions and highlights a number of flaws to prove its theory. To start with one, the report briefly criticizes Ripple for failing to eliminate centralization, the very concept Bitcoin and blockchain was founded on. The paper reads that the company has failed to eliminate the need for a “trusted third party”, but has instead created an additional entity to strengthen the centralization of traditional settlement model.
The report further questions the intent of Ripple behind holding the majority of XRP, its native currency used to propagate transactions across its private network.
“Ripple justifies XRP as an ‘anti-spam mechanism’ to deter transaction,” it reads. “However, as the volume of transactions increases the server load, transaction speed is slowed while the cost of the transaction and the amount of required XRP continues to increase.”
Furthermore, Todd’s report also questions Ripple for lacking a definite incentive mechanism to award and encourage the number of nodes active on its network to validate transactions. Discussions like these end up asking the financial institutions that why they should leverage Ripple protocol to improve their traditional settlement methods.
To know more, read this 16-page document.