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Ripple Labs, Inc. has long been on the defensive against claims from cryptocurrency pundits and investors who believe that its native token, XRP, will be viewed as a security by the U.S. Securities and Exchange Commission (SEC) due to its seemingly centralized design.
However, Ripple’s Chief Technology Officer David Schwartz aims to set the record straight about XRP’s “inherently decentralized nature.”
Ripple CTO Dives into the Topic of Decentralization
Decentralization by definition is the “dispersion or distribution of functions and powers,” according to the Merriam-Webster dictionary.
However, in the cryptocurrency space, what it means to be decentralized is less clear, and as David Schwartz says in the opening of his new report, “is wildly nuanced, misunderstood and, frankly, evolving.” In the report, titled “The Inherently Decentralized Nature of XRP Ledger,” Schwartz attempts to clear up some of the confusion around the decentralization of XRP.
Unlike Bitcoin and Ethereum that use proof-of-work algorithms, thus rewarding miners for validating transactions, XRP uses a consensus protocol that requires validators to record and verify transactions without any incentive. Schwartz says these validators are spread all across the globe and are comprised of a range of individuals, institutions, and cryptocurrency exchanges.
“Put simply, the XRP Ledger is based on an inherently decentralized, democratic, consensus mechanism — which no one party can control.”
Taking to Twitter earlier today, Brad Garlinghouse, the CEO of Ripple, showed his approval of Schwartz’s post, and promised more on the issue during his Ask Me Anything session.
.@joelkatz speaks the TRUTH on XRP Ledger! Brilliantly designed to be inherently decentralized. More on this during my AMA with @CoryTV at 3pm (PT) today on https://t.co/OmzfxkPL6N https://t.co/IIcdA75bIt
— Brad Garlinghouse (@bgarlinghouse) August 22, 2018
XRP is More Decentralized Than Bitcoin or Ethereum
Schwartz cites the fact that the four largest mining pools control as much as 58% of the Bitcoin network, while three miners control 57% of Ethereum’s, as a reason why these competing cryptocurrencies are even less decentralized than XRP.
This despite the SEC’s contrarian stance that Bitcoin and Ethereum aren’t securities due to the lack of a central governing organization controlling them.
The report also warns of nearly 80% of Bitcoin mining coming from just one country, China, stressing the risk that Bitcoin could become manipulated by a “single sovereign government.” Worse yet, Schwartz warns of a potential 51% attack on blockchain of the two top cryptocurrencies by market cap – a situation that opens the door to for potentially fraudulent transactions.
XRP, on the other hand, requires 80% of its validators across the network to continuously support a proposed change over a two-week period before it is ever applied.
The report states that Ripple only operates 10 of the 150 validators currently verifying transactions on the protocol today, and that each validator only gets one vote in support of any changes. The data suggests that Ripple is far less in control of the XRP cryptocurrency than the stronghold China has over the Bitcoin blockchain.
The most important reason XRP is “decentralized in nature,” according to Schwartz, is the fact that users on the XRP ledger select a Unique Node List (UNL) – a list of trusted validators chosen by the user. Since users are free to choose and even change their UNLs, the XRP ledger “is and always has been inherently decentralized.”
Featured image from Shutterstock.
