Is XRP really decentralized?

A bit annoying question for currency investors.

In the following, we will try to provide some information about the Ripple currency and the Ripple company and the relationship between them in order to answer this question.

XRP is one of the currencies with a large total market capitalization if it ranks third after both Bitcoin and Ethereum.

The currency project aims to reduce transactions in fiat currencies as well as help banks transfer funds by increasing speed and liquidity with virtually zero fees.

Ripple claims that it can help reduce the money that MTMs and banks need on hand.

This cash and money is released in the form of XRP coins, allowing the company to invest it or use it for other purposes, providing them with liquidity.

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Ripple CEOs Defend the Decentralization of XRP:

There is a lot of controversy surrounding XRP.

The main company, Ripple, claims that XRP is decentralized, as He said David Schwartz, the company’s technical director, said that the “XRP Ledger” network is decentralized in nature, and added that the design of the Ripple network is more decentralized than the Bitcoin and Ethereum network.

To further underscore the decentralized nature of its crypto toolkit, the company has attempted to distance itself from the creation of XRP coins.

Brad Garlinghouse, CEO of Ripple, said:

The XRP blockchain network existed before Ripple

We own a lot of XRP, but it’s a bit like saying, Exxon has a lot of oil.

So Brad Garlinghouse likened Ripple to Exxon in the oil industry, as Ripple is just a company that provides XRP to the financial engines that need it.

However, there is ample evidence to suggest that XRP is almost entirely controlled by Ripple.

Who Created XRP?

Contrary to what CEOs want investors to believe.

XRP and its blockchain were launched in 2013 by current Ripple CEO Chris Larsen, as well as Jed McCaleb and Arthur Britto, who later split from the project.

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The XRP digital asset was initially created under the name “Newcoin” in 2012, and a month later, the company’s name was changed to “OpenCoin.”

Finally, in 2013, the company was renamed again and was subsequently merged as a subsidiary under the “Delaware” company known as “Ripple Labs” in 2014, the same name until now.

More evidence that Ripple created XRP coins trademarked in 2013, nearly six months after the network was launched.

Although originally registered as “OpenCoin,” Ripple is the current owner of the trademark, even the company itself, in the past said it created XRP coins.

Preston Byrne, an attorney specializing in blockchain technology, said:

Yes, Ripple created XRP, they own most of them and were issued after the company was founded.

Who Owns XRP Supply?

In 2012, Ripple founders Chris Larsen, Jed McCaleb and Arthur Britto signed an agreement allocating 80% of the company’s total XRP supply while the remaining 20% ​​is split between the three founders.

A few months later “XRP” was launched and 100 billion XRP was created and divided between the founders and the company.

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These coins have been sold over the years to fund company development, secure partnerships, and push market makers to improve exchange availability.

Nearly seven years later, the company still controls more than 60 billion of these tokens, more than half of the supply that, if sold at current prices, would be worth more than $15 billion.

These coins are sold regularly every quarter, and are usually worth tens to hundreds of millions of dollars. Ripple and their partners largely control the supply of XRP.

Many investors are frustrated that these sales prevent a potential price hike for XRP, and they may be right.

Who controls XRP?

The final factor that indicates the centralization of XRP is how the blockchain works.

Like Bitcoin, the XRP blockchain is made up of a group of “nodes,” which are computers that run the software that supports the chain.

However, unlike Bitcoin, the XRP network does not work similarly to Bitcoin when authenticating transactions through “Proof of Work” or what is known as mining, but rather relies on the “Ripple Protocol Compatibility Algorithm” feature, or RPCA.

Another feature that distinguishes Proof of Work from RPCA is that nodes running RPCA are not compensable.

Since the node administrators are volunteers who incur thousands of dollars in expenses annually (assuming they are not affiliated with Ripple nodes).

Out of nearly 1,000 nodes, a group of 33 is chosen by the entire group to finalize the transactions.

This smaller set is called the Unique Node List or UNL, when 80% of those 33 reach an agreement, the transaction is terminated, but here’s the problem as Ripple sets the default Unique Node List.

When a volunteer spins a node, those are the default votes to finalize transactions.

In theory, different nodes can be identified outside of those recommended by Ripple, but this rarely happens. Since the launch of the Ripple network, there are few documented cases of nodes outside of the default UNL that can reach one of the distinct points.

In addition, Ripple directly controls six of these nodes and indirectly controls at least four others through grants.

What if no one likes this situation?

Schwartz says that someone could walk away from the XRP Ledger if they disagree with the company, which is possible, but in theory, due to the control that Ripple exercises over the XRP network.

The Bitcoin network has gone through more than 100 software forks, while Ethereum has gone through at least six, which is a testament to the decentralization of the two projects.

The importance of decentralization?

It is possible that the answer to whether or not XRP is decentralized can have huge legal ramifications for a company (and investors).

If these coins are issued to raise money, they can attract unwelcome attention from regulators such as the Securities Trading Commission, the Commodity Futures Trading Commission and the Financial Crimes Enforcement Network.

If the SEC, for example, considers XRP to be a security currency, it could have serious consequences.

In fact, one of these cases is already moving through the California court system.

If Ripple one day decides to stop working on XRP, the token may also be worthless unlike Bitcoin, and if one of the Bitcoin shareholders happens to go bankrupt it won’t hurt Bitcoin.

In conclusion, and in general, these factors point to one conclusion, which is that Ripple has sufficient control over XRP and thus it cannot be said that it is decentralized.

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