People Hate XRP So Much, But You Shouldn’t
Don’t let spreading misconceptions clouding your judgement
Over the years, XRP has been criticized and accused of being “centralized” and a “bankers’ coin”, among other things. But what is the actual truth of XRP?
Let’s begin with the history of XRP
It all started with three bitcoin developers, David Schwartz, Jed McCaleb and Arthur Britto, began developing a blockchain technology that would not use Proof of Work and mining to validate transactions in 2011. They called this technology XRP Ledger (XRPL). The goal was to create a better version of bitcoin, with a more sustainable and advanced consensus algorithm, to send value efficiently.
They did it. The XRP Ledger settles transactions in 3 seconds with a transaction cost of less than a penny. It can process 1500+ transactions per second and is eco-friendly. XRP is also deflationary, as every transaction fee is burned/destroyed, which slowly reduces its supply.
They originally created 100 billion XRP, with no way to create more, and later they decided to start a company (now called Ripple) on June 2nd 2012. The purposes is to work with the community and also shape the XRP’s mission and business model. It was still the early days, so they were trying to figure out what worked best.
Ultimately, they decided to focus on cross-border payments and improving the banking infrastructure. Even as of today, the banking system was running on an old, broken and corrupted system (SWIFT). They wanted to revolutionize the financial system and solve a multi-trillion dollar problem with XRP and its infrastructure.
Today, Ripple uses XRP and the XRP Ledger for cross-border payments and liquidity management and, offers instant payments and settlement to financial institutions. There are over 20 financial institutions, at the moment, that are using XRP on daily basis though Ripple’s On-Demand Liquidity (ODL) solution.
Another usage is on RippleNet. RippleNet is Ripple’s payments network and it’s a suite of products/services. RippleNet consists of xCurrent, the messaging system that all banks are required to have for the exchange of information, and it can compared to SWIFT, On-Demand Liquidity (ODL), which uses XRP as a bridge currency for instant settlement and to avoid pre-funded liquidity, and finally Line Of Credit, which also uses XRP and allows financial institutions to borrow XRP and source capital on demand to initiate cross-border payments and increase their working capital.
And if you read that, you can understand that XRP not only isn’t a “bankers’ coin.” It’s actually trying to go against the corrupted and broken financial system. XRP and Ripple are actually going against the big banks that own SWIFT and the system that many people hate so much.
But Ripple is doing that from within the system and by trying to work with regulators and educate them, because that’s the only way. If the XRP critics were open-minded and saw things how they really are, they would actually support Ripple and XRP in the next minute.
XRP and Ecosystem
If you read all of the words above, it is normal to be confused with all of the weird terms. So, here are some of the summary:
- Ripple is a company building payments solutions and software
- RippleNet is their own payments network and system that financial institutions use, just like the conventional SWIFT system.
- RippleNet a products/services suite, consisting xCurrent and On-Demand Liquidity.
- XRP Ledger/XRPL is the underlying blockchain technology of XRP.
- XRP is the native cryptocurrency/native coin used in XRP Ledger (XRPL) — an open-source, permissionless and decentralized blockchain technology.
Ripple might be an important party in the XRP ecosystem, as they are the company behind everything XRP related thing. But right now, XRP and its technology are being leveraged by an increasing number of other companies and developers. There are already tens of companies and developers that have built and are building projects on top of XRP’s blockchain technology and are using XRP for many different use cases.
Some of the use cases that XRP is used right now are micropayments for content/web monetization (Coil), music (Audiotarky, raised in space), tokenization of financial assets (Sologenic), gaming (Forte) , smart contracts — DeFi (Flare Network, Flare Finance, XRPL Labs), security infrustructure & data analytics (XRP Forensics/xrplorer, xrpscan), Wallets/payments/apps (XRPL Labs, Towo Labs, Gatehub, Trustline) and many more. In fact, there are far more projects/apps for individuals and retail investors than there are for institutions and banks.
Is it Centralized or Decentralized?
Many people hate XRP for being such a centralized cryptocurrency, as Ripple controls most of the nodes. But is it true?
Let’s take a look at the facts. XRP’s blockchain, XRP Ledger, uses a consensus protocol that relies on validator nodes to record and verify transactions without incentivizing any party. The XRP Ledger uses a form of the Federated Byzantine Agreement (FBA) consensus algorithm. Validators are nodes running as a validating server — meaning they are configured to participate in the consensus process for validating transactions and the governance of the network.
Validators are different from miners in Proof of Work that bitcoin uses, because they aren’t paid when they order and validate transactions. On the XRP Ledger there are two kinds of nodes , validators and stock nodes. Validators are meant to validate transactions, and stock nodes are the one who protect the validators, store the ledger’s history and allow API calls.
Today, there are over 170 validators and 900 nodes that operate at locations across the globe and are run by a broad range of individuals, universities, institutions and exchanges. For consensus to be reached on the network, at least 80% of the validators must agree. Ripple runs only 6 validators and controls less than 4% of all validators on the network, which gives them no power whatsoever on the XRP Ledger.
Furthermore, on the XRP network (XRP Ledger) the transactions and changes have to be approved by all the validator nodes (>80% for consensus) and not by a single node like it happens with miners on Bitcoin. This means that the XRP network is highly decentralized and it has a better, more robust and more decentralized structure than Bitcoin and even Ethereum.
And what about Ripple owning 50% of the supply? Doesn’t that make XRP centralized?
Of course not. XRPL does not use Proof of Stake consensus algorithm, so the control of the supply does not play any role in the de-centralization of the network. Ripple has been very transparent and everything is public. They have locked the XRP on escrow and a small part is unlocked every month, which they distribute carefully to expand the XRP ecosystem, fund XRPL projects, and sell OTC to institutions and provide extra liquidity for RippleNet.
Why is there so much misinformation?
Unfortunately, there is too much misinformation being spread, either by ignorance or on purpose.
There is a lot of tribalism in the crypto space and many people treat crypto like a religion. This can be known in bitcoin maximalist community. They believe that bitcoin is the only one and all the others are shitcoins. Bitcoin maximalists feel threatened by the other cryptocurrencies, especially when they are better and more advanced. So, repeating false information is a way to prevent new people and beginners from investing in other cryptocurrencies other than bitcoin. That’s why doing your own research and understanding how the technology works, is very important.
Bitcoin started this revolution and it’s the reason we are all here today. It opened the way for this technology to show what it can do and allowed for more experiments to be done and better technologies to be created. There are countless use cases, markets and problems to be solved and each cryptocurrency does its own thing. Like Bitcoin, XRP, Ethereum, all are focusing on different things and use cases. There will not be only one winner. We are in a new internet era.
