Panos

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 and why do many people avoid doing their own research?

Let's begin with the history of XRP. In 2011, 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 and would not have its limitations. They called this technology XRP Ledger (XRPL). It was a public, open-source, permissionless blockchain network. The goal was to create a better bitcoin, with a more sustainable and efficient consensus algorithm, to transfer value almost instantly and inexpesnively. And they did it. They built the XRPL based on the Federated Byzantine Agreement (FBA) consensus algorithm. The XRPL settles transactions in 3 seconds with a transaction cost of less than a cent (0.0001 XRP on average), can process 1500+ transactions per second and is energy-efficient. XRP is also deflationary, as every transaction fee is burned/destroyed, which slowly reduces its supply.

On June 2nd 2012, they created 100 billion XRP, with no way to create more, and later they decided to start a company (now called Ripple) to work with the community and also pursue its own mission and business model building on top of XRPL. It was still the early days, so they were trying to figure out what worked best and how to do the distribution of tokens as it was the first of its kind. They started with a vision of creating a global decentralized exchange for any type of asset, but ultimately, they decided to focus on cross-border payments and improving the banking infrastructure, as the banking system was running on an old, broken and corrupted system (SWIFT). They wanted to improve the financial system and solve a multi-trillion dollar problem. You can read the whole history here: https://xrpl.org/history.html

Today, Ripple uses XRP and the XRP Ledger mainly for cross-border payments and liquidity management and, through it, it offers instant payments and settlement to financial institutions. There are tens of financial instutions, at the moment, that are using XRP on daily basis though Ripple's On-Demand Liquidity (ODL) solution. You can read more about it here: https://ripple.com/ripplenet/on-demand-liquidity/

Most importantly, Ripple is currently just one of the hundrends of projects building on top of XRP Ledger and using XRP.

XRP vs Ripple vs XRP Ledger vs RippleNet

Ripple is a company building a payments infrastructure, crypto solutions and software. RippleNet is their own system that financial institutions use. It's like SWIFT has its own system and network of financial institutions. RippleNet consists of many products/services, with the main ones being xCurrent and On-Demand Liquidity. The XRP Ledger is the underlying blockchain technology of XRP. So, do not confuse these 4 different things.

XRP is the native cryptocurrency of the XRP Ledger (XRPL) — an open-source, permissionless and decentralized blockchain technology. Ripple might be an important party in the XRP ecosystem, as everything began from them, but they are not alone. Right now, XRP and its technology are being leveraged by an increasing number of other companies and developers. There are already hundrends of projects that 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 settlement, micropayments, DeFi, tokenization, NFTs, and more. In fact, there are far more projects/apps for individuals and retail investors than there are for institutions and banks. Ripple is only 1 of the hundrends of projects.

Is Ripple actually using XRP?

A common misconception is that Ripple products and RippleNet do not use XRP, but that's wrong. RippleNet is Ripple's payments network and it's a suite of products/services. Right now, 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 gpi, On-Demand Liquidity (ODL), which uses XRP as a bridge currency for instant settlement and to avoid pre-funded liquidity, 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 other upcoming products like the Liquidity Hub. If you want to understand exactly how XRP is used by Ripple and why it's revolutionizing the financial and banking system, read this: https://write.as/panosmek/xrp-disrupting-swift-gpi-and-correspondent-banking

So Ripple is actually going against the big banking cartel that owns SWIFT and the system that many people, and especially bitcoin maximalists, 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 early days, Bitcoiners tried to do that by going against the system and promoting an anarchist ideology, trying to block and exclude everything else around it and stay out of it, but that of course didn't and can't work. This can't be achieved with this way and crypto can't stay out and build their own bubble. Connecting this technology with the system is inevitable and it is already happening. We must just try to improve it and make it work for the majority. Blockchain and crypto can do that. Ripple is already doing that by using the transformative blockchain technology of XRP and changing millions of lives and improving the outdated financial and payments infrastructure.

Centralized or Decentralized?

One of the biggest misconceptions is that XRP is centralized and that Ripple controls most of the nodes or that the UNL leads to centralization. But let's 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 – 1. Validators, which were explained above, and 2. Stock nodes, which protect the validators, store the ledger's history and allow API calls. Today, there are over 150 validators and 900 nodes that operate at locations across the globe and are run by a broad range of individuals and developers, universities, institutions and exchanges. For consensus to be reached on the network, at least 80% of the validators must agree. Ripple runs only 4 validators and controls less than 2% of all validators on the network, which gives them no power whatsoever on the XRP Ledger. Furthermore, on Bitcoin network whichever miner finds the blocks, they are unilaterally responsible for which transactions are approved and go into that block, while 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 Ethereum.

Anybody can run a validator or stock node and set it up in minutes. You can see all the information about the nodes here: https://livenet.xrpl.org/network

As for the Unique Node List (UNL) on the XRP Ledger, it's simply a list of recommended validators. Users can select the specific validators for their own UNL or they can rely on recommended UNLs that have been compiled by other parties. The network has a number of recommended UNLs, including one list Ripple recommends, and users can choose whichever one they prefer or create their own. The default UNL now belongs to the XRP Ledger Foundation, run by members of the XRP community.

And what about Ripple owning ~50% of the supply? Doesn't that make XRP centralized? No, because the XRPL does not use Proof-of-Stake, so the control of the supply does not play any role in the decentralization 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. More specifically, 1b XRP is unlocked every month and Ripple has been using 100m to 200m on average, while returning the rest back to escrow.

In simple words, XRP can do what Bitcoiners wanted Bitcoin to do and what was designed for by Satoshi, but in a much more efficient way. With the XRPL you can be your own bank today, and use all its amazing features like escrow and checks or use its built-in Decentralized Exchange. Yes, you read that right, the XRPL has a DEX and the majoriy doesn't know that. In fact, XRPL's DEX was the first ever decentralized exchange and it is operating flawlessly since 2012 that the XRPL launched. Also XRPL was the first blockchain to allow for the tokenization of other assets (such as BTC, ETH, USD and more).

Which means, XRP is not just for banks or institutions, it's not only about cross-border payments or Ripple. It's an open-source, independent and permissionless technology. Anybody can use it however they like and anyone can build anything on top of it.

Difference between Bitcoin and XRP

Bitcoin was designed to be a P2P digital currency system. The vision of Satoshi Nakamoto was to use Bitcoin for P2P transactions and as an alternative payment system that had no central authority. It uses Proof of Work (PoW) consensus algorithm, which uses the mining procedure to validate transactions. This consensus mechanism has many drawbacks, which lead to bitcoin becoming slow and expensive for what it was designed for. Furthermore, PoW is not a sustainable system and consumes huge amounts of energy, which is not eco-friendly. That's why the XRP creators built XRP and the XRP Ledger as a more advanced, scalable and sustainable system that would be closer to the real Satoshi's vision. The underlying technology of XRP, XRP Ledger, uses a unique consensus algorithm (mentioned above), which makes it faster and cheaper to send transactions without having to rely on mining, thus making it more secure, eco-friendly and decentralized. In bitcoin, if someone gains over 51% of the mining power, then they can double spend and reverse transactions. Something that is not possible on the XRPL, as it works differently, and over 80% of validators must agree for any change to occur, and still there is no way to reverse transactions and double spend like you can do on bitcoin network. This is one of the most important problems of Bitcoin and PoW that the XRP creators solved with the XRP Ledger Consensus Protocol.

Why is there so much misinformation, is it done on purpose?

Unfortunately, there is too much misinformation being spread, either by ignorance or on purpose. The majority doesn't want to devote time and do their own research, so they repeat what they hear and see from others. There is a lot of tribalism and maximalism in the crypto space and many people treat crypto like a religion. This is mainly seen in bitcoin and the known bitcoin maximalists that believe bitcoin is the only one and all the others are shitcoins. A surprising and tragic fact is that many bitcoiners started paying other people in 2013 (https://bitcointalk.org/index.php?topic=212730.0) to spread misinformation and FUD against Ripple and XRP, which has continued and created a cycle over the years. 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 or whatever each group accepts. 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 is no reason for tribalism and maximalism. 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.

In the end, blockchain is a revolutionary technology and it is transforming the world. Cryptocurrencies are the evolution of money and finance, and for the people who are here for the technology and the vision of decentralization, must let hatred and tribalism aside and support each other.

Do your own research and learn about the transformative technology of XRP: http://xrpl.org/

Some useful links on how the XRP Ledger operates: 1. https://xrpl.org/intro-to-consensus.html 2. https://xrpl.org/xrp-ledger-overview.html 3. https://www.youtube.com/watch?v=fo8ZScrXFZE 4. https://www.youtube.com/watch?v=f1aXZEVq_v8