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Saturday, June 15, 2024

Despite Ripple’s Regulatory Threat Receding, XRP Blockchain Continues to Grapple with Centralization Concerns

According to Last week’s news that Ripple Labs had scored a partial court victory in its battle with the U.S. Securities and Exchange Commission lifted a regulatory cloud that had hung over the project for years.

What remains, however, is the persistent criticism historically lobbed at XRP Ledger, the project at the heart of the case, by blockchain purists: that it’s too centralized, in its technological design.

A descendent of Bitcoin but built around concepts that date to the early 2000s, XRP Ledger, or “XRPL,” relies on a key tradeoff – allowing its central transaction-processing mechanism to be controlled by a much smaller handful of “validators” or key operators than found on many rival blockchains.

“Ripple basically said, ‘Hey, let’s make Bitcoin adoptable by institutions,’ so they created their own version of a decentralized currency that was faster and more consistent and cheaper,” according to a former Ripple Labs employee who asked not to be identified so he could speak more freely without upsetting old colleagues. “But it did come with a trade-off of greater centralization compared to Bitcoin.”

Benefits come in the form of security, speed and throughput, but the downside is that more centralized networks are more susceptible to the influence of major players, or prone to single points of failure.
That’s not to say that the XRPL isn’t, in and of itself, a fascinating project in its own right, having been an early mover in the blockchain industry and now commanding a market capitalization for its native token XRP of $42 billion, the fourth-largest among tens of thousands of cryptocurrencies – along the way attracting the likes of big banks like Bank of America as partners. NFTs are natively built into the blockchain’s underlying programming – something upstart competitors are only now accomplishing. Smart contract-like functionality is currently on the way, and third-party sidechains are beginning to proliferate.

Disclaimer: The information in this news article is based on the available details at the time of publication. Subsequent updates or developments regarding Bitcoin’s price and regulatory landscape may not be reflected in this article. Cryptocurrency investments carry inherent risks, and readers are advised to conduct their own research and seek professional advice before making investment decisions.

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