Decentralization is an essential aspect of the cryptocurrency industry. For starters, without decentralization, most digital currencies would lose their qualities of being permission-less or censorship-resistant. Part of their luster comes from the fact that anyone can use their system and any developer can build on top of their network. Besides, the entire reason for the existence of decentralized cryptocurrency is to provide an open immutable ledger that is non-discriminatory in participation. It’s for this specific reason that Bitcoin was created. Bitcoin’s creator believed that entrusting financial transactions to centralized third parties was an inefficient and insecure way of making payments. This led to its creation as a Peer-to-Peer decentralized network.

Fast forward a couple of years later and more cryptocurrencies had been created, including Ethereum and Ripple which occupy the second and third most popular cryptocurrency slots respectively. Both Ethereum (ETH) and Bitcoin (BTC) use the PoW (Proof-of-Work) consensus algorithm for transaction validation, which means that more of their tokens are created through mining. On the other hand, Ripple’s (XRP’s) creators have already created about 100 billion XRPs for release. This move sparked the debate as to whether XRP is centralized or decentralized as Ripple Labs can at any one moment, flood the entire market with XRP. However, XRP supporters and those within XRP say this should not worry investors.

XRP’s Decentralization According to Ripple CTO

Many players within the crypto-landscape believe that the seemingly centralized nature of Ripple will most likely lead to the US SEC treating it as a security. However, Ripple Labs has been on the defensive about the issue, continuously refuting the claims. David Schwartz, Chief Technical Officer, has been extremely vocal about the issue on Twitter. Much recently, Schwartz took it upon himself to release a lengthy blog post titled ‘The Inherently Decentralized Nature of XRP Ledger’ on the company’s website. In the article, David Schwartz reveals why he believes that the XRP ledger is more decentralized than that of BTC and ETH.

According to Schwartz, the idea of decentralization on the blockchain platform is highly misunderstood, and frankly, it’s changing. He explains this by stating that the blockchain’s power lies in the fact that no individual or minority group is capable of dictating rules or rewriting transaction history. However, he argues that while this was a great starting point for both BTC and ETH at the beginning, some limitations have manifested over time. He constructs his reasoning on the fact that any PoW blockchain can be subject to centralized control by a few miners having significant control over the system. He provides an example of how four mining groups currently control 58% of the Bitcoin network while three miners account for 57% of Ethereum’s daily capacity.

Moreover, he states that 80% of Bitcoin mining is centralized in China, a nation that has banned cryptocurrencies on and off. He cites this as a significant risk as it could potentially lead to a 51% attack that could devastate both Bitcoin and Ethereum. The Ripple ledger, on the other hand, is risk-free as it’s built on a consensus protocol that no one party can control. Schwartz further explains that Ethereum and Bitcoin miners support high transaction fees as it translates to high rewards on their part. Meanwhile, the XRP ledger lacks mining and has a built-in fee regulator that translates to lower transaction costs and faster transaction speeds. He concludes by stating that the XRP ledger is a decentralized ledger that will get more decentralized than BTC and ETH over time.

Other People’s Response to Schwartz’s Claims

While Schwartz arguments might have been valid to some, most people still agree that if there is any project pushing centralization, it would be XRP. His assertion that XRP is more decentralized than BTC and ETH has been met with disbelief. His argument that PoW cryptocurrencies are becoming more centralized due to the increasing power of mining pools is not the final word, as many other factors make them decentralized. Some comments from both Schwartz and CEO Brad Garlinghouse have been considered to be misleading the cryptocurrency community. Weeks earlier, Schwartz had even denied that XRP would be a distributed ledger.

Perhaps what Schwartz had not expected was the response that his tweet elicited from the cryptocurrency community, especially those who hold high regard for both BTC and ETH.    Several cryptocurrency Twitter pundits, such as WhalePanda and Noah’s Ark of Crypto took to Twitter to bash Schwartz claims. According to WhalePanda (@WhalePanda), XRP is trying to take a small detail of decentralization (validating) and trying to tell a fairy tale of how their crypto is decentralized. He’s of the opinion that Schwartz’s sentiments are part of the company’s strategy to get listed on larger exchanges as they manipulate the market for higher XRP prices. Noah’s Ark of Crypto (@noah-sarkcrypto), on the other hand, stated that “there’s no such thing as decentralization when it comes to XRP.”

Conclusion

While a few of XRP’s executives are of the opinion that XRP is decentralized, a majority of the crypto-community thinks otherwise. Part of this originates from the fact that XRP wants to work with financial institutions and regulators, while BTC was meant to be for everyday folks. XRP is also a pre-mined digital currency, unlike BTC and ETH which rely on the PoW algorithm for mining. Furthermore, a majority of the XRP crypto is held by several XRP founders and the company in escrow, prompting the idea that they can manipulate and control the market.

Whether XRP will become more decentralized than BTC and ETH in the future is a question that only time will answer. All in all, at Blockchains.My, we remain hopeful for the future of all cryptocurrencies and the decentralization aspect. We invite you to check out our BCMY digital wallet app with which you can purchase and trade all of the aforementioned cryptocurrencies in this article, including a few more.