Luke Descryptive / Descryptive
Although Bitcoin is still the king of the cryptocurrency hill, there are many pretenders on its throne, and some of them are very different. One of the most fascinating distractions from multiple crypto norms is Ripple, a much more centralized cryptocurrency in a very decentralized space.
Ripple is currently still classified as a cryptocurrency, but the way it was founded and operated is very different from some of its competitors. If you want to invest in Ripple, you have to do your research first. What better place is there than here?
Would you like to know what Ethereum is all about? We also have a guide for this.
Ripple is the collective term for the cryptocurrency platform, whose transaction log is XRP. Similar to Ethereum, this is the name for the platform that facilitates trading in ether. Like other cryptocurrencies, Ripple is based on the idea of a distributed general ledger network in which different parties have to participate in the validation of transactions and not a single centralized authority.
This makes transactions around the world easier and transfer fees are far cheaper than Bitcoin. Unlike other cryptocurrencies, XRP transfers are effectively instant and do not require a typical confirmation time.
Ripple was originally founded by a single company, Ripple Labs, and will continue to be supported by that company, rather than by the broader network of developers who continue to develop Bitcoin. There is also no fluctuating amount of its currency.
Bitcoin has a continuously growing pool with a possible maximum, and Ethereum theoretically has no limits. On the other hand, Ripple started right out of the gate with all of its 100 billion XRP tokens. This number remains without mining, and most tokens are owned and held by Ripple Labs themselves – around 60 billion at the latest.
Even with the recently reduced value of around 20 cents per XRP, this means that Ripple Labs is currently sitting on a cryptocurrency worth around $ 12 billion. The company has 55 billion XRP in an escrow account, which means it can sell up to a billion a month if it chooses to fund new projects and acquisitions. Selling such an amount would likely have a drastic impact on the value of the cryptocurrency, and Ripple Labs is not planning to do so anytime soon.
In fact, Ripple Labs wants to use the technology behind XRP to enable faster banking around the world. While Bitcoin and other cryptocurrencies are based on the idea of separating financial transactions from traditional currency trading organizations, Ripple is almost the opposite in every way.
Supported by banks
You may have heard many cryptocurrency investors and financial commentators discuss the idea of regulation. While we don't think this matters, many fear that banks will take action against Bitcoin and the like.
Ripple is even less likely to do this because it is supported by some of the world's largest financial institutions. Santander, UBS, American Express, RBC, Westpac and others are involved in the functioning and distribution. You can even charge the specified transaction completion fees. This control is the most important differentiation factor for Ripple.
In many ways, this is not entirely surprising since blockchain technology offers a variety of benefits for companies that they can use effectively. Securing a cryptocurrency like Ripple is undoubtedly an outlier. This needs to be understood by potential buyers and sellers as it gives these financial institutions a much higher degree of control over Ripple than most other cryptocurrencies out there.
Bitcoin, Ethereum, and the like are completely decentralized and backed by thousands, if not millions, of global miners, which means that no one really has control over the network. In contrast, these financial institutions and Ripple Labs manage the Ripple nodes themselves.
These independent servers don't have to provide proof of work calculations like Bitcoin. The nodes simply validate transactions themselves – similar to conventional banks.
When this is combined with the fact that no new XRP is created and the circulation of existing numbers is strictly controlled, there are many concerns about the future of Ripple.
All this control over the ripple network, held by certain entities, means that they have some skills that are unique to this type of cryptocurrency. The one that has hit critics the most is “freezing”.
"The XRP ledger provides addresses with the ability to freeze non-XRP balances. This can be useful for meeting legal requirements or investigating suspicious activity," the Ripple guide to this feature says. While this is common in traditional banking, many would argue that it is the complete opposite of cryptocurrency's ultimate purpose: to remove this regulation and control.
In fact, ripple nodes can severely limit XRP wallets on an individual basis or all wallets associated with a particular node. This ability was demonstrated in 2015 when the original Ripple Labs founder, Jed McCaleb, tried to sell Ripple for over $ 1 million. Ripple Labs is said to have persuaded a Ripple node, Bitstamp, to reverse the transaction.
There are elements in the story that suggest that McCaleb violated a sales contract. Regardless, the fact that freezing was possible at all – with centralized authorities controlling the ability of the currency holder to trade with him as he wishes – has other concerns about Ripple's future. If the founding company, the stock exchanges and the banks can control XRP to this extent, is it worth trading Ripple at all?
At the very least, it's important to know that where other cryptocurrencies give owners almost complete control over their coins – as long as you use the right wallet type – Ripple has much more significant control and control by the middleman.
McCaleb is currently estimated to have sold at least one billion XRPs between 2014 and 2019. He also retains nearly 5 percent of the total token supply ($ 4.7 billion) and sold over $ 4,000,000 in XRP in January 2020. Ripple's founder's financial decisions can have a profound impact, let alone Ripple Labs' even that investors are understandably skittish.