Cryptocurrency fans have watched the rise of Ripple (XRP) with interest over the past eight months, and all this time, the controversy around the network has not subsided. Many skeptics are wondering what caused the surge in XRP prices and when the correction should occur.
In his article, Bitcoin.com journalist Jamie Redman draws attention to some aspects that not everyone attaches to, watching the rate rise.
Is the node database competing with the blockchain giants?
Ripple (XRP) has been making significant strides lately, consolidating the impressive growth of recent months. Ripple and its parent company, Ripple Labs, position themselves as an all-in-one money transfer network with their currency exchange. The protocol is called RTGS (Real Time Gross Settlement System), and it acts as a distributed ledger between nodes on the network. We also recommend reading What is mining, and what do miners do?
Such nodes are validation servers that offer no incentive or reward, as is the case with miners on the Bitcoin network (i.e., in the Proof-of-Work protocol) because independent servers run the Ripple network. It is what gave rise to accusations that Ripple is extremely centralized: most of the verification servers are operated by banks, market makers, and Ripple Labs itself. It should be noted that among the financial institutions that use Ripple are companies such as Earth point, Fidor Bank, Bank of America, and HSBC.
Without PoW incentives and only a limited group of validation nodes (nodes), all 100 billion XRP was created immediately upon network launch. Thirty-eight billion of them are now in circulation, while the rest were left to themselves by the founders and team members. Skeptics point out that one of the most dangerous aspects of the market is that Ripple Labs controls more than 60 billion XRP, more than half of the total turnover.
Jed McCaleb and the Founder's Coins
Ripple was created in 2012 by Ryan Fugger and Jed McCaleb and was originally called Ripplepay. Jed McCaleb is best known for launching the Mt Gox exchange with Mark Karpeles. McCaleb renamed his company Ripplepay to Ripple and, until the end of 2013, helped promote the "public database." He then left Ripple to start his Stellar project, which forked the XRP codebase and differs from XRP in the way data is distributed. In 2014, the XRP market dropped significantly as rumors circulated that McCaleb planned to sell his 9 billion token stakes in Ripple. However, these rumors were not confirmed.
Another Ripple founder, Chris Larsen, donated 7 billion XRP to charity around the same time. Then McCaleb was again talked about in the media - time that he was trying to sell most of his stake on the Bitstamp exchange. Then the company Ripple Labs decided that the sale was not in the network's interests, and therefore McCaleb's XRP was frozen.
Distributed ledger with freeze function
The McCaleb funds freeze revealed an interesting feature related to Ripple's "public database". It turned out that Ripple Labs can freeze XRP accounts using two methods: stopping the functionality of an individual account and a global freeze that could bring the entire network to a halt. The global freeze is not a rumor, as Ripple Labs stated its possibility on August 1, 2014. Additionally, in April 2015, a Ripple Labs spokesperson spoke to cryptocurrency columnist Sean Vince about freezing works and what choices users have.
Monica Long, VP of Marketing and Communications at Ripple Labs, explained then:
The Ripple protocol allows each gateway to adhere to its policy, and therefore users have a choice between gateways that are freeze or non-freeze, depending on their preference. Most jurisdictions require Ripple gateways to be frozen. It supports a healthy ecosystem by protecting users and reducing risks. If the user believes that his funds were unfairly frozen, they can turn to the appropriate support services for help.
XRP Markets Up 22,400% In 2017 Despite Skeptics
Ahead of 2018, skeptics and speculators were worried that investors were jumping on Ripple, considering it the "next bitcoin." It raises concerns that a company that owns more than half of its currency reserves with a centralized freeze function could theoretically censor any transactions and even the entire network. Most of the ideological crypto enthusiasts don't like Ripple and even say that it shouldn't be presented on Coinmarketcap as it is not blockchain-based. But whatever the haters say, the markets for this cryptocurrency are doing well, and many investors don't seem to be worried about the downsides of the XRP ecosystem.
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