On 22 August 2018, David Schwartz, Ripple’s Chief Technology Officer, explained in a post on Ripple’s “Insights” blog why he believes that the XRP Ledger, which powers Ripple’s xRapid product, is more decentralized than Bitcoin’s or Ethereum’s blockchain.
According to Ripple’s developers' documentation, the “XRP Ledger is a decentralized cryptographic ledger powered by a network of peer-to-peer servers.” It is the home of XRP, “a digital asset designed to bridge the many different currencies in use worldwide.” Here is how it describes the main advantages of Ripple’s consensus algorithm:
“The XRP Ledger's biggest difference from most cryptocurrencies is that it uses a unique consensus algorithm that does not require the time and energy of 'mining', the way Bitcoin, Ethereum, and almost all other such systems do. Instead of 'proof of work' or even 'proof of stake', The XRP Ledger's consensus algorithm uses a system where every participant has an overlapping set of 'trusted validators' and those trusted validators efficiently agree on which transactions happen in what order. As of early 2018, the amount of electricity the Bitcoin network uses per transaction is more than a family home in the USA uses in an entire day, and confirming the transaction takes hours. A single XRP transaction uses a negligible amount of electricity, and takes 4 or 5 seconds to confirm.
Furthermore, each new 'ledger version' in the XRP Ledger (the equivalent of a 'block') contains the full current state of all balances, so a server can synchronize with the network in minutes instead of spending hours downloading and re-processing the full transaction history.”
It also notes that:
“The XRP Ledger's system of trusted validators uses a small amount of human interaction to achieve better distribution of authority than other decentralized systems. Fully-automated systems for reaching consensus from an unknown set of participants are vulnerable to concentrations of voting power. For example, Bitcoin mining is disproportionately concentrated in places with cheap electricity. As Ripple curates a list of distinct validators operated by different entities in different jurisdictions, the XRP Ledger can become more resistant to censorship and outside pressures than proof-of-work mining.”
In his blog post, Schwartz, who is one of the original architects of the XRP Ledger, makes the following observations:
“Blockchains that use proof-of-work can be subject to centralized control, where a few miners have significant control over the system.”
“Validators are different from miners because they aren’t paid when they order and validate transactions. Today, these validators operate at locations across the globe and are run by a broad range of individuals, institutions, asset exchanges and more.
Put simply, the XRP Ledger is based on an inherently decentralized, democratic, consensus mechanism — which no one party can control.”
“With Bitcoin and Ethereum, a surprisingly small number of miners could collude to disrupt the system.
As of today, four mining groups currently control 58 percent of the Bitcoin network and three miners account for 57 percent of Ethereum’s daily capacity. Further, 80 percent of the mining on the Bitcoin blockchain is centralized in China, despite the country’s ban on digital assets. This puts it at greater risk of being manipulated by a single, sovereign government.”
“In contrast, the XRP Ledger requires 80 percent of validators on the entire network, over a two-week period, to continuously support a change before it is applied. Of the approximately 150 validators today, Ripple runs only 10. Unlike Bitcoin and Ethereum — where one miner could have 51 percent of the hashing power — each Ripple validator only has one vote in support of an exchange or ordering a transaction.”
“Additionally, this two-week waiting period gives time for those that support a proposed change to update their software in accommodation of it. If 80 percent of users, the exchanges and other participants do not adopt a change that is proposed by their validators, the change does not go into effect.”
“While Bitcoin and Ethereum are becoming more centralized over time, the XRP Ledger is getting more decentralized.”
“Users on the XRP Ledger select a Unique Node List (UNL), a list of validators trusted by that user to order transactions. 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 XRP Ledger is and always has been inherently decentralized because the users always retain the freedom to change their UNLs and the corresponding validators that they trust. For example, if a party controlling a large number of validators abused that power to propose changes that served only its own interests, users operating nodes could simply remove the party’s validators from their UNLs and rely on other validators that more closely represented their interests.
Every user is the ultimate authority of the code his or her server runs, and therefore, the rules under which it operates. If a server’s code does not support a particular set of rules, then that server can never operate under those rules. This means validators cannot conspire to enable a network rule change that does not have broad user support.”
“Nevertheless, to increase the resiliency and diversity of the network, more than half of the validators on Ripple’s recommended UNL are operated by people or groups external to the company, and Ripple continues to add even more independent validators to the list. This further demonstrates that Ripple’s validators do not wield meaningful power over the XRP Ledger.”
On Twitter, unsurprisingly, most Bitcoin fans did not seem too impressed by Ripple’s decentralization claim. For example, this was the reaction from Elizabeth Stark, a co-founder and CEO of Lighning Labs:
Like are you fucking kidding me? Not a chance in hell that XRP is more decentralized than BTC.
But hey, once something is used as a metric, it's no longer a useful measure. https://t.co/SHXNWXCqeX
— elizabeth stark (@starkness) August 22, 2018