less decentralized than other cryptocurrencies?

XRP is less decentralized than other cryptocurrencies, but it’s not necessarily a bad thing

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Grayscale, an institutional digital asset management company, recently released a report analyzing the history of XRP tokens, the protocol, the price, the transaction speed and more. According to the report, early developers of XRP Ledger focused on creating a fast protocol that challenged established financial systems. Grayscale found that Ripple is less decentralized than BTC and ETH, although it remains the third largest cryptocurrency by market capitalization.

What is Ripple?

As a reminder, Ripple is the company behind XRP, RippleNet and the XRP ledger. Ripple uses open-source technology. The company was launched in 2012, and has a market capitalization of $ 9.8 billion at the time of writing.

There are currently 100 billion XRPs in circulation, including 49.9 billion in escrow. There is no XRP mining because all tokens are pre-mined so that they can be exchanged with the lowest possible transaction costs.

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The Grayscale report

Grayscale writes:

The XRP program aimed to eliminate the high transaction costs and long processing times imposed by institutions and, like most digital goods, it tackles the problem of double spending, that is, when third parties are required to monitor counterfeit money or fraudulent transactions.
The developers incorporated features, including a consensus algorithm and escrow plan instead of a blockchain protocol and operating rewards, and incorporated a series of commercial financial products. In doing so, XRP has grown with both financial institutions and individual users.

The Grayscale report highlights the decentralized nature of the XRP registry and examines how transactions are performed over the network. However, Grayscale notes that Ripple’s efforts to expand the XRP network make the blockchain significantly less decentralized than many of its competitors, such as Bitcoin and Ethereum.

Emphasizing two other points, Grayscale said that XRP and XRP Ledger are less decentralized due to Ripple’s involvement as the driving force behind adoption, the number of XRPs the company and its founders own, and the fact that ‘there is a high concentration of XRP’s global offer located in only 100 of its main portfolios.

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The fact that Ripple is less decentralized than bitcoin and ETH is not necessarily a bad thing for investors. Although it goes against principles of decentralization, Ripple placed the vast majority of XRP in held captive to reassure investors. Ripple cannot sell all of its assets at the same time, which protects token investors. However, Grayscale points out that there is always a risk that “large and / or sustained periodic sales may put pressure on the price of the XRP”.

What’s next for Ripple?

Thus, the XRP is less decentralized than the BTC and theETH, but it’s not necessarily a bad thing for investors. Ripple remains the third largest digital currency by the market capitalization, and is actually doing pretty well at the moment. Less decentralization for a token that investors want to trust, and it’s good for blockchain – however you think of it.