WILL THE REAL DECENTRALIZED ASSET PLEASE STAND UP
In the digital asset space, there are many different coins that aim to solve a vast array of different problems. Two of the coins towards the top of the list of highest market cap are often compared against each other because they are so different in how they are set up. Fans of both XRP and Bitcoin will tell you how their coin is more decentralized than the other. So let’s take a look into both and decide for ourselves.
Bitcoin is a decentralized coin that uses Proof-of-Work to solve the problem of double spending on its blockchain network. Bitcoin has proven that it is becoming more decentralized over time. The proof of work system is cumbersome though, as more and more miners compete to complete blocks, the amount of energy needed to complete one transaction becomes greater. With the high fees and slow process times of Bitcoin’s Proof-of-Work system, it without a doubt has a scalability issue. However, the goal of becoming virtual gold shouldn’t be hurt by scalability as it is designed to be stored not frequently traded.
XRP uses a distributive ledger technology to solve the same double spending issue. XRP was initially created by the same people who then created the company Ripple Labs, and although the company has locked the majority of their XRP in escrow, their detractors still claim it is centralized with Ripple. Ripple’s Chief Cryptographer helped create the XRPLedger that he has called Bitcoin 2.0. The XRPLedger uses a consensus protocol instead of Proof-of-Work; it works by using a majority of the validators confirming the transaction without any reward system.
XRP fans will be quick to point out, though the majority of XRP is in the hands of Ripple Labs, the Ledger itself is very decentralized and will continue to become more decentralized with every new validator installed. For a change to take place on the XRP Ledger, 80 percent of the validators must continuously support the change for two straight weeks for it to go into effect and Ripple Labs only runs 7 percent of the validators on the XRP Ledger. In my mind, this is a much safer protocol than what Bitcoin has in place. The Bitcoin system can be attacked by a 51% attack, if over half of the hash rate started agreeing to the attack, then they could start double spending without any repercussions. As seen here, conservatively China is home to 70% of Bitcoin’s hash power. So although Bitcoins themselves are decentralized, the hash power for Bitcoin’s Proof-of-Work is very centralized in one country.
After looking into these deeper, it is easy to see why people in both camps don’t believe the people in the other. As it is with so many arguments, usually the answer is somewhere in between. Obviously, it isn’t ideal for the majority of XRP tokens to be in the power of Ripple Labs, and it is quite clear that it is less than perfect for over 70 percent of Bitcoin’s hash power to be coming from the communistic People’s Republic of China. I believe that there are more checks and balances built in with the XRP Ledger, and there would be many more repercussions for Ripple Labs, a United States based company if they chose one day to defraud their investors. On the other hand, all it would take to take down Bitcoin is for China’s leader to one day decide that they are going to unite all the hash power in China to create immense wealth for themselves. It is with that in mind that I believe XRP to be the most decentralized asset in the crypto world.