Is XRP Centralized or Decentralized?


XRP is a Bitcoin blockchain-based Trading site of payments that came into being through the Fintech company. Also referred to as Ripple, it was founded by a Canadian computer programmer, Ryan Fugger. However,  currently, there is a legal debate between the founding company and the securities and exchange commission of The United States of America regarding the unregistered security of the assets sold by the company that violates the country’s federal law.

This is probably the main reason why it is in the limelight at the moment. This has also made people think about whether it is a centralized system of working or a decentralized one.

Launched in 2012, Ripple is a platform founded by a private company, and ever since its launch, it has gained a lot of fame owing to its unusual operations and structuring. At the same time, it has seen a lot of criticism for the way was founded and the manner it works.  Those who support it belief in its potential for growth.  For the critics, the issues lie in the fundamental principles of cryptocurrency, which this platform defies.

Understanding The Concept Of Ripple

Where Bitcoin is essentially public in its nature and people easily use the Bitcoin trading software in order to purchase, sell and trade it, Ripple is more concerned with improving the working of the traditional banking system.

Its manner of working is to bring together a network of banks functioning independently along with some payment providers that use standard communication protocols and ensure quick and low-cost payments on the global level. The main products launched by the company are concerned with the faster transaction of funds.

The most famous of them is xRapid, also known as On-Demand Liquidity. It aids in speeding up the transfer of currencies among countries.

XRP; The Ripple Currency

XRP, in simple words, is the currency that is issued by Ripple. Along with issuing this currency, it also manages it with the help of an extensive team. XRP got into the possession of people in 2012, which helped the company operate its functions. This currency is like fuel that helps the company manage borderless payments and ensure global transactions. It has now turned into a faster medium of exchange compared to Bitcoin.

Centralized Nature Of XRP

A lot of people are confused about whether XRP works in a centralized manner or a decentralized manner. This currency is highly centralized. Experts actually consider it more centralized when compared to Etherium and Bitcoin.

What makes it this way is the fact that no public entity can decide anything regarding issuing new coins. Any person outside triple has no input over the issuance of coins. As a matter of fact, this is owing to the consideration that XRP  is quintessentially deemed as a tool that helps in transferring funds across borders on a global level.

Although Ripple is centralized, it offers greater performance in terms of speed, transaction costs, and energy consumption than many other blockchain-based cryptocurrencies.

Another factor that proves the centralized nature of XRP is its cost and speed. The design of this currency decides the cost of transactions and the speed at which each transaction gets done.  Compared to Bitcoin,  XRP is not validated by miners with the help of a proof of work mechanism of consensus. Rather, ripple comes with its own consensus mechanism, known as RPCA,  Ripple Protocol Consensus Algorithm.

This whole system of working makes Ripple less energy intensive. As a matter of fact, it avoids the proof of work mechanism, and there is no need for intensive mining compared to what Bitcoin and Ethereum require. Alongside this, each transaction made by Ripple uses way less energy compared to the transactions made through other Bitcoin. The whole credit goes to the centralized infrastructure of XRP, which makes it highly efficient and low-cost.

However, at the same time, there is a major concern regarding this centralized infrastructure. It makes this entire network way less secure than Bitcoin. Also, as it is resistant to censorship and no major permissions are required when compared to the open-source networks of blockchain, trusting it is a bit difficult.

Final Thoughts

The centralized nature of XRP doesn’t only make it extremely efficient and fast but also gives it a certain level of transparency. Its settlement speed is more than that of Bitcoin and Ethereum.  With time, its performance is becoming bette,r and it is being accepted on the global level for all the advantages it offers.

About Neel Achary 16566 Articles
Neel Achary is the editor of Business News This Week. He has been covering all the business stories, economy, and corporate stories.