Author: Justin Bons, Founder of Cyber Capital
Compiled by: Luffy, Foresight News
Ripple (XRP) is a centralized and permissioned network, contrary to the claims made by its executives. XRP misleads investors by falsely portraying its decentralized nature, while in reality, the network is completely controlled by the foundation.
XRP consensus is based on UNL (Unique Node List), where trusted nodes are determined by centralized entities (including the foundation). XRP consensus is not based on PoS or PoW, but on PoA (Proof of Authority), yet they claim to be more decentralized than Bitcoin and Ethereum...
All of this is theoretically supported by Ripple's own documentation, and it's hard to find any researchers outside of XRP who would call this design 'decentralized'; however, they are deceiving the public.
However, users can modify their own UNL and choose whom to trust. The language here is subtle. A truly decentralized cryptocurrency is 'trustless' because no 'trust' is required, and choosing whom to trust is entirely different from being trustless!
XRP is not trustless at all; worse yet: if your UNL does not overlap sufficiently with the rest of the network, you will face risks. According to Ripple's documentation: 90% UNL overlap is needed to prevent forking.
This means that in practice, direct permission from the XRP Foundation is needed to participate in consensus, which is almost centralized in terms of blockchain design... Now, let's delve deeper into these UNLs.
We have identified that the UNL is the trusted third party ultimately chosen by the XRP Foundation, and this is further confirmed as we delve deeper into these UNLs: for a long time, there was only one UNL, namely the dUNL managed by the XRP Foundation.
However, this list is not static but dynamic. The XRP Foundation can change the validator list in a completely centralized manner without any notice, kicking out anyone who violates the authority.
Over time, there are now two UNLs, namely dUNL and XRPLF, both directly funded by the XRP Foundation. This adds another layer of de facto control over the network; let me explain:
Blockchain allows participants who do not trust each other to coordinate, all thanks to the underlying incentive mechanisms (PoS or PoW). However, XRP lacks block rewards and incentives; it is purely based on trust, so how can different UNLs coordinate with each other?
XRP's claim is based on the idea that different parties can spontaneously organize around a new UNL list without the incentive mechanisms mentioned earlier. Clearly, this is nonsense, as this is exactly the problem blockchain aims to solve; new UNLs cannot achieve coordination.
If the new UNL cannot coordinate, it means the foundation has de facto complete control; control over validators equals control over the network, which resembles a consortium chain.
In all other blockchains, you cannot choose validators as they are trustless and permissionless; this is why validators can remain anonymous, as it is secured by cryptoeconomic game theory rather than trust, which is fundamentally different from XRP.
XRP is not a cryptocurrency at all. Since it is neither PoS nor PoW, it is a PoA; otherwise, what else could it be? Consensus algorithms require verification mechanisms, and trust is the foundation of this system, thus: XRP is a PoA!
PoA systems always have a central authority that appoints validators. So, what about the current existence of two 'official' UNL lists? This refutes my assertion that different UNLs cannot coordinate. This is where things start to get really crazy:
Upon careful examination, I found that all UNLs are essentially identical, using the same set of validators, further proving that the foundation actually has complete control over the XRP network!
This screenshot is from 2 years ago, but I confirm that the situation is still the same, proving that the new UNLs cannot coordinate with each other. Thus, the foundation's list becomes a de facto list, as all UNLs must comply, or there is a risk of forking.
This also allows the foundation to conduct censorship when forced, as they have such a high level of control. This is fundamentally different from how cryptocurrencies operate and explains why only 20% of validators are needed to stop the network...
Running trusted validators also provides no rewards. Unlike PoW or PoS, where the cost of attacks reflects block rewards for miners/stakers. This is why decentralization metrics are highly correlated with block rewards. On XRP, this decentralization metric is zero.
I have been studying XRP since the early days, and I clearly remember that people recognized the trade-offs of decentralization. This situation gradually changed as the community and leadership's claims became more extreme; I say this not to belittle investors but to empower them.
Help break the XRP echo chamber and stop being exit liquidity for others. The pre-mining rate of XRP is as high as 99.8%, making it one of the most unfair distributions in history, as no new XRP is created; all newly circulated XRP is purchased from the founders.
I have always been interested in early discussions about Ripple's decentralization; pretending that XRP is permissionless is not the right answer. The real solution lies in replacing the UNL list with PoS, transforming XRP into a more traditional decentralized blockchain.
They can also frankly admit that the facts are facts, and I will not dispute that. However, attracting ignorant retail investors with lies is wrong, and this is where we as an industry need to draw the line and self-regulate!
XRP might bribe or deceive the SEC, but they cannot deceive us, the cryptocurrency natives. No matter how complex and in-depth the rebuttals are, this does not change some simple facts: XRP is now completely permissioned and centralized.
If you really care about XRP, take it seriously. Because there are proposals in this critical post that can help XRP succeed: be honest about its centralization, or shift towards decentralization. The truth sets us free; leave XRP or apply pressure for change, nothing is irretrievable.
