Justin Bons believes that XRP is not a cryptocurrency.
Written by: Justin Bons, Founder of Cyber Capital
Compiled by: Luffy, Foresight News
Ripple (XRP) is a centralized and permissioned network, contrary to claims by its executives. XRP misleads investors by misrepresenting its decentralized nature, when in reality the network is completely controlled by the foundation.
XRP consensus is based on UNL (Unique Node List) where trusted nodes are decided by centralized entities (including the Foundation). XRP consensus is not based on PoS or PoW but on PoA (Proof of Authority), but they claim to be more decentralized than Bitcoin and Ethereum…
This is all theoretically backed up by Ripple’s own documentation, and you’d be hard-pressed to find any researchers outside of XRP calling this design “decentralized,” but they are deceiving the public.
However, users can modify their UNL and choose who to trust. The language here is very subtle. A truly decentralized cryptocurrency is "trustless" because no "trust" is required. Choosing who to trust is completely different from not having trust!
XRP is not trustless at all, and what’s worse is this: if your UNL doesn’t overlap enough with the rest of the network, you’re at risk. According to Ripple’s documentation: 90% UNL overlap is required to prevent forks.
This means that in practice, direct permission from the XRP Foundation is required to participate in consensus, which is pretty much centralization in terms of blockchain design… Let’s take a closer look at these UNLs.
We have already determined that UNL is the trusted third party that the XRP Foundation ultimately selected, and this was further confirmed as we dug deeper into these UNLs: for a long time, there was only one UNL, the dUNL managed by the XRP Foundation.
However, this list is not static, but dynamic. The XRP Foundation can change the validator list without any notification in a completely centralized manner, kicking out anyone who violates the authority.
Over time, there are now two UNLs, dUNL and XRPLF, both of which are directly funded by the XRP Foundation. This adds another layer of de facto control over the network; let me explain:
Blockchain allows parties that do not trust each other to coordinate, all thanks to the underlying incentive mechanism (PoS or PoW). However, XRP has no block rewards and incentives, it is purely based on trust, so how do different UNLs coordinate with each other?
XRP’s claim is based on the idea that different parties can spontaneously organize around new UNL listings without the aforementioned incentives. Obviously, this is nonsense, as this is exactly the problem that blockchains are meant to solve, and new UNLs cannot achieve coordination.
If the new UNL cannot be coordinated, it means that the foundation has de facto complete control, and control over the validators is equal to control over the network, which is like a consortium chain.
In every other blockchain, you cannot choose the validators because they are trustless and permissionless, which is why validators can be anonymous because it is secured by crypto-economic game theory rather than trust, and that is what makes XRP fundamentally different.
XRP is not a cryptocurrency at all. Since it is neither PoS nor PoW, it is a PoA, what else can it be? Consensus algorithms require verification mechanisms, and trust is the foundation of this system, so: XRP is a PoA!
PoA systems always have a central authority that appoints validators. So what about the fact that there are currently two "official" UNL lists? This disproves my assertion that different UNLs cannot coordinate. This is where things start to get really crazy:
Upon closer inspection, I discovered that all UNLs are in fact identical, using the same validator set, further proving that the Foundation actually has complete control over the XRP network!
This screenshot is from 2 years ago, but I can confirm that this is still the case, proving that new UNLs cannot coordinate with each other. Thus, the foundation's list becomes the de facto list, as all UNLs must comply or risk being forked.
This also allows the foundation to censor if forced to do so, since they have such a high degree of control. This is very different from how cryptocurrencies work, and explains why it only takes 20% of validators to halt the network…
There is also no reward for running a trusted validator. Unlike PoW or PoS, where the cost of an attack reflects the block reward to miners/stakers. This is why decentralization measures are highly correlated to block rewards. On XRP, this decentralization measure is zero.
I’ve been involved with XRP since the early days, and I remember clearly that people recognized the trade-offs of decentralization. This has gradually changed as the community and leadership have become more extreme in their advocacy, and I say this not to disparage investors, but to empower them.
Help break the XRP echo chamber and stop being exit liquidity for others. XRP was pre-mined at 99.8%, making it one of the most unfair distributions ever, as no new XRP was created, all new XRP in circulation was purchased from the founders.
I’ve always been interested in the early discussions about Ripple’s decentralization, and pretending that XRP is permissionless is not the right answer. The real solution lies in replacing the UNL listing with PoS and transforming XRP into a more traditional decentralized blockchain.
They could also just come clean and admit that the facts are the facts and I would not dispute that. However, using lies to lure in ignorant retail investors is wrong and this is where we as an industry need to draw the line and regulate ourselves!
XRP may be able to bribe or deceive the SEC at this point, but they can’t deceive us, the crypto natives. No matter how sophisticated and in-depth the rebuttal is, it doesn’t change a few simple facts: XRP is now completely permissioned and centralized.
If you really care about XRP, please take it seriously. Because in this critical post lies a solution that can help XRP succeed: confess your centralization, or move to decentralization. The truth sets us free, leave XRP or put pressure on it to change, nothing is irreversible.
