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 what its executives claim. XRP misleads investors by falsely reporting its decentralized nature; in reality, the network is entirely controlled by the foundation.
The XRP consensus is based on UNL (Unique Node List), where trusted nodes are determined by centralized entities (including the foundation). The 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 there is no need for any 'trust'; choosing whom to trust is completely different from being trustless!
XRP is not trustless at all; worse yet: if your UNL overlaps insufficiently with the rest of the network, you are at risk. According to Ripple's documentation: 90% UNL overlap is needed to prevent forks.
This means that, in practice, it is necessary to obtain direct permission from the XRP Foundation to participate in consensus, which is nearly centralized in terms of blockchain design... Let us now delve deeper into these UNLs.
We have determined that the UNL is the trusted third party ultimately chosen by the XRP Foundation; this has been 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 without any notice in a completely centralized manner, kicking out anyone who violates their 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:
Blockchains allow participating parties that do not trust each other to coordinate, thanks to the underlying incentive mechanisms (PoS or PoW). However, XRP has no block rewards or incentives; it is purely based on trust. So how do different UNLs coordinate with each other?
The claim of XRP is based on the view that different parties can spontaneously organize around a new UNL list without the aforementioned incentive mechanisms. Clearly, this is nonsense, as this is precisely the problem that blockchain aims to solve; a new UNL cannot achieve coordination.
If the new UNLs 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 because they are trustless and permissionless, which is why validators can be anonymous, as it is secured by cryptoeconomic game theory rather than trust. This is the fundamental difference of XRP.
XRP is not a cryptocurrency at all. Since it is neither PoS nor PoW, it is a PoA; otherwise, what could it be? Consensus algorithms require a verification mechanism, and trust is the foundation of this system, so: XRP is a PoA!
In a PoA system, there is always a central authority to appoint validators. So how does the fact that there are currently two 'official' UNL lists contradict 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 actually identical, using the same set of validators, further proving that the foundation effectively controls the XRP network!
This screenshot is from two years ago, but I confirm that it is still the case now, which proves 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 else they risk being forked.
This also allows the foundation to conduct censorship when forced, as they have such a high degree 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 comes with 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. In XRP, this decentralization metric is zero.
I started researching XRP early on, and I clearly remember people recognizing the trade-offs of decentralization. As the claims of the community and leadership became more extreme, this situation gradually changed. I say this not to belittle investors, but to empower them.
Help break the XRP echo chamber and stop being the 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 was created; all new circulating XRP was purchased from the founders.
I have always been very interested in the early discussions about Ripple's decentralization. Pretending that XRP is permissionless is not the correct answer; the real solution lies in replacing the UNL list with PoS, transforming XRP into a more traditional decentralized blockchain.
They can also frankly acknowledge that facts are facts, and I won't dispute that. However, it is wrong to attract ignorant retail investors with lies, and this is where we, as an industry, need to draw the line and self-regulate!
XRP may currently bribe or deceive the SEC, but they cannot deceive us, the cryptocurrency natives. No matter how complex and deep the rebuttals are, it will not change some simple facts: XRP is now fully permissioned and centralized.
If you really care about XRP, take it seriously. Because in this critical post, there are proposals 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 irreparable.
