Looking Into Ripple’s Centralization Debate

By August 21, 2018Ripple
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Ripple image - Looking Into Ripple's Centralization Debate
Looking Into Ripple's Centralization Debate

Ask any crypto die-hard about Ripple and most likely they will have plenty to criticize about it. More specifically, they’ll talk on the centralized and decentralized issue that follows XRP everywhere it goes. By most accounts, Ripple is centralized, which can go against what many see is the value of cryptocurrencies.

Although the coin has been associated with other decentralized coins, such as Bitcoin and Ethereum, and the company behind Ripple has defended itself claiming it is decentralized. Critics have always claimed that its technical functionality shows it is, in fact, centralized. Decentralized, of course, means no institution has the power to make corrections or influence, similar to how Bitcoin works. Ripple, however, seems to be manipulate-able by the company that built it.

What’s The Proof?

The first thing that provokes critics is the fact that it is believed that Ripple has the power to freeze accounts, much like a bank would if there were any concerns. The issue of freezing accounts began in 2014 when the company introduced this new feature. This feature was not publicized but its intent would soon be evident. Soon after the introduction of the feature, Jed McCaleb, one of the co-founders, tried to sell billions of XRP after leaving the company. His account was frozen by the company and he couldn’t transfer his XRP. There is also evidence that the company had created a gateway that could be used to manipulate trades. So, while they cannot take XRP away from a user, they can stop them from trading—which all that sounds quite centralized.

A report from Bitmex Research titled “The Ripple Story” is one of many reports that seek to prove Ripple’s centralization. Exploring the possibility of Ripple’s hand in the freezing case, the report notes;

“In 2015, Ripple took advantage of the Ripple freeze feature instituted in August 2014. The Bitstamp gateway froze funds belonging to a family member of Jed McCaleb. Some consider this ironic: Ripple originally stated that the freeze feature was implemented to enable gateways to comply with orders from law enforcement yet the first actual usage of the feature appears to have been an order to comply with an instruction from the Ripple company itself, against one of the founders.”

The report also talks about five public keys from the server v1.ripple.com, which according to the research conducted, were all from Ripple with four required before a proposal was accepted.


Since the keys were all downloaded from the Ripple.com server, Ripple is essentially in complete control of moving the ledger forward, so one could say that the system is centralized. Indeed, our node indicates that the keys expire on 1 February 2018 (just a few days after the screenshot), implying the software will need to visit Ripple.com’s server again to download a new set of keys.”

This puts a question on what the consensus process with Ripple protocols looks like and goes to show that the company likely has a hand in any big XRP decision.

Another favorite of critics is Ripple Labs. A technological and software company that develops APIs and interfaces for financial institutions. The company then uses their in-house currency (XRP) for payments. This means the success of the coin is tied to the success of the company and the adoption of the coin in the market.
The research report by Bitmex Research concludes by agreeing with the critics that Ripple is indeed centralized.

The last word from the report:

More significant than the disputes is the fact that the Ripple system appears for all practical purposes to be centralized and is therefore perhaps devoid of any interesting technical characteristics, such as censorship resistance, which coins like Bitcoin may have — although this does not mean that Ripple or XRP is doomed to failure.

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