In the cryptocurrency industry there are a variety of typologies. We have decentralized and centralized cryptocurrencies, with Ripple’s XRP being an example of the latter. However, aren’t cryptocurrencies supposed to be born for the purpose of being decentralized? Certainly, but let’s look at Ripple’s purpose to understand its centralization.
What is Ripple for?
Developed by United States-based technology company Ripple Blockchain Labs Inc. in 2012, Ripple is a centralized cryptocurrency that operates on a real-time gross settlement system (RTGS), currency exchange, and remittance network.
Ripple’s purpose is to be a financial intermediary more than anything else. In other words, since its creation, the objective has been to streamline the activities of banks and financial institutions around the world.
Or, what is the same, seeks to allow secure, instant and almost free global financial transactions of any size, without transaction fees. Thus, Ripple’s XRP acts both as a cryptocurrency and as a digital payment network for financial transactions.
Ripple’s infrastructure is designed to make transactions faster and more convenient for banks, making it a more popular cryptocurrency option for larger financial institutions.
By understanding this, we understand why it is valid for it to be centralized. In short, Ripple is nothing more than an alternative capitalization cryptocurrency on the market, designed to be used as a financial payment intermediary or a kind of bank SWIFT.
Does XRP fulfill its purpose? Totally
Cryptocurrencies were created to give people independence over their money and Blockchain technology to give more transparency to the process. However, they are also supposed to somehow facilitate large money transfers by decreasing the commissions paid and waiting times. It is in the latter that Ripple concentrates.
Thus, Ripple is a technological platform for profit and also a cryptocurrency (XRP), and precisely attracts many for being centralized. This is part of the reason why it is preferred by many financial institutions. Therefore, it is valid to consider that Ripple fulfills its purpose.
As we mentioned earlier, its goal is to ensure fast and unhindered transactions, and its Blockchain is designed to facilitate the achievement of this goal. An example of a company that operates with Ripple’s XRP is Bitstamp.
Unlike many other ways to generate profits at the digital level, Ripple is not managed by the common method of mining but directly with the maintenance of the network by means of consensus algorithms that facilitate its process by making the transaction faster.