Decentralized governance with a transparent, unified ledger are the tools to which Bitcoin owes its inception and popularity. It happened at the backdrop of one of the most devastating times in the history of finance, the ‘2008 subprime mortgage crisis’. The US banks and other credit rating companies all over the world were involved in a so-called corruption ring which led to the fall of the financial market of the world as a whole.
We have trusted these banks and centralized systems for far too long to question their authority or authenticity. The banks and the credit rating companies were the building blocks of development and prosperity of the 21st century with immense knowledge and expertise at their disposal. Soon, parts of the centralized system started miss-using their power for personal gain.
The credit companies would grant loans without thorough verification, and the spending caused inflation without the actual progress of the country. This discrepancy led to the fall an empire, and from its ashes, Bitcoin was born.
Bitcoin, Ethereuem, Monero, Dash and so on are decentralized in their governance and distribution. This is to say that the public ledger cannot be modified once recorded. The stake owners of the network can, however, democratically decide changes to the network protocol or mutations on the blockchain.
Nevertheless, the apparent second and third generation of cryptocurrencies does not shy from adopting a centralized nature. Ripple and EOS are two such coins where the centralized entities that developed them are also its prime owners and decision makers.
Stellar is also partly decentralized.
EOS and its Recent Reports of Centralization
On 9th November centralization, a Reddit user reported the centralized nature of EOS while highlighting a transaction that was reversed by an arbitrator appointed by the company itself. The transaction was reversed, and the EOS tokens were returned to the sender. The formal statement released by the arbitrator goes as follows,
“Under the power afforded to me as arbitrator under Article 6 of the Rules of Dispute Resolution, I, Ben Gates, rule that the EOS account in dispute should be returned to the claimant with immediate effect and that the freeze over the assets within said account is removed.”
RIPPLE’s Centralized XRP Token
The Ripple foundation led by Chris Larsen, the CEO and co-founder, is the most popular centralized cryptocurrency reportedly made Larsen richer than the owners of Google in January 2018 when ripple touched $3.84. Ripple’s XRP token has outshined Ethereum to be the second largest coin concerning market capitalization. The XRP tokens are all pre-mined, and the majority of it is still held by the co-owners (Jed McCaleb and Chris Larsen) and early venture capitalists.
Ripple has connected large banking corporations through its R3 consortium; the network has already posed severe threats to the existing system provided by SWIFT. The use of XRP in this banking innovation is, however, limited. These cross-border banking transactions are connected via what is called as RippleNet.
Only recently Ripple announced that it would also be using a new xRapid protocol which will use XRP as an intermediatory in the transaction.
Recently, post-Ripple’s recent partnership with Santander and Amercian Express, a spokesperson for the company said the following,
“The XRP currency will come into play later on in the evolutionary dynamics and the other players.
The technology we have developed, it separated a connection from the cryptocurrency or the token. So what that means is that a bank or non-bank like AMEX can use Ripple to connect and just exchange value from one fiat currency to another directly, without the need for any intermediate blockchain currency.”
The company has been uncertain about the actual use of XRP, the partnerships for the xRapid protocol are also way less than Ripple’s other service beneficiaries. Nevertheless, Coinbase, the largest cryptocurrency exchange of the world by volume has included Ripple in its custody trust. The custody trust comprises of Bitcoin (BTC), Litecoin (LTC), Ethereuem (ETH), Ethereuem Classic (ETC), Bitcoin Cash (BCH) and Ripple.Coinbase, the largest cryptocurrency exchange of the world by volume has included Ripple in its custody trust. Click To Tweet
The development and trust around these centralized cryptocurrencies are considerable to rebuff the idea of trusting a centralized system entirely. These initiatives like EOS and Ripple are complying with the regulatory laws and also building a vast consumer base. These tokens are recorded on a transparent public ledger which is far better and faster than the existing banking system. The total supply of these tokens is also pre-determined which is an advantageous property for definitive economic research, rather than relying on theories.