> Ripple tried to overcome these challenges in a different way than bitcoin. Instead of using proof-of-work, it relied on a new, unproven consensus protocol. This protocol requires users to extend trust to validating servers that produce this consensus. Relying on trust, rather than proof-of-work, kind of makes sense for Ripple, because you need similar trust relationships anyway for IOUs to work.
Saying it was unproven might have made sense a few years ago, but I think we're well past that now. The XRP Ledger has completed more transaction at a higher rate than any other public ledger/blockchain.
And lets be clear about the trust -- it is just trust that the network will make forward progress. Transaction validity is checked by every single node, just like in bitcoin.
And while it's true that you do need some trust to make IOUs work, there are two important things to remember:
1) You have XRP, a native asset with no counterparty in addition to IOUs. They inter-operate seamlessly.
2) An IOU is conceptually like a bank balance -- when you have $10,000 "in the bank", that means the bank owes you $10,000. What sucks is when everyone has to have and use IOUs from the same issuer. But Ripple is designed to allow people who use particular IOUs to seamlessly send payments to and receive payments from people who use other IOUs.
> But this means that an XRP token is absolutely nothing like bitcoin. Instead of needing to trust only the mathematics of proof-of-work, you can only trust the XRP token by setting up trust lines that almost inevitably end at Ripple. And while in theory anyone can set up such a server, if Ripple does not include your server in their trust lines, then you're not part of the consensus-making process.
Wow, so many false claims I hardly know where to begin:
First, XRP is exactly like bitcoin, it's a native asset with no counterparty, not an IOU.
Second, you have to trust much more than the mathematics of proof-of-work. You have to trust that 51% of miners won't conpsire to reject your transactions. You have to trust that the network rules won't evolve in a way that makes your bitcoins worthless. You have to trust that demand will be there in the future. That's not to say that these bits of trust are bad, it's just not fair to pretend that all you have to trust is math.
Third, Ripple doesn't issue any assets on the ledger. There are no trust lines that end at Ripple. And being part of the consensus-making process just makes sure the network makes forward progress. So long as it does, it doesn't matter who is a part of it. It's like mining except you don't get paid and you don't get to choose which transactions go in -- why would you care who does it so long as it gets done?
> So, Ripple is highly centralized and XRP is more akin to a PayPal account than a trustless system like bitcoin.
XRP trades on a public ledger. Transaction inclusion and validity is defined by deterministic rules in the software, which is open source and can be run by anyone.
If other people decided they wanted to do so, they could cut Ripple completely out of the system and run different software with different validators and even use a different ledger. Everything would work precisely the same. Try setting up your own PayPal server. Try performing a transaction if PayPal has decided you broke their rules. There is no comparison.
> As Peter Todd pointed out in his study, the new requirement of a global consensus protocol – which arose solely from the decision to add the XRP token – also has serious implications on scalability and security. If the token results in a more complicated, more centralized, less secure and less scalable protocol, you have to ask, why the token was added in the first place? What was wrong with the original concept, which is often compared to an electronic Hawala system, which needed no monolithic global consensus or ledger, and thus could have scaled almost arbitrarily?
So why does bitcoin have one? It's absolutely not less secure -- it's much more secure because transactions can be individually verified by all participants. It is less scalable, but it's more scalable than bitcoin is.
As for what's wrong with the original concept, there are a number of things that caused great difficulty with adoption. One problem is that cross-issuer atomic payments were not possible. That's what you need to allow seamless interoperation with different counterparties which is probably the most important thing for a payment network.
> The original argument, that the token is needed to counter network spam is not a good one; spam can be prevented by other means, including charging transaction fees that can be paid in any currency on the network, instead of just in XRP.
This is just silly. This completely and utterly misses the point of a decentralized, trustless system. Who would set the exchange rates? Who would determine which assets have value and which don't? We've explained our engineering decisions many times.
> Why would liquidity providers not use any other common (reserve) currency like US dollars for that, especially considering the highly volatile price of XRP ?
That's what they do now and settlement takes days. Again, we've explained this over and over. When you don't have to actually build the system and don't understand who the stakeholders are and what their costs are, it's easy to imagine simple solutions to complicated problems. It's a lot more complex when they have to actually work.
> But the company, its founders and associated foundations, still own well over 60 billion of the 100 billion tokens. That should give any investor pause.
Quite the opposite, that makes it possible for Ripple to spend millions of dollars when the only revenue model is increasing the value of XRP. That is, Ripple can justify bearing the expenses in building this settlement system that nobody has to date been willing to cover because Ripple's revenue model is unique.
> The only obvious thing that appears missing from Hyperledger compared to Ripple, is the one thing for which I see absolutely no reason for them to want: the XRP token.
Please explain how you would use Hyperledger to settle an international payment. Say I receive a million dollars from Singapore, and my bank receives some private token over Hyperledger. What happens when I want to wire that million dollars over a US domestic payment rail?
Are you imagining that my bank will lend me a million dollars until it can get that token onto a US domestic rail?