Tag: ripple bad

How Stellar Blows Ripple Out Of The Water

By Max Bibeau | USA

Many people in the cryptocurrency community aren’t exactly fond of Ripple, for a large variety of reasons. I already wrote an article about some of the many problems with Ripple, which you can read HERE.

So yes, Ripple has many problems. But it does aim to solve a pretty critical problem in the banking world, namely the high fees that bank transfers can incur. However, many critics argue that Ripple goes about solving that problem in an inefficient way that undermines the purpose and potential of the blockchain.

One member of the Ripple developer team saw the same problems that critics did. So in 2011, programmer Jed McCaleb left the Ripple developer team and used Ripple’s existing code to create Stellar. McCaleb hopes to use the blockchain to provide banks with the solution they need, all while staying true to his goals of decentralization.

The differences between Ripple and Stellar are small but critical. First, Stellar addresses one of the largest criticisms of Ripple – its centralization. While Ripple is a for-profit company, working with banks to achieve its goals, Stellar is a non-profit organization, that simply works on the Stellar network. Ripple owns XRP, while Stellar only works on developing the network that is XLM. Also, Stellar solves another big problem users saw within Ripple – frozen assets. McCaleb’s own $1 Million in Ripple assets were frozen as he left the company in 2011, so he knows firsthand the frustration that comes with not being able to control your funds. He made it a priority to build protections against this in the Stellar network he created.

Stellar, using Lumens (XLM) as its native asset, specifically serves as a method of quickly and cheaply sending value around the world, where it can be transferred into the local fiat money. For example, if I want to send $100 overseas, I could easily be charged upwards of 10% in banking fees. However, the Stellar network works around this masterfully. To simplify the process as much as possible, say I send $100 to the overseas bank, which then accepts the Stellar transaction. Then, my $100 is credited to a pool account while it searches for the best exchange rate through the Stellar network. Once my $100 is exchanged to the local currency, it is credited to the overseas bank which then transfers it to the specific account I wished to send money too. And the best part? This entire process takes place in 2-5 seconds, and costs around .00001 Stellar Lumens, currently valued at around $0.0000047.

Obviously Stellar has some incredible use cases, from everyday business transactions overseas to individuals sending remittances back home. It could be critical in financially connecting both economies and people around the world.

The cryptocurrency also has an inflation mechanism, built into the Stellar network. It works by adding Lumens to the network at a rate of 1% a year. Instead of injecting the inflated tokens into big banking partners like Ripple is doing, the Stellar network has a built-in voting system that injects the new tokens into the accounts with the highest number of votes. Every week, Lumens are distributed to every account that gets more than 0.05% of votes within the network. Everybody that holds Lumens potentially has a number of votes equivalent to the amount of Lumens they hold, at a 1:1 ratio. The Lumens from the inflation pool are distributed depending on the percentage of votes each account receives. For example, if an account receives 1% of overall votes, it receives 1% of the inflation pool. Lumens from transaction fees are included in the inflation pool. You can read more about the inflation mechanism of Stellar directly from the nonprofit’s page HERE.

For these many reasons, Stellar is superior to Ripple. It is currently valued at around $0.47 and can be bought on Binance.com or most other major exchanges. You can read more about Stellar from the organization’s website, Stellar.org.

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The Banker’s Bitcoin: How Ripple is Against the Goal of Cryptocurrency

By Max Bibeau | USA

Cryptocurrency is a newly popularized method of transferring value. It prides itself primarily on three things: decentralization, security, and its lack of banking influence. However, while popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) check all of these boxes, Ripple (XRP) finds itself surprisingly lacking. As Ripple becomes a serious contender for the top spot based on market cap, we must fully recognize the many problems that Ripple is plagued with.

First, it’s important to note that Ripple is not decentralized. In fact, it was created and is owned by a 2012 startup by the name Ripple Labs. So the first thing we will look at in this article is decentralization. Cryptocurrencies like Bitcoin utilize the blockchain to allow pretty much anybody with a computer to run their own individual “node.” A node is, to put it simply, a copy of the ledger. Who has how much of the cryptocurrency? Whenever a transaction occurs, it is recorded on each node, and the ledger updates, changing the amount of cryptocurrency with everyone involved in the transaction. The more nodes running in the world, the more decentralized the network. As of the time of this writing, Bitcoin has 11,682 individual, independent nodes, making it impossible to hack or edit. As of July 2017, Ripple has only 55 nodes. Ripple has a shockingly low amount of nodes because the company Ripple Labs maintains a list of “validated nodes,” called the UNL (Unique Node List). In order to run your own node, Ripple must confirm your node, and add you to the programmed list. This means that there are far fewer nodes in existence, therefore offering less decentralization. If 28 of the 55 centralized nodes agree to change the ledger then they have full control over the distribution of the cryptocurrency. It is far easier to get 28 of 55 node runners to agree to a change, as opposed to 5,482 independent Bitcoin node runners.

Second, the security of the cryptocurrency leaves much to be desired. Researchers at Perdue University in 2016 decided to test the security of the network – and it has a major flaw. They found that within the technology, individual “verified nodes” are actually able to hold some of the cryptocurrency themselves, acting as virtual banks. Now first, this leaves a huge potential for hacking. If an individual node acting as a bank is hacked, the hackers essentially have full reign over one of Ripple’s banks. This could cause transactions to fail, and users to lose their funds. Another, more complex example was exposed by the researchers:

When we look at a security perspective, Moreno-Sanchez and team have established that small-sized networks could be potentially vulnerable to attacks, because the Ripple network always finds an alternative way to move a transaction via it’s network, even if one of the important “gateways” nodes is removed. So can this be secure? To test the transactions via small networks, the researchers performed a simulation, where they simulated the removal of important nodes in the Ripple network, similar to what a financial event leading to those circumstances would occur. The results of the simulation was that removing those nodes would isolate the amount of Ripples stored within them, if they are already on those nodes, since they become offline, but not lost forever. According to the researchers this may result in approximately 50,000 wallets to be vulnerable to a disruption and the XRP’s in them are also at risk.

So, Ripple’s centralization leaves it open to many potential security issues as well.

Finally, many (but notably not all) cryptocurrency users share a dislike of the banking world, and it’s influence over individual finances. However, Ripple is made for the banking world. The problem that Ripple is made to solve revolves around bank transfers – so we can’t exactly hold it against them that banks have begun to use their technology. It is concerning to many, however, that banks have begun playing a major part in Ripple’s success and price jumps. If you’re looking for a cryptocurrency made for individuals, Ripple may not be for you. Ripple does solve a real-world problem – but when looking at the centralization and security concerns, paired with the fact that Ripple has no concern for anonymity, it becomes clear that Ripple is a niche technology, perfect for big banks, but less than ideal for individuals buying into the future of monetary transfers.