A storm is brewing in the cryptocurrency community. Bitcoin, which for many people is almost synonymous with crypto, has faced strong competition from Ripple, a token created by the company of the same name that aims to facilitate transfers between major financial corporations. And the bitcoin community is growing tired of what this newcomer represents.
For the most part, I’m not frustrated or angry with Ripple, I’m frustrated with the community’s general lack of knowledge these days (i.e. Ripple is a symptom, but not the problem itself),” Reddit user thieflar, a moderator of the bitcoin subreddit, tells Inverse.
The main issues stem from Ripple’s more centralized structure. When the system was created in 2013, the development team removed many of the key features you find in most other cryptocurrencies. Some of these decisions make sense for a product geared toward major financial institutions, but it does draw into question the value of comparisons between Ripple and Bitcoin.
Bitcoin incentivizes people to dedicate computer resources to powering the network by rewarding them with cryptocurrency. To avoid a situation where “Bitcoin miners” have a stake in the network’s operation, Ripple instead issues tokens itself, transforming the company’s role into something more akin to a central bank. Investopedia notes that because the company already created all the 100 billion XRP tokens (holding around 62 percent of those for itself), it doesn’t accumulate value like other deflationary assets where the supply increases.
The centralized nature of Ripple came to a head in 2015. Crypto token exchange Bitstamp filed a complaint after Ripple Labs tried to purchase nearly 100 million XRP. The company sought to buy tokens that founder Jed McCaleb put up for sale. McCaleb had an agreement with his company that, after leaving, he could only sell $10,000 of XRP per week for the first year. Bitstamp became the middleman in a dispute between XRP’s manager and its former founder.
“The fact that Ripple is labeled as a “cryptocurrency” and included on sites like CoinMarketCap has been, for the most part, seen as misleading and inaccurate for many years now,” thieflar says.
This has been the mantra of the community, but people are not listening. Charlie Lee, creator of Litecoin, has said that Ripple is “not a cryptocurrency.”