Why Some Argue Ripple Isn’t a 'Genuine' Cryptocurrency

Numerous cryptocurrencies exist today, each drawing inspiration from Bitcoin, the pioneering digital currency. Bitcoin set the foundational blueprint for what defines a cryptocurrency, but it is a complex system built on several distinctive features. For example, Bitcoin operates on a decentralized blockchain ledger, where millions of users collectively record and verify transactions. It also employs cryptographic hashing, enabling users to protect their identities through public and private key mechanisms.

Bitcoin’s transaction validation is carried out by miners—an incentivized community that ensures network stability and security. Additionally, Bitcoin has a capped supply, which contributes to its appeal as a secure means of transaction, a store of value, and an investment vehicle.

The question arises: must every cryptocurrency mirror all of Bitcoin’s characteristics, or can digital currencies with differing models still qualify as cryptocurrencies? This debate is often overlooked because many Bitcoin alternatives closely follow its established framework.

Ripple has been gaining traction after years overshadowed by Bitcoin, despite its traditional infrastructure that bridges cryptocurrency and fiat currency in a unique way. Some crypto purists dismiss Ripple as a true cryptocurrency due to these fundamental differences. But is this critique accurate? (See also: Ripple’s Resurgence: What’s Driving It.)

Ripple: A Unique Hybrid Model

Ripple was never intended to function as a conventional cryptocurrency or investment asset. Unlike Bitcoin and its peers, which balance coin value with network security, speed, and usability, Ripple prioritizes network robustness over XRP’s role as an investment. This design mainly serves institutional clients such as American Express and Santander Bank. To fulfill this vision, the Ripple Foundation crafted XRP by significantly modifying traditional cryptocurrency elements into a novel form.

Eliminating Miners

Ripple operates without miners or mining processes. Instead, it utilizes a "centralized" blockchain to enhance speed and reliability. Mining is fundamental to most cryptocurrencies, each employing mechanisms like Proof-of-Work, Proof-of-Stake, or Proof-of-Importance to regulate miner influence.

In typical cryptocurrencies, miners are rewarded with currency for processing transactions, incentivizing network maintenance. However, Ripple views this as problematic for a system designed for large financial institutions, where no independent group should have conflicting motivations within the network.

While decentralization benefits many cryptocurrencies, it often compromises transaction speed—a limitation Ripple cannot afford. The absence of mining also impacts other Ripple features, distancing it further from conventional cryptocurrency standards.

On-Demand Currency Creation

Miners typically generate new cryptocurrency as a reward, effectively creating new coins. Ripple’s lack of mining disrupts this process. XRP is not limited in supply and can be issued on demand, enhancing its reliability for payment processing, currency exchange, and institutional use. When XRP is spent, it is destroyed.

The Ripple Foundation initially issued 100 billion XRP tokens, providing a stable and less volatile asset tailored for its primary clients. However, this approach removes a core attribute of traditional cryptocurrencies: the capacity to accumulate and preserve value through scarcity and deflationary supply.

Centralized Blockchain Access

Ripple offers a wallet, but access to its blockchain is restricted. Retail users are generally excluded to maintain a controlled environment free from unpredictable factors. Unlike open blockchains, Ripple’s ledger is accessible only to "trusted" operators within its network. This setup leverages blockchain benefits while operating within a closed, efficient ecosystem.

Bitcoin promotes a "trustless" system where no single party is fully trusted, yet this creates vulnerabilities as miners can disrupt the network by ceasing operations. Ripple’s model eliminates this risk by centralizing control.

Defining Ripple’s Role

Similar to debates around Bitcoin Cash, Ripple’s creators advise against using XRP for speculation, emphasizing that it is not designed as a speculative currency. Instead, Ripple functions more like a fintech platform, blending the strengths of fiat money and blockchain technology.

Though not a "true" cryptocurrency by traditional definitions, Ripple may represent a new category emerging from the crypto revolution: a distinction between speculative assets and practical solutions. While assets rely on decentralized communities and deflationary mining to build investment value, solutions like Ripple focus on creating efficient platforms that utilize cryptocurrency technology without fitting conventional molds.

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