Ripple’s closed system has an opportunity to be fixed
Ripple Labs created the XRP token using a centralized method. However, with the legal fight against Ripple coming to an end, it may shift towards a more open platform. When sold on secondary markets, the token was not considered a security. While the Securities and Exchange Commission will appeal the ruling, the cryptocurrency community as a whole has welcomed it, as crypto trades on exchanges may avoid the securities transaction classification.
Despite the verdict, the crypto sector is nonetheless plagued by widespread uncertainty. Ripple has been embroiled in this dispute for a long time, but this legal triumph may act as a partial liberation, allowing the business to rekindle its old spark.
Ripple was created to replace the conventional SWIFT cross-border payment system. And there were legitimate reasons to do so, as anyone who has paid $45 for an international wire transfer that took four days to reach its intended destination can attest. Ripple wanted to produce a crypto product that closely mirrored the legacy financial ecosystem — a system ready for everyday transactions — by offering an expedited process free of weekend or holiday delays and free of the excessive and unexpected fees associated with SWIFT transfers.
This goal defined its offering, prompting it to take on the daunting challenge of building a full technology stack from the ground up. This, however, proved to be a difficult effort. Ripple’s key tradeoff was to develop a more centralized structure, which set it apart from other cryptocurrency efforts. This decision turned out to be a two-edged sword. While this design initially promoted quick and inexpensive transactions, it inadvertently discouraged involvement by a larger Web3 developer community. This strategic decision reduced individual participation, resulting in a less-than-welcoming environment. The centralized structure also naturally resulted in the formation of a closed system, which precluded Ripple from constructing an essential application-layer foundation.
Creating a real ecosystem, which is the desired alternative path that leads to layer-1 blockchain networks, allows a community to thrive, with both individuals and entities strongly invested in the protocol’s success. Community members and followers serve as a beacon, attracting new participants and, in the end, generating a self-fulfilling prophecy for our mission and growth. While Ripple may now share the value generated by its ecosystem with its community members, it stands to gain more economic value by gaining a larger slice of a much larger pie.
It is difficult to predict if such a community would materially affect the direction or dynamics of Ripple’s legal battle. And, as far as Ripple is concerned, it is not too late to change course. Numerous Web3 projects began with more centralization, later transforming into decentralized autonomous organizations that handed power to their communities. Notably, Cosmos pioneered a new framework, laying the groundwork for developers to build an interconnected blockchain network that still interfaces with other Cosmos-based services. Today, Ethereum thrives alongside a thriving layer-2 ecosystem – an unanticipated addition that enables quick fund transfers, experimentation, creative app creation, and rigorous testing. When companies want to affiliate with traditional or conservative institutions, regulatory ambiguity is a disincentive. Ripple now has some certainty, which is useful when approaching relationships with traditional companies. Hopefully, Ripple’s fire will rekindle, as it was one of the earliest initiatives to address real-world financial problems. Furthermore, the trend towards greater decentralization has been remarkably consistent across the whole crypto industry. In any event, the fate of Ripple will be determined by its technology and the ecosystem, over which it now has significantly more control.
Buy and sell crypto in minutes with 0.20% trading fees at Bitdenex Exchange