The CTO of Ripple, David Schwartz recently spoke to the News and Research Team from the McCombs School of Business at The University of Texas in Austin where he was interviewed about a wide range of topics on the crypto ecosystem. One that stood out was the XRP Ledger’s consensus and Proof-of-Work [PoW] protocols.
PoW/PoS relies on calculating hashes to verify transactions and unlocking rewards, and the more participants there is on these blockchains, collectively ensuring enough hashpower to keep transaction times down, the more electricity is also used.
The XRP ledger does not rely on PoW or PoS, but Consensus, and this makes it immune to double spending. So decentralization serves the purpose of eliminating governance only. Furthermore, it has the benefit of using far less electricity.
A PoW/PoS network is built to be competitive, as all participants want to get the rewards. In a consensus network participant competition is non-existing, and the incentive to participate is a reliable system. David said:
“The miner who mines a particular block gets to choose every transaction in that block, so those are sort of a dictator-of-the-moment and they are completely self-interested, they are not trying to help you out, they are trying to help themselves out. So we built the ledger from the beginning as a multi-currency ledger, and I think that we built in peer-to-peer credit and lendings to people and I think that is probably the key difference between XRP’s consensus mechanism and Bitcoin’s proof-of-work.”
The first part of Consensus is agreeing which transactions to include in the upcoming ledger. The second part of the Consensus is validation.
Each validator validates the transactions independently, resulting in an identifying hash of the ledger. This hash is used to compare the results amongst the validator, and if consensus is met, the “winning” version of the ledger is used.
Disagreeing validators either computes a new correct ledger or retrieves it as needed. He concludes this topic by saying:
“The XRP Ledger is and always has been inherently decentralized because the users always retain the freedom to change their UNLs and the corresponding validators that they trust… the XRP Ledger is in many ways a more transactional, functional and decentralized ledger than either Bitcoin or Ethereum, which will only increase over time.”