CTO at Ripple, David “JoelKatz” Schwartz, recently took to Twitter to address concerns about the decentralization of XRP and the Ripple network.
In response to an article questioning Ripple’s stance on decentralization, Schwartz stated that nobody had provided a precise description of how the company could potentially use its control over XRP to cause harm or manipulate the ledger.
The debate surrounding XRP’s decentralization stems from the ongoing legal battle between the coompnay and the U.S. Securities and Exchange Commission (SEC).
The SEC alleges that Ripple conducted an illicit sale of $1.3 billion worth of XRP, treating the cryptocurrency as a security. The company has been fighting to unseal the “Hinman docs,” which could play a crucial role in the case.
The unsealed documents include internal messages from SEC higher-ups, revealing the agency’s lack of clarity and consensus on how to regulate cryptocurrencies created after Bitcoin.
Ripple’s Argument: XRP is Not a Security
Ripple believes that these documents support its claim that the SEC unfairly targeted the company. However, not everyone is convinced that the released files prove its innocence.
The controversy began in 2018 when William Hinman, the then Director of the SEC’s Corporate Finance Division, declared that Ethereum’s native token, ether (ETH), should not be classified as a security due to its “sufficient decentralization.”
The company argues that Hinman’s reasoning does not apply to XRP and is not grounded in securities law. Ripple fought to make the Hinman documents public, suggesting a conflict of interest on Hinman’s part due to his previous association with a law firm involved with the Enterprise Ethereum Alliance.
It claims that the documents demonstrate a lack of consensus within the SEC and a violation of due process rights.
The SEC, led by Chairman Gary Gensler, opposed the release of the documents, arguing that Hinman’s speech did not represent the agency’s official position. Internal SEC communications revealed differing views among officials regarding Hinman’s speech.
Despite Ripple’s arguments, critics point out that the company’s control over validators in the network undermines the network’s decentralization. While the company has made efforts to open up the code base and allow anyone to build on the network, the company’s control over validators raises concerns.
The legal battle between Ripple and the SEC has stirred controversy within the blockchain industry. its distribution plan for XRP, controlled by the company, has raised questions about its commitment to decentralization.
However, the outcome of this legal dispute will likely have significant implications for the broader cryptocurrency landscape.
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