Source: ARK Disrupt Issue 81: July 5th, 2017 https://ark-invest.com/research/ark-disrupt-issue-81
Ripple is an opt-in network that enables transactions in any currency – including bitcoin – and is striking partnerships with an increasing number of well-known financial institutions. Unlike traditional payment rails, Ripple’s network powers fast, real-time, and low-cost transactions. Like many blockchain networks, Ripple is a public database, or ledger, that cryptographically records all transactions securely, transparently, and pseudonymously.
One of Ripple’s distinguishing characteristics is its “validating nodes”, or gateways to highly reputed wallets. Other wallets in the system trust these nodes to advance the ledger sequence, propagating and sustaining the network. Currently, Ripple oversees and hosts these validating nodes. An example is Gateway Ripple Singapore, a ramp for currencies to move into and out of the Ripple network.
A recent study, however, exposed some vulnerability in Ripple’s network, especially in small world networks with few gateways. Pedro Moreno-Sanchez at Purdue University simulated the impact of a broad financial meltdown on a small world network. The removal of just 10 validation nodes isolated tens of thousands of other wallets from Ripple’s network.
In May, recognizing the need to make the XRP ledger more robust and resilient, Ripple proposed a way to decentralize the network and distribute its oversight. First, it intends to increase the number of validating nodes. Then, it will replace half of the existing validating nodes with attested third party nodes.
ARK agrees that such diversification could be critical in preventing catastrophic network failures. Further, the addition of non-Ripple operated nodes will enhance the network’s governance, both introducing privacy and enhancing the network’s reliability.
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