Ripple CTO Proposes New Governance Token to Prevent XRP Centralization

TLDR

• Ripple CTO David Schwartz has proposed a two-tier staking system for the XRP Ledger to offer rewards while preventing centralization.
• Schwartz’s proposal aims to ensure validators police staked funds and slashing is used only as a last resort.
• A new governance token would replace the Unique Node List and allow token holders to manage the validator list.
• The governance token would have no economic value to avoid centralization and ensure fairness in decision-making.
• The proposal includes a “fork by governance” option to prevent collusion or misbehavior among token holders.

Ripple’s Chief Technology Officer, David Schwartz, recently proposed a two-tier staking system to reshape the XRP Ledger. The new proposal aims to balance staking rewards to prevent centralization. Schwartz shared this idea in a public discussion on November 19.

Ripple CTO Proposes Two-Tier Staking Model

Ripple CTO David Schwartz introduced a two-tier staking model that offers staking rewards while ensuring decentralization. The proposal addresses concerns that staking could reinforce Ripple’s existing influence over the XRP Ledger. Currently, Ripple holds a significant amount of XRP tokens, raising concerns about its central role.

Schwartz suggested that individual validators could police staked funds in the system. He emphasized that slashing, the penalty for misbehaving validators, should only be a last resort. Instead, validators would primarily enforce rules within their networks.

Schwartz acknowledged a potential risk that validators might accept stakes only from “friends,” which could lead to centralization. This concern prompted Schwartz to outline a new governance model to mitigate such risks. His solution involves creating a governance token that would have no economic value.

New Governance Token to Ensure Fair Validation

The new governance token would have limited circulation to prevent it from gaining any financial value. According to Schwartz, anyone could create such tokens, and their primary role would be to manage the validator list. This self-governing system would replace the current Unique Node List (UNL) of validators.

Holders of the governance token would be responsible for overseeing the validator list, ensuring fair and decentralized participation. If these holders collude or misbehave, the network could “fork by governance,” creating a new token and pointing validators at it. Schwartz likened this process to a nuclear deterrent, a powerful tool meant to discourage abuse.

This approach would ensure that the governance structure remains fair and transparent. It would allow the XRP Ledger to evolve without reinforcing the power of any single entity, including Ripple. Schwartz’s proposal introduces a new layer of accountability to the staking system.

Mixed Reactions to Schwartz’s Proposal

Reactions to the new staking model have been mixed. Some critics have raised concerns about the potential conflict of interest between validators and users. Others pointed out that the current amendment votes only address activation timing, leaving the decision of which software to run in the hands of individual nodes.

Despite these concerns, the proposal aims to address the risks of centralization while allowing staking rewards. Schwartz’s two-tier system seeks to balance the interests of validators and token holders while maintaining a decentralized network.

While the technical aspects of the proposal continue to be discussed, XRP’s market performance has faced challenges. Currently trading around $2.15, XRP has dropped approximately 10% in the last week. Despite this, the launch of XRP ETFs in the United States has attracted attention, with products from companies such as Canary Capital and Franklin Templeton entering the market.

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