Proof of Work (PoW) and Proof of Stake (PoS): Traditional Transaction Verification Methods

The most commonly recognized methods of carrying out transactions on a blockchain are Proof of Work (PoW) and Proof of Stake (PoS). PoW, used by Bitcoin, involves an open computer network where anyone can participate to validate each transaction on the blockchain, earning rewards for their efforts. However, this process, known as mining, involves high transaction fees and requires substantial computational power, which makes it resource and time-intensive.

On the other hand, PoS, used by cryptocurrencies like Cardano, functions by allowing cryptocurrency holders to stake or lock up their coins, providing benefits like validating power and interest earnings. This process still involves high transaction fees, but it consumes less power than PoW, despite not being particularly fast.

The XRPL’s Federated Consensus: A Distinct Approach to Transaction Verification

However, the XRPL operates differently, utilizing a transaction verification method called Federated Consensus. This system relies on the trust of “validators“, entities that run the network to confirm transactions. These validators could be financial institutions, universities, developers, or exchange platforms. Unlike PoW and PoS, validators on the XRPL do not receive incentives for their validation efforts. They participate voluntarily, primarily due to their interest in the progress of the XRPL.

Since validators are not rewarded for approving transactions, they typically don’t have ulterior motives apart from contributing to the overall system. This structure prevents situations like Miner Extractable Value (MEV) from arising. Furthermore, this is a primary reason why transactions on the XRPL are incredibly fast and consume very little energy, making it a remarkably eco-friendly blockchain solution.

The XRPL exhibits a high degree of scalability, capable of handling up to 1,500 transactions per second, and it ensures speedy transaction processing within approximately 3-4 seconds. The transaction fees are also extremely low, at 0.0003 XRP per transaction. These features make the XRPL a highly competitive blockchain platform with a unique use case that continues to prove its worth since its inception.