24. June 2021

Ripple gets praise from U.S. consumer watchdog

Consumer Financial Protection has published a document on the application of a new law for electronic transfers. In this document, Ripple or XRP also appears – in almost the same breath as the global payment network SWIFT. The passage in the document also sheds light on fundamental differences between Bitcoin and Ripple.

Ripple has positioned itself as Bitcoin’s “white brother” from the beginning. Where Bitcoin is an independent, anarchist, decentralized currency that declares war on states and banks, Ripple, or XRP, is under the Ripple umbrella, cozying up to banks and promising not a revolution but an improvement on the now somewhat technically outdated remittance networks of banks and central banks.

Ripple has been following this strategy for years with remarkable persistence. The company approaches bank after bank, persuades one or the other to become a partner in a Ripple project, and keeps introducing new platforms and tools tailored to the needs of banks or international remittances. In the process, the long, hard work is paying off piecemeal, such as Ripple’s “On Demand Liquidity” project creating ever-broader corridors for international remittances, which are arguably actually finding increased users.

At the same time, Ripple is trying to keep XRP investors in line by somehow adding the XRP token to its programs so that it has the value necessary for the company to fund itself by selling XRP. In part, this works well; in part, the company arouses the ire of its fans by inconsistently failing to provide some project details and, most importantly, by the dismayingly poor performance of the XRP price compared to bitcoin.

Bureau of Consumer Protection acknowledges Ripple’s claim

Over time, Ripple has managed to gain a hearing with its claim to be a high-performance network for bank-to-bank payments. This is illustrated by a document recently published by the U.S. Consumer Financial Protection Bureau. The document is 153 pages long and largely technocratic and legalistic. At issue is a change in the law governing the electronic transfer of funds that calls for new protections for consumers when they send money internationally. The main focus is on the often opaque conditions that have been in place up to now, which make it difficult, for example, to know specifically how high the fees are. The office is now trying to implement these rules.

In doing so, it also mentions Ripple. While the mention spans only two pages – so it plays only a tiny role in the report – what makes it special is that Ripple is mentioned almost in the same breath as SWIFT, the global standard for interbank payments.

The Bureau, the document says, continues to monitor the market for remittances from guest workers and recognizes that most developments continue to move forward.” As examples, it cites an expanded information system from SWIFT, credit card (there are also crypto debit cards -> http://www.cryptodebitcards.com/) companies enabling more and more cross-border payments, and the development and integration of fintech remittance service providers bringing more momentum to the market. Another example of a positive development, it said, is “the continued growth and expansion of partnerships by companies around virtual currencies, such as Ripple, which offers both a messaging platform for payments that allows cross-border transfers and a virtual currency, XRP, that can be used to balance transfers.

The bureau sees it as a positive that the “closed payment networks of banks and credit companies are expanding. This wording seems a bit jarring, but could be representative of the differences between Ripple and Bitcoin. That’s because in such closed networks, “individual entities exercise a high degree of control over transactions.” This control allows them to standardize transactions and enforce terms and processes that participants in the system must comply with. As a result, the bureau hopes that “expanded adoption of SWIFT’s gpi product or” – watch out! – “Ripple’s suite of products will allow banks and credit companies to determine exactly what amount the recipient of a payment will receive even before it is sent.

Centralization as a strategy

CentralizationEven though the passage in the document naming Ripple comes across as very short and meager, it nevertheless contains extremely glorious news for XRP fans: Ripple is named almost on par with SWIFT, and seems to be the only cryptocurrency at all for the bureau to make any headway in terms of remittance. That, regardless of how one feels about Ripple, is a noteworthy achievement.

The passage is also telling about the differences between Bitcoin and Ripple. For Bitcoiners – and users of most other cryptocurrencies – decentralization is the name of the game, and centralization the devil. For them, such praise of oversight that explicitly invokes “closed systems” and the exercise of control would be more akin to a cancer diagnosis. However, centralization and control are among the things that the Bureau of Consumer Protection calls for.

For without it it is not possible to enforce the rules it wants. The insistence on decentralization therefore prevents many cryptocurrencies from even being considered by the bureau as a means of international remittances. Ripple, on the other hand, had no such concerns from the start. While the company murmurs now and then about how decentralized XRP is, in fact its strategy from the start points to fitting in with the requirements of banks and regulators as a cryptocurrency with a central authority. And that is apparently paying off now.

Several supercomputers in Europe were hacked

The attackers installed a cryptominer on them, which started mining Monero (find out more about Monero -> https://www.getmonero.org/). This was clearly visible in the hashrate of Monero. The incident can also be seen as a simulation of the worst-case attack on the cryptocurrency – as well as on the supercomputers. In both cases, things turned out smoothly.

A supercomputer is super-fast, but not automatically super-secure. This was demonstrated in recent weeks when several of the high-performance computers in Europe were hacked. Reports suggest at least a dozen of the computers, which are typically used for scientific calculations.

In Germany, almost all of the major supercomputer centers reported an incident: the Leipnitz Supercomputer Center in Garching, the Stuttgart Supercomputing Center and the supercomputers in J├╝lich. Attacks on the supercomputers are also reported in Edinburgh, Scotland, Zurich, Switzerland, and possibly in Spain and Poland. The attackers are believed to have stolen SSH certificates from universities in Poland and China, which are used to allow researchers to log into the supercomputers at their home universities as well. The hackers were able to gain access to the admin level via an exploit in the Linux kernel of the supercomputers.

Initially, analysts assumed that the attackers wanted to tap into initial research results on Corona, as simulations in the course of developing a vaccine are running on several of the affected supercomputers, for example in Edinburgh. In fact, however, the hackers had something completely different in mind. They promptly installed Monero miners on the supercomputers. The mining software was set to run only at night, so as not to be noticed during the day when researchers were operating the computers. Monero is a privacycoin that is particularly popular with mining malware because, first, it is decidedly CPU-friendly, and second, it has anonymous transactions.

During the attack, Monero’s hashrate briefly increased by about 15 percent, reaching an all-time high of 2 gigahashes per second for a brief moment. Shortly thereafter, the operators of the affected supercomputers temporarily shut them down, causing the hashrate to fall again as quickly as it had risen. Monero observers therefore already suspected that mining malware was at play before this was officially confirmed for at least two supercomputers.

A multiple supercomputer attack is among the worst-case scenarios for a CPU-created coin like Monero. This is more or less equivalent to the resources a state – or a nexus of states – could muster to stop Monero. The fact that some of Europe’s fastest computers provided only 15 percent of the hashrate shows that this attack is relatively toothless. However, Europe lags far behind Asia and the U.S. in supercomputing. Of the top 10 in the Top 500 list, just two supercomputers are in European data centers. All the others are in the USA, China or Japan.

Even for the operators of the supercomputers, infection with the mining malware is a glimpsed worst-case scenario. A hacker who gains access to a supercomputer could encrypt data, falsify simulations, grab research results, or demand a horrendous ransom for not doing so. The mining malware, on the other hand, merely slowed down research for a few nights and tapped power. Thus, the damage is kept within extremely narrow limits.