This article will delve into the operational mechanisms of the XRP Ledger (XRPL), methods of token trading, core concepts, and directions for in-depth research.
Written by: Ignas | DeFi Research
Translated by: Yuliya, PANews
In the current cryptocurrency market, a remarkable phenomenon is unfolding: XRP has surged 3.5 times in just one month, with its market capitalization even surpassing that of Solana. This dramatic market performance once again confirms the unpredictability of the cryptocurrency market.
Although XRP has always been controversial within the cryptocurrency community, market choices often transcend personal biases.
With the booming market for meme coins, the XRP ecosystem may become an important battleground for a new wave of speculative frenzy.
This article will delve into the operational mechanisms of the XRP Ledger (XRPL), methods of token trading, core concepts, and directions for in-depth research.
What is XRPL?
XRP Ledger prides itself on being a blockchain platform that pursues speed and efficiency.
However, in reality, it is not optimal in terms of speed, decentralization, and efficiency (especially the efficiency aspect remains highly debated).
Unlike blockchains that use PoW or PoS, XRPL employs a federated consensus mechanism, allowing validators to reach transaction consensus without mining or staking.
The specific operational mechanism is as follows:
The entire network has over 109 validators processing transactions, with 31 trusted validators forming a Unique Node List (UNL) for consensus. These validators include institutions such as Arrington XRP Capital, Bifrost Wallet, Ripple, and XRPscan.
Although theoretically any entity can run and publish a UNL, this reliance on UNL actually introduces centralization risks, as Ripple and the XRP Ledger Foundation largely control the selection of the default UNL. New validators typically need approval from Ripple Labs, which is also the origin of the term "federated consensus."
The transaction confirmation time for XRP is 3-5 seconds, whereas Solana far outpaces it in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fees are nearly zero, at just 0.00001 XRP per transaction.
Trust Lines, Reserve Requirements, and Rippling Mechanism
Wallet Activation and Reserve Requirements
When creating a wallet in the XRPL ecosystem, there are some unique requirements to note:
Activating an account requires at least 10 XRP as a base reserve. Additionally, for each token held, the system requires an extra 2 XRP to be locked as owner reserve. For example, if holding 20 meme coins, an additional 40 XRP must be locked.
A governance vote is currently underway proposing to reduce these requirements by tenfold. Users can check the current specific requirements under the "base reserve" and "owner reserve" tabs on XRP Scan.
Trust Lines Mechanism Explained
Trust Lines are the foundational structure used by XRPL to hold fungible tokens. According to Ripple's official documentation: "Trust lines enforce the rules of XRPL, ensuring that others are not forced to hold unwanted tokens. This precaution is crucial for achieving use cases such as community credit on XRPL."
The core value of Trust Lines lies in:
Preventing the forced reception of junk tokens
Allowing for the implementation of freeze and authorization controls
Supporting the "No Ripple flag" to prevent accidental balance adjustments
When a token issuer creates a token, their balance may become negative, indicating the amount issued, while the holder's balance remains positive. For instance, after the issuer sends 100 tokens, their trust line balance is -100, and the receiver's balance is +100.
Detailed Explanation of the Rippling Mechanism
Rippling (also the origin of the name Ripple) further expands this concept, allowing token balances to automatically flow through connected accounts during payments. This is a passive exchange system that enables atomic settlement without the issuer's involvement.
For example: If Alice owes Bob $10, and Bob owes Charlie $10, the rippling mechanism allows Alice to pay Charlie directly while automatically adjusting all trust line balances.
This design is similar to a double-entry bookkeeping system, primarily used for:
Achieving efficient net settlement
Supporting real-world assets (RWA)
Stablecoin trading
Tokenized goods
Cross-border payments
This design gives asset issuers stronger control. Particularly regarding compliance requirements, authorized Trust Lines issuers can enable the "Require Auth" flag, restricting token ownership to approved accounts. This makes XRPL particularly suitable for assets that require strict KYC/AML regulation.
While this centralized control may draw criticism from decentralization advocates, it is precisely this unique advantage of XRPL in specific application scenarios.
Understanding how Rippling works, users can choose to enable or disable this feature based on their needs:
Enabling Rippling is suitable for:
Users who want their accounts to be part of the payment path
Accounts acting as intermediaries, such as market makers or exchanges (it is currently uncertain whether fees can be earned through this feature)
Disabling Rippling is suitable for:
Users who do not want their balances to be used in the payment path
Ordinary users who want to protect their assets from accidental adjustments
It is important to note that each time a trust line is established (for example, connecting with the meme coin issuer), 2 XRP must be locked in the wallet as a reserve.
Technological Evolution of XRPL: From Hooks to EVM Sidechains
Compared to Ethereum's EVM, Solana's SVM, or Aptos's Move VM, XRPL has adopted a different technological route. It uses a WebAssembly-based Hooks system, which is a lightweight transaction logic program.
Hooks System
Hooks are XRPL's unique answer to smart contracts. Interestingly, they currently run on the Xahau network (a fork of XRPL) rather than the XRPL mainnet. Hooks can add additional logic before and after transactions, such as:
Preventing fraudulent payments
Automatically saving XRP
Adding carbon offsets to transactions
Notably, Uniswap v4 also employs a similar hooks mechanism to add additional functionalities before and after transactions, supporting features like limit orders.
EVM Sidechain: Expanding the XRPL Ecosystem
Although XRPL already has native AMM functionality, supporting liquidity provision and cross-token trading, Ripple is developing an EVM sidechain to achieve more efficient capital flows between other chains and DeFi applications.
Key Features
Currently in the testing phase
Expected to launch in a few months
XRP will serve as the gas token
Using Axelar as the cross-chain bridging solution
Community Controversy
There are divisions within the XRPL community regarding the technological route:
Some wish to implement Hooks functionality on the mainnet
There are doubts about the necessity and role of the EVM sidechain
It is worth noting that the bridging between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar may become a significant beneficiary.
Future Outlook
XRPL is moving towards modularity, representing an important technological turning point. The development trend of the EVM sidechain will be a focal point worth watching, as it may bring new application scenarios and development opportunities to XRPL.
These technological innovations will bring more possibilities to XRPL, especially in terms of applications in the DeFi space. As the ecosystem continues to evolve, we may see more innovative application scenarios emerge.
Complete Guide to Trading Meme Coins on XRP
XRPL has a built-in AMM (Automated Market Maker) function, currently mainly used for trading meme coins.
Approximately 14 million XRP are deposited in the AMM pool. Although the TVL is relatively low, trading volume continues to rise due to the meme coin craze. (The pool's locked amount can be viewed through XRP Scan.)
Getting Started with Trading
- Wallet Selection
Visit the First Ledger website, where you can create a wallet via Telegram or directly in the browser and save the keys locally.
Additionally, you can try the Xaman wallet on mobile. It runs well, and you can import keys between these two wallets to see which one suits you better.
- Acquire XRP
Purchase from a centralized exchange or use Simpleswap for cross-chain bridging.
- Trading Platforms
First Ledger (preferred for beginners) has a token list that updates in real-time, supporting sorting by 24h trading volume, market capitalization, number of holders, and creation time.
xMagnetic (advanced platform) offers token discovery, liquidity provision, and data analysis features, and is recommended to be used in conjunction with the Xaman wallet.
Sologenic DEX can serve as an alternative trading platform, but the user experience may not be as good as the aforementioned platforms. It is recommended to use the Xaman wallet with xMagnetic.
Risk Warning
Most meme coins are controlled by a few wallets, with common occurrences of 10 wallets holding over 40% of the supply. There is indeed a need for Pump.fun on XRPL to make token issuance fairer. Pay attention to early projects, value trading volume, check holder distribution, and be cautious with new coins.
Investing in meme coins requires caution, proper risk control, and thorough research. Remember: always understand the project's fundamentals before trading to avoid impulsive investments.
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