Original author: Ignas | DeFi Research
Compiled by: Yuliya, PANews
A striking phenomenon is unfolding in the current cryptocurrency market: XRP has surged 3.5 times in just one month, even surpassing Solana in market capitalization. This dramatic market performance again confirms the unpredictability of the cryptocurrency market.
Although XRP has always been controversial in the cryptocurrency community, market choices often transcend personal biases.
With the booming meme coin market, the XRP ecosystem could become an important battleground for a new wave of speculation.
This article will delve into the operational mechanisms of the XRP Ledger (XRPL), methods for token trading, core concepts, and directions for in-depth research.
What is XRPL?
The XRP Ledger claims to be 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 controversial).
Unlike blockchains that use PoW or PoS, XRPL uses a federated consensus mechanism, allowing validators to reach consensus on transactions 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 like Arrington XRP Capital, Bifrost wallet, Ripple, and XRPscan.
Although theoretically any entity can run and publish an UNL, this reliance on UNL mechanisms actually brings centralization risks, as Ripple and the XRP Ledger Foundation largely control the selection of the default UNL. New validators usually need approval from Ripple Labs, which is also the origin of the term 'federal consensus'.
XRP's transaction confirmation time is 3-5 seconds, while Solana far outperforms in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fees are almost zero, only 0.00001 XRP per transaction.
Trust Lines, reserves, and the Rippling mechanism
Wallet activation and reserve requirements
When creating a wallet in the XRPL ecosystem, there are some unique requirements to be aware of:
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 an owner reserve. For example, if holding 20 meme coins, an additional 40 XRP needs to 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 analysis
Trust Lines are the infrastructure used by XRPL to hold fungible tokens. According to Ripple's official documentation: "Trust lines enforce the rules of the XRPL, ensuring that others are not forced to hold unwanted tokens. This precaution is crucial for scenarios such as community credit in XRPL."
The core value of Trust Lines lies in:
Prevent the forced acceptance of junk tokens
Allow the implementation of freeze and authorization controls
Support for the "No Ripple flag" to prevent accidental balance adjustments
When the token issuer creates a token, its balance may become negative, indicating the quantity issued, while the holder's balance is positive. For example, after the issuer sends 100 tokens, its 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 during payments through connected accounts. This is a passive exchange system that enables atomic settlement without the participation of the issuer.
For example: If Alice owes Bob $10, and Bob owes Charlie $10, the rippling mechanism allows Alice to pay Charlie directly while automatically adjusting balances on all trust lines.
This design is similar to a double-entry accounting system, mainly used for:
Achieve efficient net settlement
Support for real-world assets (RWA)
Stablecoin trading
Tokenized commodities
Cross-border payments
This design gives asset issuers stronger control. Especially 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.
Although this centralized control may invite criticism from decentralization supporters, it is precisely XRPL's unique advantage in specific application scenarios.
After 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 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 function)
Disabling Rippling is suitable for:
Users who do not want their balances to be used for payment paths
Ordinary users who want to protect their assets from accidental adjustments
It is particularly important to note that for each trust line established (for example, connecting with a meme coin issuer), 2 XRP must be locked in the wallet as a reserve.
The technological evolution of XRPL: from Hooks to EVM sidechains
Compared to Ethereum's EVM, Solana's SVM, or Aptos's Move VM, XRPL adopts 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) instead of the XRPL mainnet. Hooks can add additional logic before and after transactions, such as:
Prevent fraudulent payments
Automatically save XRP
Add carbon offsets to transactions
It is worth mentioning that Uniswap v4 also adopts a similar hooks mechanism to add additional features before and after trades, supporting features like limit orders.
EVM sidechain: Expanding the XRPL ecosystem
Although XRPL already has native AMM functionality supporting liquidity provision and cross-token transactions, Ripple is developing an EVM sidechain to achieve more efficient capital flow between other chains and DeFi applications.
Key Features
Currently in the testing phase
Expected to go live in a few months
XRP will serve as a gas token
Use Axelar as a cross-chain bridging solution
Community disputes
There are divergences in the XRPL community regarding the technical roadmap:
Some people hope 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 an important beneficiary.
Future outlook
XRPL is moving towards modularization, representing an important technological turning point. The development trend of the EVM sidechain will be a focal point worth paying attention to, as it may bring new application scenarios and developmental opportunities to XRPL.
These technological innovations will bring more possibilities to XRPL, especially in the application field of DeFi. As the ecosystem continues to evolve, we may see more innovative application scenarios emerge.
Complete guide to trading meme coins on XRP
XRPL has built-in AMM (automated market maker) functionality, currently mainly used for meme coin trading.
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. (Pool lock-up amounts can be viewed through XRP Scan.)
Getting started with trading
1. Wallet selection
Visit the First Ledger website, where you can create a wallet via Telegram or create one directly in the browser and save the keys locally.
Alternatively, you can also try the Xaman wallet on mobile. It works well, and you can import keys between these two wallets to see which one suits you better.
2. Acquire XRP
Buy from a centralized exchange or use Simpleswap for cross-chain bridging.
3. Trading platforms
The First Ledger (beginner's choice) token list is updated in real-time, supporting sorting by 24h trading volume, market cap, number of holders, and creation time.
xMagnetic (advanced platform) offers token discovery, liquidity provision, and data analysis features, recommended to be used 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 Xaman wallet along with xMagnetic.
Risk warnings
Most meme coins are controlled by a few wallets, with a common 10 wallets holding over 40% of the supply. There is indeed a need for Pump.fun on XRPL to make token issuance fairer. Focus on 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 fundamentals of a project before trading to avoid impulsive investments.
