Written by: Ignas | DeFi Research
Compiled by: Yuliya, PANews
In the current cryptocurrency market, a remarkable phenomenon is unfolding: XRP has surged 3.5 times in just one month, surpassing Solana in market capitalization. This dramatic market performance once 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 market of Meme coins, the XRP ecosystem may become an important battleground for a new round of speculative frenzy.
This article will delve into the operational mechanisms of 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 fact, 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 the Unique Node List (UNL) for consensus. These validators include organizations such as Arrington XRP Capital, Bifrost Wallet, Ripple, and XRPscan.
Although theoretically any entity can run and publish UNL, this mechanism's reliance on UNL 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 'federated consensus.'
The transaction confirmation time for XRP is 3-5 seconds. In contrast, Solana far exceeds XRP in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fee is almost 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, some unique requirements need to be noted:
Activating an account requires at least 10 XRP as a base reserve. Additionally, for each token held, the system requires an additional 2 XRP to be locked as owner's 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 homogeneous 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 in XRPL.'
The core value of Trust Lines lies in:
Prevent forced acceptance of junk tokens
Allow the implementation of freeze and authorization controls
Support for 'No Ripple flag' to prevent accidental balance adjustments
When the issuer creates a token, its balance may become negative, indicating the amount issued, while the holder's balance remains positive. For example, after the issuer sends 100 tokens, its trust line balance would be -100, while the receiver's balance would be +100.
In-depth Explanation of the Rippling Mechanism
Rippling (also the origin of Ripple's name) further expands this concept, allowing token balances to automatically flow through connected accounts during payment. This is a passive exchange system that enables atomic settlement without issuer participation.
For example: If Alice owes Bob $10, and Bob owes Charlie $10, the rippling mechanism allows Alice to pay Charlie directly while automatically adjusting the 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 Goods
Cross-Border Payments
This design grants asset issuers stronger control. Especially regarding compliance requirements, authorized Trust Lines issuers can enable the 'Require Auth' flag, limiting token ownership to approved accounts. This makes XRPL particularly suitable for assets requiring strict KYC/AML regulation.
Although this centralized control may draw criticism from decentralization advocates, it is precisely XRPL's unique advantage in certain application scenarios.
After understanding how Rippling works, users can choose to enable or disable this feature based on their needs:
Enable Rippling 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 feature)
Disable Rippling 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 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 has adopted a different technical route. It uses a WebAssembly-based Hooks system, which is a lightweight trading 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 extra logic before and after transactions, such as:
Prevent fraudulent payments
Automatically save XRP
Add carbon compensation to transactions
It is worth mentioning that Uniswap v4 also adopts a similar hooks mechanism to add extra functions before and after trading, supporting features such as limit orders.
EVM Sidechains: Expanding the XRPL Ecosystem
Although XRPL already has native AMM functionality, supporting liquidity provision and cross-token trading, Ripple is developing EVM sidechains to achieve more efficient capital flows between other chains and DeFi applications.
Key Features
Currently in the testing phase
Expected to go live within a few months
XRP will serve as a gas token
Using Axelar as a cross-chain bridging solution
Community Controversy
The XRPL community has differences regarding the technical route:
Some hope to implement Hooks functionality on the mainnet
There are doubts about the necessity and role of EVM sidechains
Notably, the bridging between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar may become an important beneficiary.
Future Prospects
XRPL is evolving towards modularity, representing an important technical turning point. The development trend of EVM sidechains 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, particularly in terms of applications in the DeFi sector. As the ecosystem continues to develop, 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) feature, currently mainly used for Meme coin trading.
About 14 million XRP are deposited into the AMM pool. Although the TVL is relatively low, trading volume continues to rise due to the Meme coin frenzy. (The pool's locked amount can be viewed via XRP Scan.)
Getting Started with Trading
1. Wallet Selection
Visit the First Ledger website, where you can create a wallet via Telegram or create it directly in the browser and save the keys locally.
Additionally, you can try the mobile Xaman wallet. It works well, and you can import keys between these two wallets to see which one suits you better.
2. Acquire XRP
Purchase from centralized exchanges or use Simpleswap for cross-chain bridging.
3. Trading Platforms
The First Ledger (beginner's choice) token list is updated in real-time and supports 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. It is recommended to use it 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 together with xMagnetic.
Risk Warning
Most Meme coins are controlled by a few wallets, with common scenarios where 10 wallets hold over 40% of the supply. XRPL indeed needs Pump.fun 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, effective risk control, and thorough research. Remember: always understand the project's fundamentals before trading to avoid impulsive investments.
