Original author: Ignas | DeFi Research
Compiled by: Yuliya, PANews
In the current cryptocurrency market, a remarkable phenomenon is unfolding: XRP has skyrocketed 3.5 times in just a month, surpassing Solana in market capitalization. This dramatic market performance once again confirms the unpredictability of the cryptocurrency market.
Despite the controversies surrounding XRP in the cryptocurrency community, market choices often transcend personal biases.
With the booming Meme coin market, the XRP ecosystem may become an important battleground for a new round of speculative frenzy.
This article will deeply analyze the operational mechanism of XRP Ledger (XRPL), methods of token trading, core concepts, and directions for in-depth research.
What is XRPL?
The 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 a significant point of contention).
Unlike blockchains that adopt PoW or PoS, XRPL uses a federated consensus mechanism, where validators can reach transaction consensus without mining or staking.
The specific operational mechanism is as follows:
The entire network has more than 109 validators processing transactions, of which 31 trusted validators form 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 the UNL, this reliance on UNL mechanisms realistically brings 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, while Solana significantly outperforms in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fee is almost zero, at only 0.00001 XRP per transaction.
Trust Lines, Reserves, 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 needs to be locked.
Currently, a governance vote is 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.
Analysis of the Trust Lines mechanism
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 on XRPL."
The core value of Trust Lines lies in:
Prevent forced acceptance of junk tokens
Allow freezing and authorization controls
Support "No Ripple flag" to prevent unexpected balance adjustments
When the token issuer creates tokens, their balance may become negative, representing the issued amount, while the holder's balance remains positive. For example, after issuing 100 tokens, the issuer's 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 flow automatically between connected accounts during payments. This is a passive exchange system that achieves atomic settlement without the involvement 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 the balances on all trust lines.
This design is similar to a dual-entry accounting system, mainly used for:
Achieving efficient net settlement
Supporting 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, limiting token ownership to approved accounts. This makes XRPL particularly suitable for assets that require strict KYC/AML regulation.
Although this centralized control may attract 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 own needs:
Enabling Rippling is suitable for:
Users who hope the account will 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 unexpected adjustments
It is especially important to note that each time a trust line is established (for example, connecting with a meme coin issuer), 2 XRP needs to 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 technical route. It uses a WebAssembly-based Hooks system, which is a lightweight transactional 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 extra 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 functionalities before and after transactions, supporting features like limit orders.
EVM Sidechain: Expanding the XRPL Ecosystem
Although XRPL already has native AMM capabilities supporting liquidity provision and cross-token trading, 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 the gas token
Using Axelar as the cross-chain bridging solution
Community Controversy
The XRPL community has divergent views on the technical roadmap:
Some people hope to realize Hooks functionality on the mainnet
There are doubts about the necessity and role of the EVM sidechain
It is noteworthy that the bridging between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar might become a significant beneficiary.
Future Outlook
XRPL is evolving toward modularity, representing an important technological turning point. The development trend of the EVM sidechain will be a focal point worth paying attention to, as it could bring new application scenarios and development opportunities to XRPL.
These technological innovations will bring more possibilities to XRPL, especially in the application 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 a built-in AMM (Automated Market Maker) functionality, mainly used for Meme coin trading.
About 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 via XRP Scan.)
Getting Started with Trading
1. Wallet Selection
Visit the First Ledger website to create a wallet through Telegram, or create it directly in your 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.
2. Obtaining XRP
Purchase from centralized exchanges or use Simpleswap cross-chain bridging.
3. Trading Platform
First Ledger (beginner's choice) token list is updated in real-time, supporting sorting by 24h trading volume, market capitalization, number of holders, and creation time.
xMagnetic (advanced platform) provides 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 the Xaman wallet with xMagnetic.
Risk Warning
Most Meme coins are controlled by a few wallets, with common 10 wallets holding 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, proper risk control, and thorough research. Remember: always understand the fundamentals of a project before trading to avoid impulsive investments.
