Original author: Ignas | DeFi Research
Compiled by: Yuliya, PANews
A remarkable phenomenon is occurring in the current cryptocurrency market: XRP surged 3.5 times in just one month, even 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, the market's choices often transcend individual biases.
With the booming meme coin market, the XRP ecosystem may become an important battlefield for a new wave 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 speed, decentralization, and efficiency (especially the efficiency aspect still remains a significant controversy).
Unlike blockchains that use PoW or PoS, XRPL uses 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 the 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 UNL, this reliance on the UNL mechanism actually brings centralization risks, as Ripple and the XRP Ledger Foundation largely control the default UNL choices. New validators usually need approval from Ripple Labs, which is the origin of the term 'federal consensus'.
The transaction confirmation time for XRP is 3-5 seconds, while Solana far surpasses in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fees are almost zero, at just 0.00001 XRP per transaction.
Trust Lines, reserves, and the Rippling mechanism
Wallet activation and reserve requirements
When creating wallets 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 must be locked.
A governance vote is currently underway, proposing to reduce these requirements by a factor of ten. 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 foundational structure used by XRPL to hold fungible tokens. According to Ripple's official documentation: 'Trust lines enforce XRPL's rules, 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 implementation of freezing and authorization control
Support 'No Ripple flag' to prevent accidental balance adjustments
When the token issuer creates a token, their balance may become negative, indicating the amount issued, while the holder's balance is positive. For example, 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 extends this concept, allowing token balances to flow automatically through connected accounts during payment. This is a passive exchange system that achieves atomic settlement without the involvement of the issuer.
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 accounting system, mainly used for:
Achieve efficient net settlement
Support for real-world assets (RWA)
Stablecoin trading
Tokenized goods
Cross-border payments
This design gives asset issuers greater 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.
While this centralized control may draw 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 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 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 important to note that establishing a trust line (for example, connecting with a meme coin issuer) requires locking 2 XRP as a reserve in the wallet.
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) 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 employs a similar hooks mechanism to add extra functionality 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 EVM sidechains to achieve more efficient capital flow between other chains and DeFi applications.
Key Features
Currently in testing phase
Expected to go live in a few months
XRP will serve as a gas token
Using Axelar as a cross-chain bridging solution
Community controversy
There are differences in the XRPL community regarding the technological route:
Some people hope to implement Hooks functionality on the mainnet
There are doubts about the necessity and role of EVM sidechains
It's 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 modularization, representing an important technological 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, especially in the application of DeFi. 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.
Approximately 14 million XRP are locked in the AMM pool; although the TVL is relatively low, trading volume continues to rise due to the meme coin craze. (The locked amount can be viewed through XRP Scan.)
Introduction to trading
1. Wallet Selection
Visit First Ledger's 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 version of the Xaman wallet. It works well, and you can import keys between these two wallets to see which one suits you better.
2. Acquiring XRP
Purchase from centralized exchanges or use Simpleswap for cross-chain bridging.
3. Trading Platform
First Ledger (recommended for beginners) 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 platforms mentioned above; it is recommended to use the Xaman wallet together with xMagnetic.
Risk Warning
Most meme coins are controlled by a few wallets, with the top 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, and check holder distribution; 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.
