Original author: Ignas | DeFi Research
Compiled by: Yuliya, PANews
In the current cryptocurrency market, a striking phenomenon is unfolding: XRP 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.
Despite the ongoing controversy surrounding XRP in the cryptocurrency community, market preferences often transcend individual biases.
With the booming growth of the Meme coin market, the XRP ecosystem may become a key battleground for a new wave of speculation.
This article will delve into the operational mechanisms of the XRP Ledger (XRPL), token trading methods, core concepts, and directions for further 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 speed, decentralization, and efficiency (especially the efficiency aspect remains highly debated).
Unlike blockchains that use PoW or PoS, XRPL uses a federated consensus mechanism, allowing validators to achieve 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 Arrington XRP Capital, Bifrost wallet, Ripple, and XRPscan, among others.
Although theoretically any entity can run and publish UNL, this dependence 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'.
The transaction confirmation time for XRP is 3-5 seconds, while Solana far outperforms in terms of node numbers, 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 Rippling Mechanism
Wallet Activation and Reserve Requirements
When creating a wallet in the XRPL ecosystem, certain unique requirements must be noted:
To activate an account, at least 10 XRP is required as a base reserve. Additionally, for each token held, the system requires an extra 2 XRP to be locked as the owner's 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 view the current specific requirements under the 'base reserve' and 'owner reserve' tabs on XRP Scan.
Trust Lines Mechanism Analysis
Trust Lines are the foundational structure for holding homogeneous tokens on XRPL. 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 like community credit on XRPL.'
The core value of Trust Lines lies in:
Prevent forced acceptance of junk tokens
Allow implementation of freeze and authorization controls
Support for 'No Ripple flag' to prevent accidental balance adjustments
When the token issuer creates tokens, 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 Ripple's name) further expands this concept, allowing token balances to flow automatically through connected accounts during the payment process. 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 dual-entry bookkeeping system, primarily 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, restricting token ownership to approved accounts. This makes XRPL particularly suitable for assets that require strict KYC/AML regulation.
While such centralized control may draw criticism from decentralization supporters, it is precisely this that gives XRPL its unique advantages 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 wishing for accounts to be part of payment paths
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 wish for their balances to be used for payment paths
Ordinary users who want to protect their assets from unexpected 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 adopts a different technical 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 on the XRPL mainnet. Hooks can add additional 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 additional functions before and after trading, supporting features like limit orders.
EVM Sidechain: Expanding the XRPL Ecosystem
Although the XRPL already has native AMM functionality that supports liquidity provision and cross-token trading, Ripple is developing an EVM sidechain for more efficient capital flow 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 Disputes
There are differences in the community regarding the technical route:
Some people want 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 evolving towards modularization, representing a significant technological turning point. The development 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 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) function, primarily used for Meme coin trading.
Approximately 14 million XRP is deposited into the AMM pool. Although the TVL is relatively low, trading volume continues to rise due to the Meme coin boom. (You can view the pool's locked amount via XRP Scan.)
Trading Basics
1. Wallet Selection
Access the First Ledger website to create a wallet via Telegram, or create one directly in the browser and save the key locally.
Alternatively, you can also 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. Obtain XRP
Purchase from centralized exchanges or use Simpleswap for cross-chain bridging.
3. Trading Platforms
The First Ledger (entry-level option) 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 for use 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 Warning
Most Meme coins are controlled by a few wallets, with common holdings of 40% or more by 10 wallets. XRPL truly needs Pump.fun to make token issuance fairer. Focus on early projects, pay attention to trading volume, check holder distribution, and approach new coins cautiously.
Investing in Meme coins requires caution, proper risk control, and thorough research. Remember: always understand the project's fundamentals before trading to avoid impulse investments.
