Article reproduced from: Yuliya
Original author: Ignas | DeFi Research
Compiled by: Yuliya, PANews
A remarkable phenomenon is unfolding in the current cryptocurrency market: XRP surged 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.
Although XRP has 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 round of speculative frenzy.
This article will delve into the operational mechanism of the XRP Ledger (XRPL), token trading methods, core concepts, and directions for in-depth study.
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 employs 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 the unique node list (UNL) for consensus. These validators include institutions such as Arrington XRP Capital, Bifrost Wallet, Ripple Inc., and XRPscan.
Although theoretically any entity can run and publish UNL, this mechanism's reliance on UNL actually brings centralization risks, as Ripple Inc. 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 far 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 the Rippling mechanism
Wallet activation and reserve requirements
When creating a wallet in the XRPL ecosystem, there are some unique requirements to keep in mind:
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 the owner's reserve. For example, if you hold 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 view 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 XRPL uses to hold homogeneous 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 is:
Prevent forced acceptance of junk tokens
Allow implementation of freeze and authorization control
Supports the "No Ripple flag" to prevent unintentional balance adjustments
When an asset issuer creates a token, their balance may turn negative, indicating the amount issued, while the holder's balance remains 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 expands 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.
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 bookkeeping system, primarily used for:
Achieving efficient net settlement
Supporting real-world assets (RWA)
Stablecoin trading
Tokenized goods
Cross-border payment
This design gives asset issuers greater control. Particularly 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 attract criticism from decentralization supporters, it is precisely this unique advantage of XRPL 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 account 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 balance used for payment paths
Ordinary users who want to protect their assets from unintended adjustments
It is important to note that each time a trust line is established (for example, connecting with a meme coin issuer), 2 XRP need to be locked in the wallet as a reserve.
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 approach. It utilizes 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 additional logic before and after transactions, for example:
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 additional features before and after transactions, supporting limit orders and other characteristics.
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 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 a cross-chain bridging solution
Community controversy
There are differences in the technical approach within the XRPL community:
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 a modular direction, representing an important technological turning point. The development 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 built-in AMM (automated market maker) functionality, currently 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. (You can check the pool's locked amount through XRP Scan.)
Getting started with trading
1. Wallet selection
Visit the First Ledger website to create a wallet via Telegram, or create it directly in the browser and save the keys locally.
Additionally, you can also try the mobile version of the Xaman wallet. It runs 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 cross-chain bridge.
3. Trading platforms
First Ledger (the preferred entry point) 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 above platforms. It is recommended to use Xaman wallet together with xMagnetic.
Risk warning
Most meme coins are controlled by a few wallets, with common wallets holding over 40% of the supply. XRPL does need Pump.fun to make token issuance fairer. Focus on early projects, value trading volume, check holder distribution, and be cautious about new coins.
Investing in meme coins requires caution, good risk control, and thorough research. Remember: always understand the fundamentals of a project before trading to avoid impulsive investments.
