Author: 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, with its market capitalization even surpassing Solana. This dramatic market performance once again underscores the unpredictability of the cryptocurrency market.
Although XRP has been controversial in the cryptocurrency community, the market's choice often transcends individual biases.
With the thriving MEME coin market, the XRP ecosystem may become an important battlefield for the next speculative frenzy.
This article will delve into the operating mechanism of the XRP Ledger (XRPL), the methods of token trading, the core concepts, and the directions for in-depth research.
What is XRPL?
The XRP Ledger touts itself as a blockchain platform that pursues speed and efficiency.
However, in terms of speed, decentralization, and efficiency, it is not necessarily the best (especially the efficiency aspect, which is still highly controversial).
Unlike blockchains that adopt PoW or PoS, XRPL uses a federated consensus mechanism, where validators can reach transaction consensus without the need for mining or staking.
The specific operating mechanism is as follows:
The entire network has over 109 validators processing transactions, with 31 trusted validators forming the Unique Node List (UNL) to reach consensus. These validators include institutions such as Arrington XRP Capital, Bifrost wallet, Ripple, and XRPscan.
Although in theory any entity can run and publish a UNL, this UNL-dependent mechanism actually introduces centralization risk, as Ripple and the XRP Ledger Foundation largely control the choice of the default UNL. New validators typically need to be approved by Ripple Labs, which is the origin of the term "federated consensus".
The XRP transaction confirmation time is 3-5 seconds, while Solana is far ahead in terms of node count, transaction speed, and smart contract capabilities. However, the XRP transaction fee is almost zero, 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 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 the owner's reserve. For example, if you hold 20 MEME coins, an additional 40 XRP will need to be locked.
There is currently a governance vote in progress to propose reducing 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.
Understanding Trust Lines
Trust Lines is the fundamental infrastructure in XRPL for holding fungible tokens. According to the Ripple official documentation: "Trust lines enforce the rules of the XRPL to ensure that no one is forced to hold tokens they don't want. This safeguard is crucial for enabling XRPL's use cases around community credit."
The core value of Trust Lines lies in:
Preventing forced acceptance of junk tokens
Allowing for freezing and authorization control
Supporting the "No Ripple flag" to prevent accidental balance adjustments
When a token issuer creates a token, its balance may become negative, representing the amount issued, while the holders' balances are positive. For example, after the issuer sends out 100 tokens, their trust line balance is -100, and the recipient's balance is +100.
Explaining the Rippling Mechanism
Rippling (which is also the origin of the Ripple name) further extends 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 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, with the balances on all trust lines automatically adjusted.
This design, similar to a double-entry accounting system, is primarily used for:
Efficient net settlement
Supporting real-world assets (RWA)
Stablecoin trading
Tokenized commodities
Cross-border payments
This design gives asset issuers stronger control. Particularly in terms of compliance requirements, authorized Trust Lines issuers can enable the "Require Auth" flag to restrict token ownership to approved accounts. This makes XRPL particularly suitable for assets that require strict KYC/AML regulations.
Although this centralized control may invite criticism from decentralization supporters, it is the unique advantage of XRPL in certain application scenarios.
After understanding the Rippling mechanism, users can choose to enable or disable this feature based on their own needs:
Enabling Rippling is suitable for:
Users who want their accounts to be part of the payment path
Intermediary accounts, such as market makers or exchanges (it is currently unclear whether fees can be earned through this function)
Disabling Rippling is suitable for:
Users who do not want their balances to be used in the payment path
Regular users who want to protect their assets from accidental adjustments
It is important to note that for each trust line established (e.g., with a MEME coin issuer), 2 XRP must be locked in the wallet as a reserve.
XRPL's Technical Evolution: From Hooks to EVM Sidechain
Compared to Ethereum's EVM, Solana's SVM, or Aptos' Move VM, XRPL has taken a different technical path. It uses a WebAssembly-based Hooks system, which is a lightweight transaction logic program.
Hooks System
Hooks are XRPL's unique solution to smart contracts. Interestingly, they are currently running on the Xahau network (a fork of XRPL), rather than the XRPL mainnet. Hooks can add additional logic before and after transactions, such as:
Preventing fraudulent payments
Automatically saving XRP
Adding carbon offsets to transactions
It's worth noting that Uniswap v4 also adopted a similar hooks mechanism to add additional functionality before and after trades, 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, to achieve more efficient capital flow between other chains and DeFi applications, Ripple is developing an EVM sidechain.
Key features:
Currently in the testing phase
Expected to launch in a few months
XRP will be used as the gas token
Using Axelar as the cross-chain bridge solution
Community Debate
The XRPL community is divided on the technical roadmap:
Some want to see Hooks functionality implemented on the mainnet
There are doubts about the necessity and role of the EVM sidechain
It's worth noting that the bridge between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar may become an important beneficiary.
Future Outlook
XRPL is evolving towards a modular architecture, which represents an important technological turning point. The development trajectory of the EVM sidechain will be a focus worth watching, as it may bring new application scenarios and growth opportunities to XRPL.
These technological innovations will open up more possibilities for XRPL, especially in the realm of DeFi applications. As the ecosystem continues to evolve, we may see more innovative use cases emerge.
Complete Guide to Trading MEME Coins on XRP
XRPL has built-in AMM (Automated Market Maker) functionality, which is currently mainly used for MEME coin trading.
Approximately 14 million XRP are deposited in the AMM pools, and although the TVL is relatively low, the trading volume has been rising due to the MEME coin frenzy. (The pool's locked amount can be viewed on XRP Scan.)
Trading Basics
1. Wallet Selection
Visit the First Ledger website, you can create a wallet through Telegram, or directly create and save the key locally in the browser.
You can also try the Xaman wallet on your mobile device. It runs well, and you can import the key between these two wallets to see which one suits you better.
2. Acquiring XRP
Purchase from a centralized exchange or use the Simpleswap cross-chain bridge.
3. Trading Platforms
First Ledger (beginner's choice) has real-time token listing updates, and supports sorting by 24-hour trading volume, market cap, number of holders, and creation time.
xMagnetic (advanced platform) provides token discovery, liquidity provision, and data analysis functions, and is recommended to be used with the Xaman wallet.
Sologenic DEX can be an alternative trading platform, but the user experience may not be as good as the above platforms, so it is recommended to use the Xaman wallet with xMagnetic.
Risk Warning
Most meme coins are controlled by a small number of wallets, with 10 wallets often holding more than 40% of the supply. XRPL indeed needs Pump.fun to make token issuance more fair. Pay attention to early projects, focus on trading volume, check the holder distribution, and be cautious about new coins.
Investing in meme coins requires caution, proper risk control, and thorough research. Remember: always understand the project fundamentals before trading to avoid impulsive investments.
