XRP

XRP

XRP is the native asset of the XRP Ledger and primarily used as a bridge currency within its blockchain ecosystem. All accounts on the XRPL must hold a minimum balance of 20 XRP as a reserve and can send XRP between one another. An example of XRP being used as a bridge currency on the XRPL is through the auto-bridging of order books. In this process, two separate order books like BTC/XRP and XRP/LTC can be merged to facilitate transactions through a synthetic BTC/LTC order book. XRP is broken down into six decimal point with 1/1,000,000 of a XRP referred to as a drop. Due to the fast and efficient nature of the XRPL consensus, XRP can be traded on the XRP Ledger for a small number of drops as a transaction fee. Every transaction fee in XRP is burned and thus creates a deflationary mechanism on the total XRP supply.

The pre-minted supply of XRP is 100B, which was distributed to the project founders and the firm, Ripple. To provide XRP’s market with some clarity around the distribution of Ripple’s gifted XRP, the firm opted to place the remaining XRP in a cryptographically-locked escrow on the XRPL in 2017. Every month 1B XRP are released from the escrow for Ripple to utilize. Ripple has greatly reduced the amount of XRP they sell or distribute over the past couple of years and release a market report every quarter detailing what they did with the escrow. Any XRP not utilized from an escrow released is placed back into the monthly escrow distribution at t + 1 months, where t is the total remaining months on the escrow distribution. 

The XRP escrow is one of the most talked about distribution mechanisms in crypto markets as it has drawn the ire of regulators and other opponents to the XRPL. While the market capitalization of the escrow is rather large, Ripple is unable to sell all of that XRP at once or at market prices. Furthermore, much of Ripple’s business is centered around the use of XRP and the XRPL, which stands as a deterrent to flooding the market of XRP with too much supply via their escrow distributions. Ultimately, Ripple’s sales of XRP during the past few years have often amounted to less than 100 basis points of total XRP trading volume on a monthly basis.