Ripple’s CTO has addressed concerns regarding the potential impact of Ripple’s stablecoin RLUSD on XRP’s role in the ecosystem.
The stablecoin, which is expected to be launched in the coming weeks, could be used for on-demand liquidity (ODL) in certain areas, among other potential uses. Ripple, which is still in the beta testing stage, has minted millions of tokens on the XRP Ledger (XRPL) and Ethereum.
Concerns surrounding RLUSD
However, as the launch approaches, some community members are worried that RLUSD will replace XRP in utility, especially in areas where XRP has long played an important role.
Most recently, XRP enthusiasts took these concerns directly to Ripple’s CTO, David Schwartz. Investors wondered whether RLUSD would be a net positive for XRP.
This takes into account the idea that RLUSD could perform up to 70% or more of XRP’s current functionality, especially in cross-border payments. The enthusiast expressed feelings of uncertainty and frustration, fearing that XRP will be sidelined by future stablecoins.
Ripple CTO affirms XRP utility
In response, David Schwartz reassured the community that XRP’s role in the XRP Ledger (XRPL) remains central and irreplaceable. He emphasized that network participants can only use XRP to pay transaction fees in XRPL, a unique feature that cannot be performed with other assets, including RLUSD.
Only XRP can be used to pay transaction fees in XRPL. Everyone making transactions must have XRP to pay these fees. XRP is the only asset that any account can hold, has no counterparty or jurisdiction, and cannot be frozen or retrieved. XRP has structural advantages over XRPL…
— David “JoelKatz” Schwartz (@JoelKatz) October 8, 2024
Additionally, all XRPL accounts must hold XRP in reserve. Additionally, Schwartz emphasized that XRP has advantages over other stablecoins as it has no counterparty risk, is not frozen, and has no jurisdictional restrictions.
Schwartz also mentioned autobridges, a key structural feature that gives XRP an advantage over XRPL. This feature allows XRP to automatically link liquidity between different assets, enhancing its utility within the ecosystem.
This makes XRP more than just a way to pay transaction fees. In particular, it acts as a central bridging asset that facilitates the transfer of liquidity and value between different currencies and digital assets.
However, Schwartz believes that XRP could actually lose some of its usefulness if RLUSD or another stablecoin proves more efficient at performing most of XRP’s functions. I admitted something. He acknowledged that in such a scenario, XRP could face competition from stablecoins, regardless of the specific impact of RLUSD.
Increase fees to increase XRP scarcity
In response, another community member asked Mr. Schwartz if he would consider increasing XRPL fees and increasing the minimum 10 XRP required to open a wallet with XRPL.
This question arose from the idea that increasing transaction fees and minimum XRP wallet balances can increase scarcity and thus the value of altcoins. For context, XRPL automatically burns fees in XRP and has burned 12.9 million XRP to date since its inception.
Schwartz clarified that the decision to increase fees and minimum balances was not his alone. These issues are subject to a consensus process within the XRP Ledger ecosystem.
However, the Ripple CTO personally opposed the idea of using higher fees to create artificial scarcity for XRP. He explained that XRPL needs to prioritize service to users instead of focusing on providing passive benefits to XRP holders.
He believes the ledger should exist to provide utility to users who actively engage with the ledger, not to cater to speculative investors.
Schwartz noted that despite its stance on fees, XRPL smart contracts could ultimately lead to higher transaction fees. Recall that Ripple recently confirmed its plans to bring programmability to XRPL through its EVM sidechain and native smart contract mechanisms.
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