The XRP Ledger is known for its efficiency, but it also incorporates a unique mechanism called XRP burning. Every transaction on the ledger incurs a small fee in XRP, which is permanently removed from circulation. While the fee is typically minimal, around 0.00001 XRP, it plays a significant role in the network’s design and stability. During times of high network activity, fees can increase and transactions compete for priority based on the fee amount, ensuring the security and functionality of the network. Ripple CTO David Schwartz stated that validators are responsible for setting fee levels, which can change without compromising network security.
Ripple’s upcoming stablecoin, RLUSD, operates under the same fee structure as XRP transactions. Despite being a separate asset, RLUSD transactions still require XRP fees to be processed on the ledger, ensuring that the burning mechanism is consistently enforced. As the adoption of RLUSD grows, it may lead to some minor reductions in XRP’s total supply. However, when compared to global systems like SWIFT, Visa, and Mastercard, which process over a billion transactions daily, the impact on XRP’s supply is relatively modest, at around 0.0075% annually.
The launch of Ripple USD (RLUSD) is eagerly anticipated, with the stablecoin set to enter the market before the end of the year. As the stablecoin market is projected to reach $2.3 trillion, RLUSD could play a significant role in the XRP Ledger ecosystem, not just as a payment solution but also as a contributor to XRP’s long-term dynamics. With its unique burning mechanism, RLUSD’s transactions will continue to support the overall stability and efficiency of the XRP Ledger, further solidifying its position in the cryptocurrency market.
