Ripple CTO Explains XRP Burn Mechanics Behind Ripple USD Stablecoin
2024-12-13
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XRP Ledger is all about efficiency, but there is more to it than that. It also has a unique mechanism called XRP burning. Every transaction, including those that involve Ripple's upcoming stablecoin RLUSD, incurs a small fee in XRP. This fee is not put back into the system; it is permanently removed from circulation. While it is a pretty minor process - usually only around 0.00001 XRP - it does have broader implications for how the network is designed and how stable it is.
The system is not set in stone. As a general rule, fees stay low, but during periods of high network activity, they can rise. The transactions compete with each other for priority, with higher fees moving through faster. This keeps the network safe from spam and congestion while ensuring that it can still be used for genuine purposes. 
Ripple CTO David Schwartz explained that the fee levels are set by validators, so they can change without affecting the security of the network.
The minimum is set by consensus. But if there's a burst of transaction load beyond what the network can clear, transactions are prioritized based on fees.
RLUSD, Ripple's stablecoin, operates under the same set of rules. Its transactions are a separate asset, but they still need XRP fees to be processed on the ledger. This ensures that the burning mechanism is not bypassed, no matter what asset is being traded. As more and more people start using RLUSD, its transaction volume could lead to some noticeable, but still small, reductions in XRP's total supply.
The numbers tell a modest story, though. An analysis of global systems like SWIFT, Visa and Mastercard - with over a billion transactions per day - shows that this scale of activity would burn only around 0.0075% of XRP's supply annually.
When will Ripple USD (RLUSD) launch?
For RLUSD itself, the launch window remains open. With less than two weeks until year's end, Ripple is still on track to introduce its stablecoin. If RLUSD can carve out space in a stablecoin market projected to grow to $2.3 trillion, its role within the XRP Ledger ecosystem may gain significance, not just as a payment solution but also as a contributor to XRP’s long-term dynamics.