- Ripple CTO David Schwartz has outlined three potential solutions to address the issue of XRP scarcity as the token’s value rises.
- Despite the recent drop in trading activity, large investors are busy buying XRP. This strong buying pressure indicates the potential for a price surge.
Recently, Eduardo Farina, CEO of Alpha Lions Academy, shared insights from David Schwartz, the Chief Technology Officer of Ripple, who is tackling these issues via the X platform. Schwartz discussed possible outcomes if XRP became scarce to the point where its smallest unit, a drop (one-millionth of an XRP), became too valuable to facilitate effective transactions.
Unlike some cryptocurrencies, such as SHIB and BNB, which have implemented token-burning mechanisms to increase their value, XRP supply reduction occurs organically with every transaction on the XRP ledger. As XRP’s price increases, the reduced supply might pose challenges to its use as a medium of exchange. In light of this, Schwartz outlined three critical solutions.
- Increasing XRP divisibility: According to Schwartz, the first solution would involve the community agreeing to increase XRP’s divisibility. This change would require a software update allowing smaller XRP token subdivisions. Additionally, by increasing its divisibility, XRP would remain a usable option for everyday transactions regardless of its overall supply.
- Redefining Transaction Fees: Secondly, Schwartz came up with a potential solution that revolves around changing how transaction fees are structured. Right now, fees for each transaction are determined by the number of drops involved. In a scenario where XRP became too scarce, the XRP community could decide to change the metric to transactions per drop. In essence, this would mean that a single drop could cover multiple transactions rather than each transaction costing a specific amount of drops. Consequently, this approach could mitigate the impact of scarcity.
- Introducing Transaction Credits: Lastly, Schwartz concluded that the final solution required the creation of a new asset called “transaction credits.” These credits would be introduced with a zero balance for all users and priced at one trillionth of an XRP. If a transaction required more credits than a user possessed, the necessary amount of XRP drops could be converted into transaction credits at a predetermined rate, such as one million drops per transaction credit. By separating transaction costs from direct XRP usage, this system would protect XRP’s value while enabling efficient transactions.
At the time of writing, XRP, Ripple’s native token, is swapping hands for $0.595, marking a 0.93% and 1.20% decline in the last 24 hours and past month, respectively. Additionally, the digital asset has seen a 38.64% decline in its 24-hour trading volume. Despite the recent drop in trading activity, whales are busy buying XRP. This strong buying pressure indicates the potential for a price surge.
