on
health
- Get link
- X
- Other Apps
1. What is XRP Burning?
If you are interested in stock or cryptocurrency investments, you may have frequently heard the term "burning." This strategy involves eliminating a portion of circulating shares or coins to increase scarcity or stabilize the ecosystem. Other blockchains, such as Ethereum with its EIP-1559 protocol, also employ a fee-burning mechanism, and many projects use token burning to adjust their tokenomics.
But did you know that the burn process is also applied to XRP (Ripple)? XRP is a leading cryptocurrency specializing in international remittance and payments, known for its high transaction speed (TPS) and low fees. Notably, the XRP Ledger employs a mechanism where a small fee is automatically burned whenever a transaction occurs, causing the total supply to decrease slightly over time.
This article will explore how XRP’s burn mechanism works, the cumulative burn amount so far, the impact of the newly launched RLUSD (Ripple's stablecoin) on XRP burning, and its future implications.
2. XRP Structure and Supply
(1) Initial Supply
XRP was created in 2012 by Ripple Labs (formerly OpenCoin) with a total initial supply of 100 billion XRP tokens. Unlike Bitcoin or Ethereum, which are gradually mined, all XRP tokens were pre-mined at the time of launch.
(2) Escrow and Circulating Supply
Out of the total 100 billion XRP issued, Ripple Labs holds 37% (around 37 billion XRP) in an escrow account. Therefore, the circulating supply in the market is limited compared to the initial supply.
Each month, a portion of the escrowed XRP is released (unlocked) into the market, gradually increasing the circulating supply over time. As a result, the reduction in supply from burning and the increase in supply from escrow unlocks occur simultaneously.
3. How the XRP Burning Mechanism Works
(1) Transaction Fee (Network Fee) Burning
When you send XRP or perform a specific transaction, a small fee is incurred. Unlike other blockchains, where fees are paid to miners or validators, the XRP Ledger burns this fee directly.
This means the fee is permanently removed from circulation rather than being transferred to a specific account.
The primary purpose of this burn mechanism is to prevent network attacks (e.g., spam transactions). Since creating numerous transactions involves a cost (burning), it becomes challenging to launch malicious mass transactions.
(2) Burn Fee Formula and Variation
The transaction fee in the XRP Ledger, known as the Base Fee, varies slightly depending on network congestion.
- During high transaction activity, the fee slightly increases (resulting in higher burn amounts) to prevent excessive network overload.
- During low activity, the base fee remains minimal, allowing regular users to send transactions at a very low cost.
4. RLUSD and Its Impact on XRP Burning
(1) What is RLUSD?
RLUSD is a recently introduced stablecoin in the Ripple ecosystem, designed to be pegged 1:1 to the US Dollar (USD). Though still in its early stages, RLUSD has the potential to become a widely used stablecoin on the XRP Ledger.
(2) Increased RLUSD Transactions → Higher Transaction Count
If RLUSD becomes widely adopted for payments, remittances, and DeFi services, transaction activity on the XRP Ledger will likely rise significantly. Since stablecoin transfers often involve frequent and high-volume transactions between exchanges and custody platforms, an increase in RLUSD usage could lead to higher overall XRP Ledger transaction counts.
(3) Impact of Increased Transactions on Burn Amounts
As the number of XRP Ledger transactions rises, the cumulative burned fees will also increase. If RLUSD becomes widely used, a small amount of XRP will be burned for each RLUSD transfer or smart contract interaction (e.g., IOU settlements).
While the burn amount per transaction is minimal, continuous activity can lead to a significant cumulative burn effect over time.
(4) RLUSD Adoption Scenario
If RLUSD gains widespread adoption within Ripple Labs or the XRP Ledger community, the ledger could become a hub for stablecoin payments and remittances, significantly increasing transaction frequency.
However, as RLUSD is still in its early stages, its long-term impact remains uncertain. Should RLUSD be integrated with large-scale partnerships or global payment networks, experts predict that XRP burn rates may rise significantly over time.
5. Current Cumulative XRP Burn Data
(1) Cumulative Burn Amount
As of January 2025, approximately 13.35 million XRP have been burned cumulatively.
Recently, the average daily burn rate has been around 5,000 XRP per day.
(2) Increased Trading Activity and Accelerated Burning
During past market booms, such as the 2017-2018 ICO craze and the 2021 crypto bull run, XRP transaction activity surged, temporarily accelerating burn rates.
If RLUSD and other stablecoin usage expand in the future, similar acceleration in burn rates could occur again.
6. Impact of Burn Rates on XRP Price
(1) Does Burning Increase Scarcity?
A primary effect of burning is increased scarcity. However, XRP’s initial supply of 100 billion tokens, along with the continued release of escrowed XRP by Ripple, makes it difficult for burning to have a significant short-term price impact.
However, if cumulative burns grow significantly over the long term, reduced circulating supply could create upward price pressure.
(2) Market Sentiment and Regulatory Issues
Key factors influencing XRP’s price include the SEC lawsuit, partnerships with financial institutions, Ripple’s escrow release policies, and overall market sentiment. Most experts believe that burning supports scarcity only as a long-term supplementary factor rather than an immediate price driver.
7. Interaction Between Burning and Escrow Policy
(1) Burn Rate vs. Escrow Release Volume
If Ripple’s escrow release volume outpaces the burn rate, the effective circulating supply will continue increasing. However, if network activity surges and burn rates accelerate, the reduction effect might become more significant over time.
(2) RLUSD and Escrow Interaction
Even if RLUSD leads to higher transaction counts and increased burn rates, the consistent monthly release of escrowed XRP could still result in a net supply increase. However, if RLUSD gains mass adoption, creating exponential transaction growth, the increased burn rate could balance or even outweigh the escrow releases.
8. Recent Trends and Future Outlook
(1) Expansion of DeFi, NFT, and CBDCs
With the growing use of DeFi, NFTs, and Central Bank Digital Currencies (CBDCs), blockchain technologies are expanding rapidly. The XRP Ledger is also exploring functionalities like smart contracts, sidechains, and bridges.
If RLUSD and similar stablecoins are widely adopted for payments and liquidity purposes, the increased transaction count could lead to higher burn rates.
(2) SEC Lawsuit and Regulatory Clarity
The ongoing SEC lawsuit remains a major factor affecting XRP's market position. If regulatory clarity improves and XRP usage expands in the US market, it could lead to increased transaction volume and thus higher burn rates.
(3) Voluntary Burn Events?
Some community members have suggested that Ripple should burn a large portion of its escrowed XRP for faster supply reduction. However, Ripple has not indicated any plans for large-scale voluntary burns, meaning the current transaction fee burning will likely remain the primary deflationary mechanism.
Conclusion: XRP Burning and RLUSD’s Potential Impact
XRP burning occurs through the XRP Ledger's unique fee-burning structure, with more transactions leading to increased burning.
While the escrow release limits the short-term supply reduction impact, the potential activation of RLUSD and similar services could further accelerate the burn rate over time.
However, XRP’s price is still heavily influenced by market sentiment, regulatory issues, and Ripple’s escrow policies. Therefore, a comprehensive analysis of multiple factors is essential when evaluating XRP’s supply dynamics.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency investments carry risks, and readers should conduct their own research or consult a financial advisor before making any investment decisions.