San Francisco, CA – Recent discussions among cryptocurrency enthusiasts, including investor Michael Arrington, have brought renewed attention to the operational mechanics of Ripple USD (RLUSD) and its interaction with the native XRP token. It has been highlighted that transactions involving RLUSD on the XRP Ledger (XRPL) incur a small burn of XRP, a detail confirmed by Ripple's Chief Technology Officer, David Schwartz.
"I didn't know that RLUSD transactions burned XRP. It's apparently a very small burn but its there," Michael Arrington stated in a recent social media post.
RLUSD, a stablecoin issued by Standard Custody & Trust Company, LLC, a subsidiary of Ripple Labs, is designed to maintain a 1:1 peg with the U.S. dollar. It operates on both the XRP Ledger and the Ethereum blockchain, aiming to provide a secure, compliant, and scalable digital dollar solution for cross-border payments and broader digital asset markets. The stablecoin is backed by U.S. dollars and cash equivalents, with Ripple committing to monthly reserve attestations for transparency.
The burning mechanism on the XRP Ledger is a fundamental feature, designed to enhance network security and prevent spam transactions by permanently removing a small amount of XRP from circulation with each transaction. Ripple CTO David Schwartz has clarified that this fee, typically around 0.00001 XRP, applies to all transactions on the XRPL, including those involving RLUSD. While the burn is minimal per transaction, its cumulative effect contributes to a gradual reduction in XRP's total supply.
Despite the continuous burning, experts suggest the impact on XRP's overall supply remains negligible. Schwartz previously noted that even if global payment systems like SWIFT, Visa, and Mastercard adopted XRP for billions of daily transactions, the annual burn would account for only about 0.0075% of XRP's total supply. This indicates that while the mechanism exists, it does not lead to drastic short-term changes in XRP's availability.
The discussions also touched upon "drops," the smallest unit of XRP. Similar to how a "satoshi" is the smallest unit of Bitcoin, a "drop" represents 0.000001 XRP. This granular denomination allows for highly precise and low-cost transactions on the XRP Ledger, reinforcing its efficiency for micro-payments and high-volume operations. RLUSD's strategic importance for Ripple is underscored by its potential to drive further adoption of the XRP Ledger by providing a stable, regulated digital asset for institutional and enterprise use.