XRP Depth analysis: From technical to Meme coin trading guide

Author: Ignas | Decentralized Finance Research

Translated by: Yuliya, PANews

In the current Crypto Assets market, a remarkable phenomenon is unfolding: XRP has experienced a big pump of 3.5 times in just one month, and its Market Cap has even surpassed that of Solana. This dramatic market performance once again confirms the unpredictability of the Crypto Assets market.

Despite the controversy surrounding XRP in the cryptocurrency community, market choices often go beyond personal biases.

With the booming development of the Meme coin market, the XRP ecosystem may become an important battlefield for a new round of speculation.

This article will delve into the operation mechanism, Token trading method, core concepts, and directions for in-depth research of the XRP Ledger (XRPL).

What is XRPL?

XRP Ledger claims to be a Block chain platform that pursues speed and efficiency.

However, in fact, it is not optimal in terms of speed, decentralization, and efficiency (especially the efficiency aspect still has a lot of controversy).

Unlike blockchains using PoW or PoS, XRPL utilizes a Federated Consensus Mechanism, where validators can achieve transaction Consensus without the need for Mining or stake.

The specific operational mechanism is as follows:

The entire network has over 109 validators to process transactions, of which 31 trusted validators form the unique Node List (UNL) for Consensus. These validators include institutions such as Arrington XRP Capital, Bifrost Wallet, Ripple, and XRPscan.

Although theoretically any entity can run and publish a UNL, the mechanism that depends on UNL actually brings centralization risks, because Ripple and XRP Ledger Foundation largely control the selection of default UNLs. New validators usually need to be approved by Ripple Labs, which is also the origin of the name 'Federaled Consensus'.

The transaction confirmation time of XRP is 3-5 seconds. In comparison, Solana is far ahead in terms of the number of Nodes, transaction speed, and Smart Contract capabilities. However, the Money Laundering of XRP is almost zero, only 0.00001 XRP per transaction.

Trust Lines, Reserve and Rippling Mechanism

Wallet Activation and Reserve Requirements

When creating a wallet in the XRPL ecosystem, there are some unique requirements to be aware of:

Activating an account requires at least 10 XRP as a base reserve. In addition, for each Token held, the system also requires an additional 2 XRP to be locked as an owner's reserve. For example, if you hold 20 Meme coins, an additional 40 XRP will need to be locked.

Currently a governance vote is underway, proposing to drop these requirements by tenfold. Users can check the specific requirements under the 'base reserve' and 'owner reserve' tabs on XRP Scan.

Trust Lines Mechanism Analysis

Trust Lines is the fundamental structure in XRPL for holding Fungible Tokens. According to the official Ripple documentation, 'Trust lines enforce XRPL rules to ensure that others are not forced to hold unwanted Tokens. This preventive measure is crucial for scenarios such as community credit in XRPL.'

The core value of Trust Lines is:

Prevent the forced reception of junk Tokens

Allow freezing and authorization control

Support 'No Ripple flag' to prevent accidental balance adjustments

When the Tokenissuance party creates a Token, its balance may become negative, indicating the quantity already issued, while the holder's balance is positive. For example, after the issuance party sends 100 Tokens, its trust line balance is -100, and the recipient's balance is +100.

Rippling Mechanism Explained

Rippling (also the origin of the name Ripple) further extends this concept, allowing Token balances to flow automatically through connected accounts during payment. This is a passive exchange system that achieves atomic Settlement without the issuer's participation.

Example: If Alice owes Bob 10 USD, and Bob owes Charlie 10 USD, the rippling mechanism allows Alice to directly pay Charlie while automatically adjusting the balances on all trust lines.

This design is similar to a double-entry bookkeeping system and is mainly used for:

Achieve efficient net Settlement

Support Real World Assets (RWA)

Stablecoin Trading

tokenization goods

Cross-border payment

This design gives the asset issuance party more control. Especially in terms of compliance requirements, authorized trust line issuers can enable the 'Require Auth' flag to restrict all token permissions to approved account ranges. This makes XRPL particularly suitable for assets that require strict KYC/AML regulations.

Although this centralized control may invite criticism from Decentralization supporters, it is precisely the unique advantage of XRPL in specific application scenarios.

After understanding the working principle of Rippling, users can choose to enable or disable this feature according to their own needs:

Enabling Rippling is suitable for:

Users who want account as part of the payment path

As an account of an intermediary, such as a market maker or exchange (it is currently uncertain whether fees can be earned through this function).

Disabled Rippling is suitable for:

Users who do not want their balance to be used for payment paths

Ordinary users who want to protect their assets from unexpected adjustments

It is important to note that for each trust line established (such as connecting with the meme coin issuer), 2 XRP needs to be locked as a reserve in the Wallet.

The technological evolution of XRP Ledger: from Hooks to EVM sidechains

Compared with Ethereum's EVM, Solana's SVM, or Aptos's Move VM, XRPL adopts a different technological approach. It uses a Hooks system based on WebAssembly, which is a lightweight transaction logic program.

Hooks System

Hooks is XRPL's unique answer to Smart Contracts. Interestingly, they are currently running on the Xahau network (a fork of XRPL) instead of the XRPL Mainnet. Hooks can add additional logic before and after transactions, such as:

Preventing fraudulent payments

Auto Save XRP

Add carbon offset to trading

It is worth mentioning that Uniswap v4 also adopts similar hooks mechanism, which can add additional functions before and after the transaction, and support limit order and other features.

EVM Sidechain: Extending the XRPL Ecosystem

Although XRPL already has native AMM functionality, supporting Liquidity provision and cross-token transactions, Ripple is developing an EVM Sidechain to enable more efficient capital flow between other chains and Decentralized Finance applications.

Key Features

Currently in the testing phase

Expected to go live in a few months

XRP will be used as gas Token

Using Axelar as a cross-chain bridges integration solution

Community controversy

There are differences in the technical roadmap within the XRPL community:

Some people want to implement Hooks functionality on the Mainnet.

There are doubts about the necessity and role of EVM Sidechains

What is worth following is that the bridge between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar may become an important beneficiary.

Future Outlook

XRPL is evolving towards modularity, which represents an important technological turning point. The development trend of EVM sidechains will be a focus worth following, and it may bring new application scenarios and development opportunities to XRPL.

These technological innovations will bring more possibilities to XRPL, especially in the application of Decentralized Finance. With the continuous development of the ecosystem, we may see more innovative application scenarios emerge.

XRP Trading MEME coin complete guide

XRPL has built-in Automated Market Maker (AMM) functionality, currently primarily used for Meme coin trading.

Approximately 14 million XRP coins were deposited into the AMM pool. Although the TVL is relatively low, the volume continues to rise due to the Meme coin craze. (The locked amount in the pool can be viewed through XRP Scan.)

Trading Basics

Wallet selection

Visit the First Ledger website, you can create a Wallet through Telegram, or directly create and save the Secret Key locally in the browser.

In addition, you can also try the mobile Xaman Wallet. It works well, and you can import the Secret Key between these two Wallets to see which one suits you better.

Get XRP

Purchase or use Simpleswap cross-chain bridges from a Centralized Exchange.

Trading Platform

First Ledger (Entry Preferred) Token list is updated in real time, supporting sorting by 24h volume, Market Cap, number of holders, and creation time.

xMagnetic (advanced platform) provides Token discovery, Liquidity provision, and data analysis functions, recommended for use with Xaman Wallet.

Sologenic DEX can be used as an alternative trading platform, but the user experience may not be as good as the above-mentioned platforms. It is recommended to use Xaman Wallet together with xMagnetic.

Risk Warning

Most Meme coins are controlled by a few Wallets, with the top 10 Wallets holding over 40% of the supply. Pump.fun is indeed needed on XRPL to make token issuance more fair. Follow early projects, pay attention to volume, check the distribution of holders, and be cautious about new coins.

Investing in MEME coin requires caution, risk management, and thorough research. Remember: be sure to understand the fundamentals of the project before trading to avoid impulsive investment.