In a recent conversation, Ripple’s Chief Technology Officer (CTO), David Schwartz, discussed the broader role of XRP within the XRP Ledger (XRPL) ecosystem, highlighting its significance beyond acting solely as a gas token.
XRP as a Gas Token
During the conversation with Saul, an active member of the XRP community, the concept of XRP as a “gas token” was explored. This term refers to the native cryptocurrency that powers transactions and operations on a blockchain network.
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Saul referenced the gas token theory introduced by Digeratis, which suggests that XRP’s primary purpose is to serve as the fuel for the XRPL. In this context, XRP’s role is similar to the gas used in other blockchain networks to facilitate transactions and execute smart contracts.
It turns out that @Digeratis1' "gas token theory" was right all along
XRP is simply the gas token of the XRPL; nothing more, nothing less
This was presented as part of a negative outlook on price, but I see it in the opposite light
— Saul 🏴☠️ (@uptownsaul) July 20, 2023
Contrary to the negative connotations associated with this perspective, Saul viewed XRP’s role as a gas token in a positive light. He agreed with Digeratis’ theory that the XRPL was designed to tokenize other assets, with XRP functioning as the gas token for the movement of these assets.
We are on twitter, follow us to connect with us :- @TimesTabloid1
— TimesTabloid (@TimesTabloid1) July 15, 2023
Efficiency and Price Impact
Saul highlighted the XRPL’s high efficiency, suggesting that transaction volumes on the network might not significantly impact the price of XRP as some believe. Due to the XRPL’s consensus mechanism, which relies on trusted validators instead of miners, transaction processing costs are generally lower compared to networks that use proof-of-work.
Given the efficiency of the XRPL, Saul argued that despite high transaction volumes, the demand for XRP as a gas token may not heavily influence its price. The lower demand for XRP in this context could lead to less significant price fluctuations.
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Ripple CTO’s Perspective
David Schwartz acknowledged Saul’s observation, agreeing that high volumes on the XRPL do not necessarily have to impact XRP’s price significantly. However, he also clarified that it does not rule out the possibility of an impact.
That is absolutely true. But that something doesn't need to happen doesn't mean it won't happen. XRP also has special features (such as autobridging) that makes it extra liquid on XRPL.
— David "JoelKatz" Schwartz (@JoelKatz) July 21, 2023
Beyond its gas token functionality, Schwartz emphasized the unique features that make XRP outstanding on the XRPL. One such feature is “auto-bridging,” which enhances XRP’s liquidity within the network and increases its utility, thereby driving demand.
Autobridging allows for seamless exchange between different assets on the XRPL without requiring individual order books for each asset pair. This feature leverages XRP to improve liquidity across all currency pairs on the XRPL, further solidifying its role and utility within the ecosystem.
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