While XRP is the primary and native token of the XRP Ledger (XRPL), several other crypto tokens have been developed on the highly scalable and low-cost blockchain network.
In a tweet today, Zack Rector, a widely followed crypto enthusiast and content creator, inquired to know what backs XRP besides Ripple, the leading crypto solutions company and cross-border payment firm headquartered in San Francisco, United States.
“Do XRPL Tokens “back” XRP?” he asked the hopeful XRP community. Notably, to back XRP here means to give financial, material or moral support to the 6th-largest cryptocurrency by market capitalization, according to Rector.
This question got mixed reactions from the XRP Army as opposing answers flooded the comment section of the tweet. Whereas some opinionated that tokens built on the XRP Ledger do not give any form of financial, material or moral support to XRP, others including David Schwartz upheld that XRPL-based tokens provide a multifaceted form of backing to XRP.
In particular, a pseudonymous member of the XRP community stated categorically that XRPL-based tokens do not back XRP; instead, they are in direct competition with XRP. However, the user pointed out that they have only one benefit to the sixth-largest cryptocurrency which is employing XRP as fees.
Rippleitin said, “the single benefit they give to XRP is that they have to use XRP for fees, which are negligible. Both XRP and the XRPL token are after the same thing —Your dollar.”
In stark contrast, Ripple Chief Technology Officer David Schwartz submitted that XRPL-based tokens pose several benefits to XRP, particularly in the aspect of Automated Market Makers (AMM). Secondly, he highlighted that tokens built on XRPL help to boost the liquidity of XRP.
According to Schwartz, they offer this benefit via the auto-bridging feature which allows offers in the XRPL decentralized exchange to swap two XRPL-based tokens by potentially using XRP as an intermediary currency in a synthetic order book.
“I don’t think that’s quite the only benefit. They tend to increase the liquidity of XRP both because of autobridging and because of XRP’s position as the only asset that has no issuer and that everyone holds. And soon because of AMMs too,” Schwartz wrote.
Coincidentally, this is the second time Schwartz has countered Rippleitin. As published, the XRP community member asserted that XRP cannot function as collateral for loans but the Ripple CTO disputed, stating that XRP is a good collateral tool just like stocks and gold.
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