XRP In-Depth Analysis: A Guide to Trading from Technology to Meme Coins

Original Author: Ignas | DeFi Research

Compiled by: Yuliya, PANews

In the current cryptocurrency market, a remarkable phenomenon is unfolding: XRP has surged 3.5 times in just one month, with a market cap even surpassing Solana. This dramatic market performance once again confirms the unpredictability of the cryptocurrency market.

Although XRP has always been controversial within the cryptocurrency community, market choices often transcend personal biases.

With the booming development of the meme coin market, the XRP ecosystem may become an important battleground for a new wave of speculative frenzy.

This article will delve into the operational mechanisms of the XRP Ledger (XRPL), token trading methods, core concepts, and directions for in-depth research.

What is XRPL?

XRP Ledger prides itself on being a blockchain platform that pursues speed and efficiency.

However, in reality, it is not optimal in terms of speed, decentralization, and efficiency (especially the efficiency aspect remains highly debated).

Unlike blockchains that use PoW or PoS, XRPL employs a federated consensus mechanism, where validators reach transaction consensus without mining or staking.

The specific operational mechanism is as follows:

The entire network has over 109 validators processing transactions, with 31 trusted validators forming 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, this reliance on UNL actually introduces centralization risks, as Ripple and the XRP Ledger Foundation largely control the selection of the default UNL. New validators typically need approval from Ripple Labs, which is also the origin of the term "federated consensus."

The transaction confirmation time for XRP is 3-5 seconds, whereas Solana far outpaces it in terms of node count, transaction speed, and smart contract capabilities. However, XRP's transaction fees are nearly zero, at just 0.00001 XRP per transaction.

Trust Lines, Reserve Requirements, and the Rippling Mechanism

Wallet Activation and Reserve Requirements

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

Activating an account requires at least 10 XRP as a base reserve. Additionally, for each token held, the system requires an extra 2 XRP to be locked as owner reserve. For example, if holding 20 meme coins, an additional 40 XRP must be locked.

A governance vote is currently underway proposing to reduce these requirements by a factor of ten. Users can check the current specific requirements under the "base reserve" and "owner reserve" tabs on XRP Scan.

Analysis of the Trust Lines Mechanism

Trust Lines are the foundational structure used by XRPL to hold fungible tokens. According to Ripple's official documentation: "Trust lines enforce the rules of XRPL, ensuring that no one is forced to hold unwanted tokens. This precaution is crucial for use cases such as community credit on XRPL."

The core values of Trust Lines include:

• Preventing the forced reception of junk tokens

• Allowing for freezing and authorization controls

• Supporting the "No Ripple flag" to prevent accidental balance adjustments

When a token issuer creates a token, their balance may become negative, indicating the amount issued, while the holder's balance remains positive. For instance, after the issuer sends 100 tokens, their trust line balance is -100, and the receiver's balance is +100.

Detailed Explanation of the Rippling Mechanism

Rippling (which is also the origin of the name Ripple) further expands this concept, allowing token balances to flow automatically through connected accounts during payments. This is a passive exchange system that achieves atomic settlement without the issuer's involvement.

For example: If Alice owes Bob $10, and Bob owes Charlie $10, the rippling mechanism allows Alice to pay Charlie directly while automatically adjusting all trust line balances.

This design is similar to a double-entry bookkeeping system, primarily used for:

• Achieving efficient net settlement

• Supporting real-world assets (RWA)

• Stablecoin trading

• Tokenized goods

• Cross-border payments

This design grants asset issuers greater control. Particularly regarding compliance requirements, authorized Trust Lines issuers can enable the "Require Auth" flag, restricting token ownership to approved accounts. This makes XRPL particularly suitable for assets that require strict KYC/AML regulation.

While this centralized control may attract criticism from decentralization advocates, it is precisely this unique advantage of XRPL in specific application scenarios.

Understanding how Rippling works, users can choose to enable or disable this feature based on their needs:

Enabling Rippling is suitable for:

• Users who want their accounts to be part of the payment path

• Accounts acting as intermediaries, such as market makers or exchanges (it is currently uncertain whether fees can be earned through this feature)

Disabling Rippling is suitable for:

• Users who do not want their balances to be used in the payment path

• Ordinary users who want to protect their assets from accidental adjustments

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

Technological Evolution of XRPL: From Hooks to EVM Sidechains

Compared to Ethereum's EVM, Solana's SVM, or Aptos's Move VM, XRPL has adopted a different technological route. It uses a WebAssembly-based Hooks system, which is a lightweight transaction logic program.

Hooks System

Hooks are XRPL's unique answer to smart contracts. Interestingly, they currently run on the Xahau network (a fork of XRPL) rather than the XRPL mainnet. Hooks can add additional logic before and after transactions, such as:

• Preventing fraudulent payments

• Automatically saving XRP

• Adding carbon offsets to transactions

It is worth mentioning that Uniswap v4 also employs a similar hooks mechanism to add extra functionalities before and after transactions, supporting features like limit orders.

EVM Sidechains: Expanding the XRPL Ecosystem

Although XRPL already has native AMM functionality, supporting liquidity provision and cross-token trading, Ripple is developing EVM sidechains to achieve more efficient capital flow between other chains and DeFi applications.

Key Features

• Currently in the testing phase

• Expected to launch in a few months

• XRP will serve as the gas token

• Using Axelar as the cross-chain bridging solution

Community Controversy

The XRPL community has differing opinions on the technological route:

• Some hope to implement Hooks functionality on the mainnet

• There are doubts about the necessity and role of EVM sidechains

It is noteworthy that the bridging between EVM and XRPL is supported by Axelar. If this ecosystem develops smoothly, Axelar may become a significant beneficiary.

Future Outlook

XRPL is moving towards modularization, representing an important technological turning point. The development trend of EVM sidechains will be a focal point worth watching, as it may bring new application scenarios and development opportunities to XRPL.

These technological innovations will bring more possibilities to XRPL, especially in terms of applications in the DeFi sector. As the ecosystem continues to evolve, we may see more innovative application scenarios emerge.

Complete Guide to Trading Meme Coins on XRP

XRPL has a built-in AMM (Automated Market Maker) function, currently mainly used for meme coin trading.

Approximately 14 million XRP are deposited in the AMM pool. Although the TVL is relatively low, trading volume continues to rise due to the meme coin craze. (The pool's locked amount can be viewed through XRP Scan.)

Getting Started with Trading

1. Wallet Selection

• Visit the First Ledger website, where you can create a wallet via Telegram or directly in the browser and save the keys locally.

• Alternatively, you can try the mobile Xaman wallet. It works well, and you can import keys between these two wallets to see which one suits you better.

1. Acquiring XRP

Purchase from centralized exchanges or use Simpleswap for cross-chain bridging.

3. Trading Platforms

• First Ledger (recommended for beginners) has a real-time updated token list, supporting sorting by 24h trading volume, market cap, number of holders, and creation time.

• xMagnetic (advanced platform) offers token discovery, liquidity provision, and data analysis features, recommended to be used with the Xaman wallet.

• Sologenic DEX can serve as an alternative trading platform, but the user experience may not be as good as the above platforms; it is recommended to use Xaman wallet with xMagnetic.

Risk Warning

Most meme coins are controlled by a few wallets, with common cases showing that 10 wallets hold over 40% of the supply. There is indeed a need for Pump.fun on XRPL to make token issuance fairer. Pay attention to early projects, value trading volume, check holder distribution, and be cautious with new coins.

Investing in meme coins requires caution, proper risk control, and thorough research. Remember: always understand the fundamentals of a project before trading to avoid impulsive investments.