“It’s a Source of XRP Demand”

The Chief Technology Officer (CTO) of Ripple, David Schwartz, has drummed support for the Burn2Mint approach from Xahau, admitting that it could be a source of demand for XRP.

Xahau, a sidechain on the XRP Ledger (XRPL) to enable smart contracts, recently launched with its native token, XAH. XRPL Labs, the team behind Xumm, is also behind the project, pushing it as an early access to Hooks.

However, there have been reservations among some users regarding the requirement to permanently burn their XRP tokens in exchange for XAH, in a process termed Burn2Mint. It’s important to note that this process is irreversible, resulting in the permanent loss of XRP.

Ripple CTO Explains the Rationale Behind Burn2Mint

Amid these concerns, David Schwartz, one of the XRPL’s original architects, has publicly endorsed Xahau’s Burn2Mint approach. Taking to X, Schwartz highlighted the rationale and benefits of the method. He also clarified that it is not the primary means of acquiring XAH.

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According to Schwartz, the primary sources for acquiring XAH will include airdrops, rewards for mints, initial grants, airdrops centralized and decentralized exchanges. Burn2Mint is a contingency option to ensure that individuals with XRP can also obtain XAH early in a decentralized and secure manner.

There are a lot of advantages to their approach though.

First, it’s important to understand that the idea is not that burn2mint will be the primary way people get XAH. People will primarily get XAH from the initial grants, from airdrops, from subsequent reward mints, from…

— David “JoelKatz” Schwartz (@JoelKatz) November 1, 2023

Schwartz also argued that Burn2Mint will establish a minimum price for XAH, preventing users from paying more for XAH than they would for burning XRP. Additionally, he posited that Burn2Mint mitigates potential challenges that could hinder Xahau’s launch, such as a shortage of XAH supply or liquidity issues.

Furthermore, the Ripple CTO explained why Xahau opted for Burn2Mint over a two-way bridge solution. A two-way bridge would necessitate a custodian entity to hold bridged assets on the XRPL, introducing technical and legal complexities and associated risks. Burn2Mint circumvents these complications.

Schwartz also addressed concerns of XRP holders who may hesitate to commit their tokens to acquire XAH. He noted that if Burn2Mint remains unused, it will not impact them. However, if implemented, it will diminish the supply of XRP and create a demand for it, potentially benefiting these holders.

“As an XRP holder, you should be pretty happy about it. If Burn2Mint is not used, it doesn’t really affect you. To the extent it is used, it reduces the supply of XRP and is a source of demand for XRP. Why should you object to that?” Schwartz remarked.

Schwartz concluded by emphasizing that his views are personal and may not align with those of the Xahau team. He acknowledged the possibility of misunderstanding or errors in his assessment of certain aspects of the project. Notably, XRPL Labs founder Wietse Wind endorsed his explanation.

Thank you, I couldn’t have said it better myself 🤗

— WietseWind (🛠+🪝 Xumm @ XRPL Labs) (@WietseWind) November 1, 2023

Xahau and Its Effects on XRP Supply

Xahau is one of the first sidechains to launch on the XRPL, promising to enhance functionality and scalability. The project asserts its capability to deliver swift, cost-effective, and secure transactions while allowing users to leverage Hooks for smart contracts.

Meanwhile, amid the Burn2Mint commentaries, Krippenreiter, a community figure, predicted that not many market participants would leverage the mechanism. According to him, users might only burn less than 1% of XRP’s supply to procure XAH.

“The reason for this is that ordinary users/investors (like me & you) have no real incentive to b2m our XRP for XAH right now & will most likely trade on a CEX or DEX instead of burning coins in the future,” he stressed.

In a subsequent remark, he cited data from onledger.net, highlighting a 44,742 XRP burn on Nov. 1, with just 0.0177 of XRP supply burned.

The burning process has begun, and we are now at 0.0117% of the initial XRP burnt.

Let’s see how close we can go to my <1% estimate. 😉 https://t.co/Ijp1kGJGIW pic.twitter.com/VKxQhybsoF

— Krippenreiter (@krippenreiter) November 1, 2023

Interestingly, a user burned 40,000 XRP in a single transaction yesterday, presumably to procure XAH. Currently, the easiest way to burn XRP for XAH is through Bitrue.