Ripple CTO says Only XRP Can Be Used For This Function, Confirms XRP Won’t Be Replaced by RLUSD

The Ripple CTO addresses concerns around the potential impact of the Ripple stablecoin, RLUSD, on the role of XRP in the ecosystem. 

The stablecoin, expected to launch in the coming weeks, could be used for On-Demand Liquidity (ODL) in certain areas, among other potential applications. Still in its beta testing phase, Ripple has minted millions of tokens on the XRP Ledger (XRPL) and Ethereum.

Concerns Around the RLUSD

However, as the launch draws nearer, some community members worry that RLUSD may replace XRP in utility, particularly in areas where XRP has long played a significant role.

Most recently, an XRP enthusiast directly addressed these concerns to Ripple’s CTO, David Schwartz. The investor questioned whether RLUSD would be a net positive for XRP.

This is considering the belief that RLUSD could perform up to 70% or more of XRP’s current functions, particularly in cross-border payments. The enthusiast expressed feelings of uncertainty and frustration, worried that the upcoming stablecoin could sideline XRP.

Ripple CTO Affirms XRP Utility

In response, David Schwartz reassured the community that XRP’s role on the XRP Ledger (XRPL) remains central and irreplaceable. He stressed that network participants can only use XRP to pay transaction fees on the XRPL, a unique function that no other asset, including RLUSD, can perform. 

Only XRP can be used to pay transaction fees on XRPL. Everyone who transacts must have XRP to pay those fees. XRP is the only asset that every account can hold and that has no counterparty or jurisdiction and cannot be frozen or clawed back. XRP has structural advantages on XRPL…

— David “JoelKatz” Schwartz (@JoelKatz) October 8, 2024

Also, every account on the XRPL is required to hold XRP as reserve. Furthermore, Schwartz highlighted that XRP stands apart because it has no counterparty risk, cannot be frozen, and has no jurisdictional limitations, which offers advantages over any stablecoin.

Schwartz also mentioned a key structural feature that gives XRP an edge on the XRPL: autobridging. This feature, which allows XRP to automatically connect liquidity between different assets, strengthens its utility in the ecosystem. 

This makes XRP more than just a transaction fee payment method. Notably, it acts as a central bridge asset that helps facilitate liquidity and value transfers across different currencies and digital assets.

However, Schwartz acknowledged that if a stablecoin like RLUSD or another one proves to be more efficient in performing most of XRP’s functions, then XRP could indeed lose some of its utility. He admitted that in such a scenario, XRP could face competition from stablecoins, irrespective of the specific impact of RLUSD.

Increasing Fees to Boost XRP Scarcity

In response, another community member asked Schwartz if he would consider raising fees on the XRPL, and possibly increasing the minimum 10 XRP required to open a wallet on the XRPL.

The question stemmed from a belief that increasing transaction fees or the minimum XRP wallet balance could drive up scarcity and potentially boost the altcoin’s value. For context, the XRPL automatically burns fees in XRP, having so far burned 12.9 million XRP since inception.

Schwartz clarified that the decision to increase fees or the minimum balance is not his alone. These matters are subject to a consensus process within the XRP Ledger ecosystem. 

However, the Ripple CTO personally opposed the idea of using higher fees to create artificial scarcity for XRP. He explained that the XRPL should prioritize serving its users, rather than focusing on generating passive gains for XRP holders. 

He believes the ledger should exist to provide utility to users who actively engage with it, rather than catering to speculative investors.

Despite his stance on fees, Schwartz noted that smart contracts on the XRPL could eventually lead to higher transaction fees. Recall that Ripple recently confirmed plans to introduce programmability on the XRPL through its EVM sidechain and a native smart contracts mechanism.