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Ripple’s RLUSD Sparks Debate—Why It Won’t Overshadow XRP

Ripple’s RLUSD Sparks Debate—Why It Won’t Overshadow XRP

DailyCoinDailyCoin2024/10/11 07:40
By:DailyCoin
  • Ripple’s RLUSD stablecoin launch has sparked debate on XRP’s future.
  • XRP supporters are worried RLUSD will reduce XRP’s cross-border role.
  • Ripple’s CTO has assured XRP’s unique XRPL functions remain irreplaceable.

Ripple is gearing up for the release of its RLUSD stablecoin, which is currently in beta testing and set to go live soon. With RLUSD being integrated across both the XRP Ledger (XRPL) and Ethereum , many are eager to see how this new asset will support Ripple’s On-Demand Liquidity (ODL). 

However, not everyone is celebrating. A segment of the XRP community is raising concerns over whether RLUSD’s introduction might overshadow XRP’s pivotal role, particularly in cross-border payments.

Ripple’s XRP an Irreplaceable Role on the XRPL

The heart of the debate revolves around whether RLUSD could dampen XRP’s relevance. David Schwartz , Ripple’s Chief Technology Officer, quickly stepped in to calm these fears, making it clear that while RLUSD may offer certain advantages, it cannot fully replace XRP. He pointed out that XRP holds unique functions on the XRPL that no other asset can fulfill. 

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For example, XRP is the only currency that can pay transaction fees on the XRPL, and every account on the ledger is required to hold a minimum balance of XRP as a reserve. Schwartz emphasized that XRP’s competitive edge lies in its lack of counterparty risk and freedom from jurisdictional control—advantages that stablecoins like RLUSD do not share. 

XRP’s decentralized nature allows it to operate without the potential restrictions or risks tied to a specific institution or jurisdiction, which is not the case for stablecoins. This makes XRP a safer bet for some users.

Another unique feature is XRP’s “autobridging” capability, which allows it to seamlessly connect liquidity between different assets on the XRPL. 

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

This function further solidifies XRP’s place in the ecosystem as a transactional asset and a bridge that facilitates asset transfers across platforms.

Ripple’s RLUSD vs. XRP’s Core Functions

Even though RLUSD might bring efficiency in certain areas, Schwartz acknowledged that XRP could face some competition from stablecoins. But with its unique features, XRP remains hard to displace. 

It's not up to me, it's a consensus decision. But I have personally never felt that we should use fees to try to increase XRP's scarcity. IMO, the ledger belongs to, and should serve, those who use it, not those who hold XRP for passive gain. But smart contracts may result in…

— David "JoelKatz" Schwartz (@JoelKatz) October 8, 2024

Still, the advantages XRP brings to the table, including its autobridging function and decentralized nature, make it a critical tool in Ripple’s ecosystem. Some members of the XRP community have suggested increasing transaction fees or raising the minimum XRP balance required on the XRPL to boost XRP’s scarcity and, theoretically, its value. 

However, Schwartz cautioned against making these changes lightly. He argued that any such adjustments would require consensus from the community and stressed that the XRPL should remain focused on usability, not merely speculative value.

Ripple’s broader strategy, including its work on new features like the EVM sidechain and the introduction of smart contracts, aims to enhance XRPL’s capabilities while ensuring that XRP retains its central role.

On the Flipside

  • While RLUSD’s efficiency could challenge XRP, it lacks XRP’s unique edge of having no counterparty risk or jurisdictional constraints.
  • Some community suggestions to increase XRP’s scarcity, such as raising transaction fees, could harm the XRPL’s usability.
  • Stablecoins may complement, but not entirely replace, XRP’s autobridging function and liquidity role in the Ripple ecosystem.

Why This Matters

Ripple’s launch of the RLUSD stablecoin introduces new layers to the XRP ecosystem but raises questions about XRP’s future role. The continued focus on innovation, particularly with features like smart contracts and sidechains, aims to ensure that XRP remains irreplaceable. 

Despite recent awards, Ripple faces challenges with its cryptocurrency XRP. To learn more about the reasons behind the price volatility, read here:
Ripple Secures Top Fintech Award Amid Poor Market Performance

Coinbase is using the Ripple case to argue for more clarity on cryptocurrency regulation. To learn more about this legal battle, read here:
Ripple Appeal Fuels Coinbase’s Fight for Howey Test Clarity

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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