- Liquidity on the XRP Ledger (XRPL) will be enhanced through interoperable Automated Market Maker (AMM) pools.
- XRP’s price must rise to facilitate the trillions in settlement needed for daily global transactions.
- The true circulating supply of XRP is much lower than commonly reported, significantly impacting its market dynamics.
The XRP Ledger is poised for a big boost in liquidity, while a spate of upcoming Automated Market Maker pools is soon expected. When RLUSD goes live, financial institutions as small as banks or as large as governments will be able to use their own tokens, fiat, or CBDCs and pool with RLUSD.
According to researcher Crypto Tank, those kinds of pools will be interoperable with each other through the Interledger Protocol for smoothly conducting transactions among different financial networks. Such architecture solves some of the main challenging points in the financial world: lack of liquidity, market depth for settlements, and counterparty risk.
Pairing any other currency with RLUSD provides for a more stable structure that would not easily suffer from massive price fluctuations during transactions. Using ILP, these liquidity pools will be interconnected on XRPL to give the depth needed to facilitate such high-volume transactions amounting to trillions each day. Adding the XRP as a bridge asset further fortifies this system in the facilitation of the transactions.
Scalability via ILP for Trillions in Transactions
The Interledger Protocol is Ripple’s creation with the aim of solving the scalability capabilities of the XRPL, which was designed to process global-scale transactions. Presently, XRPL processes 1,500 TPS. ILP aimed at connecting different networks and increasing TPS to prepare XRPL for trillions in daily transaction volume when banks and governments start settling on the ledger.
When the system is at full-scale use, Ripple will leverage ILP to improve transaction throughput and guarantee smooth settlements between different currencies and assets. RLUSD goes right to the heart of this strategy, considering the eventual goal of Ripple to process global liquidity at scale.
Circulating Supply of XRP Much Lower Than Expected
The actual amount in use for the settlement of transactions is way lower than the number reported in circulation, which is 56 billion XRP. The supply on the ledger does not take into account the huge amounts held by financial institutions or locked in escrow. With over 1,700 agreed Non-Disclosure Agreements, Ripple says that the true circulating supply could be between 10 and 20 billion XRP.
The approach to get such supply would mean the price of XRP shall have to be much higher to provide the needed liquidity for such huge-volume transactions. In the future, as more assets, including tokenized real estate and debt, can come into the XRPL ecosystem, the value of XRP will need to be appreciated with the growing use cases in order to ensure frictionless operations and prevent transaction failures.
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