In the past, many have argued whether or not the XRP token was deflationary or not. In support of the former, pro-XRP crypto analyst Panos Mekras has provided data that suggests that the token has deflationary characteristics.ย
Number Of Tokens Burned So Far
In a tweet shared on his X (formerly Twitter) platform, Mekras referenced another tweet showing that over 11 million tokens had been burned. This stat undoubtedly suggests that the token is deflationary since its total supply has decreased over time due to the burn mechanism.
However, another X user (@hasen_van) argued that the token was only deflationary in โrespect to all XRP in existenceโ and that the token will continue to be inflationary as long โas Ripple keeps on selling into the open market.โ
true with respect to all XRP in existence, but from a holders point of view โ given that mostly all exchanges are using circulating supply (x price) to measure market cap, XRP is inflationary as long as ripple keeps on selling into the open market. #fridayfacts
โ VanHasen (@hasen_van) October 6, 2023
In response, Mekras tried to correct the belief that some XRP tokens were not yet โin existenceโ as he stated that XRPโs total supply of 100 billion has existed since โday 1,โ meaning that 100% of its supply has been circulating from the beginning and some XRP tokens cannot be classified as โnon-existentโ yet.ย
This debate seems to stem from the fact that Ripple has an escrow system in place. As such, some (like VanHansen) believe that the XRP in escrow lockups does not fall under its circulating supply and that this escrow system affects XRPโs deflationary status. However, people like Mekras argue that the escrow system doesnโt change the fact that the token is deflationary.
VanHansen further argued that the token cannot be deflationary (except technically) as XRPโs circulating supply gets inflated every time โRipple releases XRP from the escrow.โ Both sides seemed to look at it from different angles, with Mekras abiding by what deflationary meant in the strict sense while VanHansen was trying to provide a context.ย
Bulls continue to fight to hold support | Source: XRPUSD on Tradingview.com
Is XRP Deflationary Or Not?
It is worth mentioning that the XRP Ledger doesnโt exactly have a built-in mechanism to decrease the tokenโs total supply, unlike some other networks. For instance, Ethereum implemented the London hard fork, which introduced a fee-burning mechanism with some Ether burned immediately after processing a transaction.
Related Reading: When Are AMMs Coming To XRP Ledger? Ripple CTO Gives Clear Answer
However, in XRPโs case, these token burns have occurred coincidentally rather than being a deflationary model on the network. In July, an engineer at Ripple explained that the monumental increase in the burn rate was mostly because of the XRPL account deletions. He mentioned that 2 XRP are usually burned when an account is deleted.ย
He further noted that 85,556 old accounts on the Ledger were deleted in June, which led to over 100,000 XRP being burned. Hence, the burned token figure rises every time an account is deleted.
Featured image from Facts.net, chart from Tradingview.com
