Money in the XRP Ledger
Money in the XRP Ledger
The XRP Ledger is an advanced blockchain-like system that was designed to let people transact in multiple currencies. Users of the XRP Ledger can seamlessly track, trade, and settle multiple currencies in an exchange that's as decentralized as the network itself. Users can issue their own currency-like digital assets, which may or may not represent obligations owed outside the XRP Ledger. Tying it all together is XRP, the XRP Ledger's native cryptocurrency, which acts as a medium of exchange and serves anti-spam purposes.
XRP is the native cryptocurrency of the XRP Ledger. All accounts in the XRP Ledger can send XRP among one another and must hold a minimum amount of XRP as a reserve. XRP can be sent directly from any XRP Ledger address to any other, without needing a gateway or liquidity provider. This helps make XRP a convenient bridge currency.
Some advanced features of the XRP Ledger, such as Escrow and Payment Channels, only work with XRP. Order book autobridging uses XRP to deepen liquidity in the decentralized exchange by merging order books of two issued currencies with XRP order books to create synthetic combined order books. (For example, autobridging matches USD:XRP and XRP:EUR orders to augment USD:EUR order books.)
XRP also serves as a protective measure against spamming the network. All XRP Ledger addresses need a small amount of XRP to pay the costs of maintaining the XRP Ledger. The transaction cost and reserve are neutral fees denominated in XRP and not paid to any party. In the ledger's data format, XRP is stored in AccountRoot objects.
For more information on XRP's use cases, benefits, and news, see the XRP Portal.
The very first ledger contained 100 billion XRP, and no new XRP can be created. XRP can be destroyed by transaction costs or lost by sending it to addresses for which no one holds a key, so XRP is slightly deflationary by nature. No need to worry about running out, though: at the current rate of destruction, it would take at least 70,000 years to destroy all XRP, and XRP prices and fees can be adjusted as the total supply of XRP changes.
In technical contexts, XRP is measured precisely to the nearest 0.000001 XRP, called a "drop" of XRP. The
rippled APIs require all XRP amounts to be specified in drops of XRP. For example, 1 XRP is represented as
1000000 drops. For more detailed information, see the currency format reference.
All currencies other than XRP are represented as issued currencies. These digital assets (sometimes called "issuances" or "IOUs") are tracked in accounting relationships, called "trust lines," between addresses. Issued currencies are typically considered as liabilities from one perspective and assets from the other, so the balance of a trust line is negative or positive depending on which side you view it from. Any address may freely issue (non-XRP) currencies, limited only by how much other addresses are willing to hold.
Issued currencies can "ripple" through multiple issuers and holders if they use the same currency code. This is useful in some cases, but can cause unexpected and undesirable behavior in others. You can use the NoRipple flag on trust lines to prevent those trust lines from rippling.
Issued currencies can be traded with XRP or each other in the XRP Ledger's decentralized exchange.
In the typical model, an issued currency is tied to holdings of currency or other assets outside the XRP Ledger. The issuer of the currency, called a gateway, handles deposits and withdrawals to exchange currency outside the XRP Ledger for equivalent balances of issued currency in the XRP Ledger. For more information on how to run a gateway, see the Gateway Guide.
There are other use cases for issued currencies in the XRP Ledger. For example, you can create an "Initial Coin Offering" (ICO) by issuing a fixed amount of currency to a secondary address, then "throwing away the key" to the issuer.
Warning: ICOs may be regulated as securities in the USA.
Ripple strongly recommends researching the relevant regulations before engaging in any financial service business.
Issued Currency Properties
All issued currencies in the XRP Ledger exist in trust lines, represented in the ledger's data as RippleState objects. To create an issued currency, the issuing address sends a Payment transaction to an address which has a trust line to the issuer with a nonzero limit for that currency. (You can also create issued currency by rippling "through" such a trust line.) You can erase issued currency by sending it back to the issuer.
The issuer of a currency can define a percentage transfer fee to deduct when two parties transact in its issued currencies.
Addresses can also freeze issued currencies, which may be useful for businesses to comply with financial regulations in their jurisdiction. If you do not need this feature and do not want to freeze currencies, you can give up your address's ability to freeze individual trust lines and to undo a global freeze. XRP cannot be frozen.
Issued currencies are designed to be able to represent any kind of currency or asset, including those with very small or very large nominal values. For detailed technical information on the types of currency codes and the numeric limits of issued currency representation, see the currency format reference.