In the past, many have argued whether the XRP token was deflationary or not. In support of the former, pro-XRP crypto analyst Panos Mekras provided data indicating that the token has deflationary characteristics.
Number of tokens burned so far
In a tweet shared on his X platform (formerly Twitter), Mekras referenced another tweet show that more than 11 million tokens had been burned. This statistic undoubtedly suggests that the token is deflationary, as 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 with respect to “all existing XRP” and that the token will remain inflationary as long as “if Ripple continues to sell on the open market.”
That’s true with respect to all existing XRP, but from the holders’ perspective – given that virtually all exchanges use circulating supply (x price) to measure market cap, . #fridayfacts
— VanHasen (@hasen_van) October 6, 2023
In response, Mekras sought to correct the belief that some circulation was. is starting and some XRP tokens cannot yet be classified as ‘non-existent’.
This debate seems to stem from the fact that Ripple is a Escrow system available. As such, some (like VanHansen) believe that the XRP in escrow holds is not part of the circulating supply and that this escrow system affects the deflationary status of XRP. However, people like Mekras argue that the escrow system does not change the fact that the token is deflationary.
VanHansen further argued that the token cannot be deflationary (except technically) because the circulating supply of XRP is inflated every time “Ripple releases XRP from escrow.” Both sides seemed to be looking at it from different angles, with Mekras sticking to what deflationary meant in the strictest sense, while VanHansen tried to provide context.
Bulls continue to fight to hold support | Source: XRPUSD on Tradingview.com
Is XRP deflationary or not?
It is worth noting that the XRP ledger doesn’t exactly have a built-in mechanism to reduce the total supply of the token, unlike some other networks. For example, Ethereum has the London hard forkwhich introduced a fee burning mechanism where a portion of the ether was burned immediately after a transaction was processed.
Related Reading: When Are AMMs Coming to XRP Ledger? Ripple CTO gives a clear answer
However, in the case of XRP, these token burns have happened by chance rather than being a deflationary model on the network. An engineer at Ripple in July explained that the monumental increase in combustion rate was largely due to the XRPL account deletions. He said that usually 2 XRP are burned when an account is deleted.
He further noted that in June, 85,556 old accounts on the Ledger were deleted, leading to more than 100,000 XRP being burned. Therefore, the token burn figure increases every time an account is deleted.
Featured image from Facts.net, chart from Tradingview.com