Understanding the Differences Between XRP, NFTs, and XLS

XRP, as the native token on the XRP Ledger (XRPL), is a fungible token, meaning each individual XRP is identical. When sending 1 XRP to David Schwartz, there is no way for him to differentiate it from the other XRP in his wallet. The power of the XRPL lies in its ability to efficiently issue various fungible tokens, enabling cost-effective and straightforward token creation.

On the other hand, NFT stands for non-fungible token, where uniqueness is the defining factor. Although the XRPL wasn’t originally designed for NFTs, it gets intriguing when an XRPL NFT project introduces fungible tokens on the blockchain, like the example of XPUNKS. They issued 5,000 identical fungible $XPUNKs, each precisely divisible up to 15 decimal places, 0.000000000000001.

However, owning such a tiny fraction of $XPUNK doesn’t grant you a full XPUNK NFT in the future (you need to hold at least 0.5 $XPUNK). To address this, the XLS-14d and XLS-20d come into play.

XLS stands for ‘XRP ledger standards,’ representing proposals for the XRPL put forth by various parties to be discussed, debated, and potentially implemented. These proposed ledger standards are sequentially numbered from XLS-1, XLS-2, XLS-3, and so on. The ‘d’ in XLS-14d and XLS-20d indicates that these protocols have not yet been adopted.

If you are curious about these protocols, you can explore all proposed XRP ledger standards on Github. These standards play a crucial role in shaping the future integration of NFTs and enhancing the functionality of the XRPL.

How does the XLS-14d protocol work?

The XLS-14d, proposed by XUMM founder and XRPL developer @WietseWind, was a protocol intended to enable the issuance of a unique token on the XRPL with the properties of an NFT. The concept involved issuing a minuscule amount of a fungible token, resulting in a token that was indivisible and possessed non-fungible attributes. The fraction used for this purpose was an incredibly tiny number with more than 15 decimal places.

While the implementation of this protocol was successful, it came with certain consequences. As I mentioned earlier, the XRPL can precisely divide issued tokens up to 15 decimal places. However, the basic infrastructure of the XRPL was not designed to handle such incredibly small fractions of a token. Consequently, the XLS-14d tokens encountered issues in the Decentralized Exchange (DEX) built into the XRPL, leading to rounding errors within the system.

Due to these challenges and the mishandling of tokens on the XRPL, @WietseWind has decided to step back from his protocol. As a result, the XLS-14d remains labeled as ‘DEPRECATED’ and is unlikely to be adopted in the future. The experience with this protocol sheds light on the complexities and considerations involved in integrating NFT-like properties into the XRPL and highlights the need for careful design and development to ensure seamless functionality within the network.

The challenge with unadopted protocols like the XLS-14d lies in their lack of universal standardization. This means that while I could issue an XLS-14d ‘NFT’ associated with a SuperEagle, XPUNK, or Happy Cat, the metadata generated during issuance would not be universally recognized by other users on the blockchain. This lack of standardization creates difficulties in interpreting the semantics beyond the scope of the issued NFT’s metadata, limiting scalability to the desired extent.

Despite these drawbacks, some basic functions, such as sending and receiving XLS-14d tokens, are still available and do not compromise the security of your XRP wallet when used. However, the absence of standardized protocols for NFTs on the XRPL poses challenges in establishing a cohesive and widely accepted framework for NFT issuance and interoperability within the network. As the landscape of blockchain and NFTs continues to evolve, addressing these standardization issues becomes crucial for seamless integration and broader adoption of NFTs in the XRPL ecosystem.

Why do we need the XLS-20d protocol?

The XLS-20d, proposed by cryptographer @nbougalis, aims to introduce NFTs to the XRPL with a significant difference from the XLS-14d protocol. Rather than creating tiny fractions of an XRPL token, the XLS-20d proposes the creation of a separate token type called ‘NFToken’ explicitly designed for NFTs.

However, implementing this new token type requires changes to the underlying XRPL systems. For example, dedicated NFToken pages will be created to store each NFT, and users will be able to make offers to buy NFToken-based NFTs. These changes necessitate voting by validators to ensure they don’t adversely affect the XRPL’s overall stability.

If the proposal is successfully passed, developers will gain access to essential NFT functionalities like minting, trading, burning of tokens, setting automatic royalties, and co-ownership. The XLS-20d is currently undergoing testing on the XRPL testnet, and if all goes well, it will be integrated into the mainnet as the fully adopted XLS-20.

The potential integration of the XLS-20d into the XRPL mainnet promises exciting opportunities for the platform’s users. By enabling NFT functionalities, it will foster a closer relationship between artists, creators, developers, and investors, fostering a thriving community.

While XLS-14d is not considered dangerous to the XRPL, it is not perceived as the future. The XLS-20d, on the other hand, holds promise for the XRPL’s future, and if implemented successfully, it may bring significant advancements and innovations to the platform. As the XRPL evolves and explores new possibilities, the XLS-20d stands as a potential step towards enhancing its capabilities and offering new opportunities for its users.