The Tokenomics of XRP
On the 7th of December, 2017, Ripple Labs completed the lockup of 55 billion XRP in its escrow accounts on the XRP Ledger–XRP’s native blockchain. Since then, a comprehensive strategy has been employed in order to carefully increase the circulating supply whilst maintaining and increasing liquidity. So what are the tokenomics behind this blockchain, and when will all XRP be added to the circulating supply?
The Creation of XRP
On June 2nd, 2012, Arthur Britto, one of the original three developers of the XRPL, brought to existence 100 billion XRP. The original code can still be visited on Github.
Of the 100 billion XRP, 20% was allocated to its founders. In 2017, Ripple locked 55 million XRP into a series of escrows that release a 1 billion XRP each month to the company to provide additional predictability to the XRP supply.
At the end of the month, a new escrow is made for the remaining XRP and a new month is added to the release schedule. For example, in Q3 2021, 3 billion XRP were released out of escrow (one billion each month) in line with prior quarters and the official escrow arrangement. In total, 2.6 billion XRP were returned and subsequently put into new escrow contracts throughout the quarter.
Deflation Of XRP
XRP is slightly deflationary. As a mechanism to protect the XRPL from spam attacks, every transaction carries a small transaction cost, which is then burned. This transaction cost varies depending on the load the transaction puts on the system, or the type of transaction. However, these costs remain very insignificant as the typical payment costs just fractions of a penny—or 0.0003 XRP. Projections show that it will take up to 70,000 years before the XRP supply runs out. It must be noted, however, that amendments can be made to the ledger to adjust transaction costs as well, if ever desired.