What is a Trustline?

A trustline is a fundamental feature of the XRP Ledger, commonly used by developers who create or issue new tokens on the XRPL. These tokens can either be IOU tokens, representing the same value as the underlying asset, or tokens with their own unique utility. To hold and recognize these tokens in your wallet, establishing a trustline is essential.

Understanding Trustlines in Practice

Imagine James issuing an XPUNKS token on the XRPL. When you purchase XPUNKS, you enter into an agreement with James, placing trust in his ability to deliver the corresponding asset. This trust is established through a trustline. You and James both agree that when you provide him with the required XRP (credit) and have signed a trustline with the issuing address, James will owe you an XPUNKS token (asset) in return.

The Role of Trust in Token Ownership

When holding a token in your wallet, you inherently rely on trust in the token issuer’s ability to fulfill their credit obligations. Consequently, users of XRP are cautious about whom they trust as an issuer. Before being able to hold the issuer’s credit, you must place trust in the token developers or issuers.

Practical Implementation: Creating a Trustline

Connecting a trustline is the practical step to establish trust in the token issuing account. Often, the token issuer account is controlled by the developer team, and their wallet addresses may be displayed in the project’s whitepaper. To buy a token on the XRPL and hold it in an online wallet like XUMM, creating a trustline is imperative. Trustlines monitor the limit to which your account trusts the issuing account and the amount of credit from the issuing account held in your account.

Example: Connecting an XPUNK Trustline via XUMM

To establish your wallet’s connection, press ‘confirm.’

Next, sign the connection by opening the XUMM app and scanning the QR code.

Once completed, your wallet is ready to receive XPUNK in your possession.

This trustline process applies to various projects, allowing you to securely hold and trade different tokens on the XRPL. By effectively managing trustlines, users can engage confidently with the diverse world of cryptocurrencies on the XRP Ledger.