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Cryptocurrency News Articles

The Deflationary Model of XRP and How It Could Help Sustain Price Growth Over Time

May 27, 2025 at 04:09 pm

With XRP price showing minimal price movements in recent times, attention has shifted to its deflationary model and how it could help sustain price growth over time.

The Deflationary Model of XRP and How It Could Help Sustain Price Growth Over Time

In recent times, as the price of XRP has shown minimal movements, attention has shifted to its deflationary model and how it could help sustain price growth over time.

Popular XRP community researcher "SMQKE" recently reignited discussion on XRP’s long-term price potential by highlighting its deflationary design. In a tweet, SMQKE emphasized that XRP's supply is continually decreasing due to its unique burn mechanism, rendering it fundamentally scarce.

The commentator went on to claim that the token is also meant to be fundamentally deflationary, adding that it cannot be mined and its supply is shrinking. To support this claim, the tweet cited a statement from a published paper noting that anything limited in supply and actively used tends to become more expensive over time.

Unlike many digital assets, XRP does not rely on mining. Instead, all 100 billion tokens were pre-issued at launch. What makes XRP notably deflationary is that a small portion, like 0.00001 XRP, is destroyed with every transaction. For context, this feature is to mitigate spam transactions.

According to official documents from the XRP Ledger and Ripple-backed research, this deflationary mechanism is built into the protocol’s core, with no system in place for inflation or token replenishment.

Since its inception, the XRP network has seen 13,919,025 XRP permanently removed from circulation. These tokens are neither redistributed nor collected by validators.

Pointing to this burning process, XRP proponents often claim that as transaction volume grows, the total circulating supply decreases, enhancing scarcity over time.

Meanwhile, despite the ongoing token burn, XRP’s total supply remains at 99,986,080,974 (approximately 99.98 billion). While many XRP supporters view this gradual reduction as bullish, critics often argue that it is inconsequential, as the overall supply remains nearly the same even after more than a decade of burns.

Expanding Utility as a Global Bridge Asset

Beyond its deflationary structure, XRP’s role as a bridge currency for global value exchange bolsters its long-term utility. The XRP Ledger supports the transfer of fiat currencies, cryptocurrencies, commodities, securities, and even loyalty points, making it one of the most versatile networks in the digital payments ecosystem.

Its speed and cost-efficiency are unmatched. XRP transactions settle in 3–5 seconds with fees averaging just $0.0002. This outperforms traditional networks like SWIFT, which can take days and cost up to $50 per transfer.

Competitive Edge Through Interoperability

XRP also maintains a strong position in the cross-border payments space thanks to its interoperability features. Its integration with projects like Axelar enables XRP to function across multiple blockchains, enhancing liquidity.

According to analysts, these interoperability bridges, along with XRP’s shrinking supply, contribute to its long-term value proposition.

Comparative analysis shows that XRP rivals centralized stablecoins like USDC and even emerging central bank digital currencies (CBDCs) by offering decentralization, lower fees, and superior cross-chain utility.

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