Prominent Asset Manager Bitwise Investment Addresses Burgeoning Concerns About XRP's Real Use Case

Prominent asset manager Bitwise Investment has addressed burgeoning concerns about XRP's real use case in the XRP Ledger and Ripple ecosystem.

Prominent asset manager Bitwise Investment has addressed burgeoning concerns about the real use case of (XRP) in the XRP Ledger and Ripple ecosystem.

As reported by the firm in a new report, which was shared by WrathofKahneman (WOK), an influential figure in the XRP community, Bitwise created a clear, succinct, and relevant description of what XRP does in the Ripple ecosystem. The report provides a deep dive into the digital asset and what drives its value.

The asset manager highlighted that there are three major functions of XRP and how they impact valuation. First, it serves as the native token of the XRPL network, with users required to pay transaction fees in the digital asset for each transaction on the chain.

The XRP Ledger is programmed to burn realized transaction fees permanently, effectively reducing the asset’s total supply. At the reporting time, this mechanism has helped incinerate 13.85 million XRP, cutting the supply to 99.986 billion XRP. Notably, the current transaction volume’s annual burn rate is 0.0075% of XRP’s total supply.

Now, how does this drive XRP’s price? With the Q1 2025 transaction count on the XRP Ledger averaging 1.17 million per day, an increased number will consequently impact the XRP burn rate.

Bitwise emphasized that a notable surge in the adoption of the XRPL blockchain will make the burn rates more significant. For instance, a 100x growth in volume will increase annual incineration rates to 0.75% of XRP’s total supply, which could impact prices in the long term.

Secondly, the report shared that XRP has utility as spam protection for the XRP Ledger. To avoid the creation of multiple junk accounts on the network, the network placed a base reserve requirement of 1 XRP. Notably, the initial requirement was 10 XRP before the December 2024 amendment, which slashed the minimum balance by 90%.

The report noted that the base reserve requirement is not a notable driver for XRP’s ownership or demand. With about 6.1 million active addresses on the Ledger, the portion of XRP locked in for account maintenance would have minimal impact on supply, even with a 100x increase.

Finally, the exposition mentioned XRP’s bridging currency status as its most important function in the ecosystem and the one it sees as a major driver for the asset’s price.

With Ripple’s core business tied around large-scale currency-to-currency and currency-to-asset bridging through the XRP Ledger, XRP’s adoption as a central bridging asset would encourage institutional clients to hold XRP, significantly impacting supply and prices.

Interestingly, Ripple is planning to compete with SWIFT, the largest payment messaging solution in the world. Analysts have predicted that if the financial technology firm processes just 15% of SWIFT’s daily transaction volume, its prices will explode to $25.68.

Nonetheless, XRP’s utility as a central bridging asset faces shared attention from the Ripple USD stablecoin launched in December. While Ripple has assured that the dollar-pegged token will not replace XRP, it will impact the number of transactions processed with the XRPL native token.