XRP community figures are speculating on the potential impact the Xahau Ledger and its native token XRP+ could have on the XRP Ledger and XRP.
Following the Whitepaper release for the XRP Ledger sidechain Xahau and its native token XRP+, pundits have weighed in on the potential implications for both the XRPL Mainnet and the original XRP token.
Recall that XRPL Labs, the developers of Xumm, recently released the Xahau Whitepaper. Per the Whitepaper, Xahau will incorporate Hooks, functioning as an XRPL sidechain with smart contracts capabilities.
In addition, Xahau will demand its native token, XRP+, for on-chain functionalities. The Whitepaper affirmed that users can procure XRP+ by burning their original XRP tokens. Pundits believe the emergence of Xahau and XRP+ could affect the XRPL and XRP.
Xahau’s Impact on XRP Ledger
The founder of Dizer Capital, Yassin Mobarak, presented an analysis of the potential outcomes. His perspective, although speculative, discusses the possible positives and negatives of this significant development.
OK, I thought about this whole Xahau/Hooks fork and its impact on the current XRP ledger. Below is my analysis/speculation.
Please note, this is only a humble attempt at a thought experiment on how things might transpire based on what we know today. I could be entirely wrong as…
— Yassin Mobarak 🪝 (@Dizer_YM) August 28, 2023
On the positive side, Mobarak points out that the Xahau Ledger is unlikely to challenge the primary value proposition of XRP. He believes Xahau might be unable to establish the same international payment corridors Ripple has cultivated over the past decade.
Mobarak keyed in on the “Burn to Mint” mechanism. This mechanism involves the burning of XRP to obtain XRP+. According to Mobarak, this would effectively reduce the circulating supply of XRP.
However, some experts argue that the impact of this mechanism might not be substantial enough to make a considerable difference in the market.
Mobarak also highlighted the decentralization of the XRP Ledger. The success of Xahau could serve as concrete evidence that Ripple does not wield control over the XRPL. This would address concerns of centralization that have persisted over time.
The XRP community influencer also underlined the potential downsides of the emergence of Xahau. One key concern is the predicted impact on XRP liquidity.
As the sidechain gains traction and becomes a vibrant ecosystem, a shift in liquidity from the original XRP to the new XRP+ token might occur, particularly from the retail sector.
Additionally, Mobarak raises the possibility that the success of Xahau could lure independent developers and entrepreneurs.
This influx of interest could create an array of use cases that overshadow the XRP Ledger. Consequently, the XRPL could become more reliant on Ripple’s involvement for its continued success.
A fundamental aspect of the XRP+ introduction is the one-way burn-to-mint mechanism. Community members are compelled to choose a chain for their XRP holdings. As these two chains evolve in divergent directions, the value accrual from this mechanism would be exclusive to Xahau.
Burning XRP for XRP+
In a separate conversation, Daniel Keller, CTO at Eminence, delved into the question of how much XRP should be sacrificed for XRP+.
Xahau – The burning question (dun dun)
Before you start asking "How many XRP should one burn to get XRP+", it's necessary to look at "Why should one burn XRP for XRP+"
Same as on the XRPL, you are required to have some tokens in your account on Xahau for basic needs such as:
— Daniel 🇮🇲🪝 (@daniel_wwf) August 29, 2023
He highlighted that possessing XRP+ is only crucial for basic functionalities on Xahau, such as account reserves, trust lines, transactions, and the execution of Hooks (smart contracts).
Keller categorizes potential users into speculators, speculators, and risk-takers or mini liquidity providers. Each group has varying incentives to burn XRP for XRP+.
For speculators with no on-chain activities on Xahau, Keller believes there is no need to burn XRP for XRP+. For the curious people interested in exploring the chain, he advises them to hold 2 XRP+ in addition to the 2 XRP+ already reserved in their accounts upon migration.
For mini liquidity providers or risk-takers, the XRP community figure advised they don’t burn more XRP tokens than they can afford to lose. He emphasized that the burn-to-mint mechanism is a one-way track from XRP to XRP+ for the time being.
Keller stressed the importance of not speculating on XRP+. He advocated for users only to burn what they intend to utilize rather than treating it as an investment opportunity.