Ripple CTO Says Burning XRP Escrow Would Have No Real Benefits

In a recent discussion on X, the Ripple CTO Chief David Schwartz emphasized that the burning of the company’s entire XRP escrow would not bring the benefits the XRP community anticipates.

Schwartz said this while responding to questions from the XRP community about how Ripple manages its XRP holdings.

Several XRP holders have raised concerns about Ripple’s escrowed XRP tokens, with some even suggesting that the monthly releases put pressure on the token.

A community member with the X pseudonym “GPDBurnTheEscrow” recently raised this issue while responding to a disclosure from Mr. Huber, an on-chain sleuth. He expressed concerns about whether Ripple’s main focus was consistently selling XRP. 

In response, Schwartz explained that Ripple could either maintain their current XRP holdings or actively reduce them. According to the Ripple CTO, there is no third option, and the company’s initial plan from its establishment was to decrease its XRP bag swiftly.

Burning the XRP Escrow Would Yield No Benefit

The community member, whose pseudonym indicates he advocates for incineration of the escrowed tokens, asked Schwartz if the idea of burning the tokens was not to be considered as an option.

Replying to this proposition, Schwartz expressed skepticism about its feasibility and questioned the actual benefits it might bring.

“I can’t think of any set of events that would lead that to happen that’s even remotely probable. I also don’t think it would have any real benefits,” he said.

I can't think of any set of events that would lead that to happen that's even remotely probable. I also don't think it would have any real benefits.

— David "JoelKatz" Schwartz (@JoelKatz) January 8, 2024

Upon Schwartz’s disclosure, another community member shared concerns about XRP holders potentially facing challenges for an extended period until the escrow is depleted. 

The Stellar Case

Schwartz countered this viewpoint by referencing past arguments in 2018. He called attention to the fact that most proponents argued back then that reducing the token’s supply would not drastically impact its market cap but rather help bolster price upswings.

Notably, Stellar, a project similar to the XRP Ledger and founded by Ripple co-founder Jed McCaleb, initially had a supply of 100 billion tokens.

Concerns emerged about the extensive nature of the asset’s supply. The Stellar Development Foundation burned 55 billion tokens ($5.5 billion) in November 2019.

In response, the price of XLM only rallied by a meager rate to $0.09 and then immediately dumped, closing November 2019 with a surprising 12% decline.

Schwartz called attention to this event, arguing that the Stellar burn proved that the narrative of burns bolstering prices was “nonsense.”

In 2018, lots of people argued that a reduction in supply could not lower the market cap and so price would have to go up significantly. The Stellar burn proved that to be nonsense. I wouldn't assume the economics work some particular way without really thinking about it first.

— David "JoelKatz" Schwartz (@JoelKatz) January 8, 2024

The Ripple CTO aimed to provide a more detailed analysis but restrained himself due to potential inaccuracies and legal constraints. Schwartz encouraged community members to use their imagination to understand the tokenomics of XRP.

GPDBurnTheEscrow acknowledged and appreciated Schwartz’s engagement with the community but lamented a sense of pessimism within the XRP community. 

Schwartz responded by sharing two enduring beliefs. Firstly, prices are generally rational, with expectations already factored into the value. Secondly, he noted that any radical change that is not clearly beneficial is likely viewed negatively by the market.