XRP News Today: Ripple's Business Model Depends on XRP Demand Growth

An official Ripple document has brought attention to the company's strategic reliance on the increasing demand for XRP to drive its price appreciation. Crypto researcher SMQKE highlighted an excerpt from the document, stating that Ripple’s business model is built on the premise that as demand for XRP grows, so will its price.

The document, titled “XRP Demand Examined,” outlines Ripple’s approach to ensuring the long-term viability of XRP. It emphasizes that the fixed supply of 100 billion XRP, with no possibility of creating more under the protocol’s rules, will lead to price appreciation as the protocol gains broader adoption.

Ripple’s document makes a clear distinction between different types of demand for XRP. It highlights the importance of “long-term ‘organic’ demand” over purely speculative demand. For organic demand to exist, XRP must provide utility to its holders. The document identifies two key utility functions for XRP: its use for network security and as a bridge currency.

XRP plays a crucial role in securing the Ripple network by deterring spam and denial-of-service (DoS) attacks. The network charges small fees in XRP for each transaction and requires reserves to prevent abuse. For instance, each account must maintain a reserve of 20 XRP, and transaction fees, typically fractions of a cent, are permanently destroyed with each payment. These mechanisms create an economic barrier against network abuse, ensuring the stability and reliability of the network, which in turn drives organic demand for XRP.

Ripple also requires small reserve amounts for trust lines and working orders, further emphasizing XRP’s function as a deterrent against system abuse. These utility features contribute to the organic demand for the asset, as they ensure the stability and reliability of the network.

The documentation presented in SMQKE’s tweet substantiates the claim that Ripple’s business model inherently depends on the increasing demand for XRP. It confirms that Ripple views the success of its protocol and the corresponding increase in XRP demand as essential for the long-term appreciation of XRP’s price. This aligns with Ripple’s strategic interest in fostering adoption of its technology, not solely for transaction processing, but also as a foundational driver of demand for XRP.

By framing XRP as both a security mechanism and a bridge currency, Ripple underscores the practical utility it believes will drive this demand. This strategic approach is designed to ensure that as more entities adopt the Ripple protocol, the demand for XRP will naturally increase, leading to price appreciation.