Why XRP’s Tokenomics Lack Deflationary Impact and What It Means for Investors

The Deflationary Illusion: XRP’s Tokenomics in Context

XRP’s tokenomics are often framed as deflationary, but a closer examination reveals a structural asymmetry compared to models like Ethereum and Shiba Inu. While the XRP Ledger (XRPL) burns approximately 1 million tokens annually through transaction fees [1], this rate pales in comparison to the aggressive deflationary mechanisms of its peers. For investors focused on supply-driven value creation, this distinction is critical.

XRP’s Gradual Burn and Controlled Supply

XRP’s deflationary mechanism relies on a transaction-based burn, where a small amount of XRP is permanently destroyed with each transaction. As of 2025, this process removes roughly 1 million tokens yearly, reducing the total supply from the original 100 billion [1]. However, this rate is dwarfed by Ripple’s controlled supply release: the company holds 50 billion XRP in escrow accounts and releases up to 1 billion tokens monthly [4]. This deliberate inflationary counterbalance ensures market liquidity but undermines the deflationary narrative.

Even under optimistic scenarios—such as XRP handling 28% of SWIFT transactions—it would take 25 years to burn 5–10 billion tokens [5]. By contrast, Ethereum’s EIP-1559 mechanism burned over 2,000 ETH daily during peak activity in 2025, contributing to a -0.25% annualized deflation rate [3]. Shiba Inu, despite its volatile burn dynamics, briefly achieved a 3,277% 24-hour burn rate in June 2025 [6], though this was insufficient to offset its 589.5 trillion-token supply.

Structural Design: XRP vs. Ethereum and Shiba Inu

Ethereum’s deflationary edge stems from its EIP-1559 upgrade, which burns base transaction fees, and its Proof-of-Stake transition, which slashed daily issuance from 13,000 to 1,700 ETH [3]. This structural shift has created a net deflationary environment, even as network usage fluctuates. Shiba Inu, meanwhile, relies on community-driven burns, which have proven inconsistent. By August 2025, its burn rate plummeted by 98.89%, correlating with a 4% price drop and a breakdown below key technical support levels [5].

XRP’s design lacks such dynamism. Its burn rate is tied to transaction volume, which remains low compared to Ethereum’s global smart contract ecosystem. While XRP’s fixed supply cap (100 billion) theoretically supports scarcity, the controlled escrow releases and minimal burn rate dilute this effect. For instance, even if XRP’s burn rate doubled to 2 million tokens annually, it would still take 50,000 years to reduce the supply by 10%—a timeframe far exceeding investor horizons.

Implications for Investors

For investors prioritizing supply-driven value creation, XRP’s tokenomics present a paradox. The asset’s utility in cross-border payments and institutional adoption could drive demand, but its deflationary impact is too weak to meaningfully constrain supply. This contrasts with Ethereum, where deflationary pressures have historically supported price resilience during bull markets [3], or Shiba Inu, where extreme burn volatility has created speculative opportunities despite structural flaws [6].

Strategically, investors should: 1. Differentiate Use Cases: XRP’s value proposition lies in transactional utility, not deflationary scarcity. Focus on adoption metrics (e.g., SWIFT integration) rather than supply-side narratives. 2. Monitor Burn Rate Trajectories: If XRP’s burn rate accelerates due to increased transaction volume, it could enhance scarcity arguments—but this remains speculative [5]. 3. Compare Structural Models: Ethereum’s hybrid deflationary-inflationary balance offers clearer long-term predictability, while Shiba Inu’s volatility highlights the risks of unstructured burn mechanisms.

Conclusion

XRP’s tokenomics are neither inherently inflationary nor deflationary; they are a carefully calibrated mix of controlled supply and minimal burn. While this design ensures stability, it lacks the structural force to drive price appreciation through supply-side dynamics alone. For investors, the lesson is clear: XRP’s future hinges on real-world adoption, not tokenomics. In a market where deflationary models like Ethereum and Shiba Inu (at peak burns) offer more aggressive supply-side tailwinds, XRP’s muted approach may limit its upside—unless demand outpaces all expectations.

Source: [1] XRP Burn Mechanism Could Drive Price to $3,500 by 2050: ChatGPT Analysis Shows [https://www.mexc.com/cs-CZ/news/xrp-burn-mechanism-could-drive-price-to-3500-by-2050-chatgpt-analysis-shows/66902] [2] Can Shiba Inu Reach $1 in 2025? This $589 Trillion Problem [https://www.nasdaq.com/articles/can-shiba-inu-reach-1-2025-589-trillion-problem-stands-way] [3] VanEck says Ethereum might be a better store of value..., [https://www.mitrade.com/insights/news/live-news/article-3-1017105-20250806] [4] How Many XRP Tokens Are There in Total [https://ambcrypto.com/blog/how-many-xrp-tokens-are-there-in-total/] [5] Shiba Inu Burn Rate Plummets 98%, SHIB Price Loses 20-Day Support [https://pintu.co.id/en/news/196506-shiba-inu-burn-rate-plummets-98-shib-price-loses]