The XRP Ledger is Evolving. The Puzzle Pieces are Assembling

The XRP Ledger provides a fast, cheap, reliable and secure means of exchanging value. It has been a pioneer in solving cross-border payment friction between common and uncommon payment rails around the world. With a proven track record of over 90 million ledger entries completed since its creation in 2012, things are about to change.

Ripple, the payments company that uses the XRP Ledger, has teamed up with Axelar to create smart contracts optionality for the XRPL. The XRPL EVM (Ethereum Virtual Machine) sidechain is directly connected to the XRP Ledger through the XRPL bridge. Through this bridge, you can connect to the XRPL EVM Sidechain and use its features and functionality.

“The XRPL EVM sidechain will utilise the Axelar network, a crypto bridging service that allows for seamless cross-chain token transfers. With Axelar's support, users will be able to move tokens between the XRPL EVM sidechain and 55 other blockchains, significantly enhancing interoperability.” https://coinmarketcap.com/community/articles/66defe324c4e346c634fb027/

With smart contract sidechains, bridging to other blockchains and ecosystems becomes possible. Examples could include the Cosmos (ATOM) which has a huge developer and ecosystem presence. This interoperability and cross-chain connectivity looks to drive new developer interest, new use cases and liquidity, something the XRPL has lacked over recent years.

Ripple’s CEO Brad Garlinghouse has openly been excited about the potential of tokenising Real World Assets (RWA’s). Smart Contract capability and connectedness promise access to trillions of dollars worth of currently illiquid assets.

“Ripple Labs recently announced its participation in the Hong Kong government's e-HKD CBDC pilot by deploying a real estate tokenisation solution. Ripple Labs is the developer of the XRP Ledger (XRPL) blockchain, best known for its cryptocurrency, XRP. The firm received something of a boost last week after a U.S. Court, at first instance, determined that the XRP token is not in and of itself a security. Ripple's participation in the Hong Kong CBDC pilot forms part of its broader plans to help revolutionise the real estate industry, using tokenisation to streamline transactions and improve transparency, liquidity and accessibility to the global real estate market, which is projected to reach over $5 trillion in value by 2027.  The Hong Kong pilot involves 15 other firms trialling further CBDC use cases.”

https://www.bitsofblocks.io/post/ripple-to-tokenise-real-estate-in-hk-cbdc-pilot#:~:text=Ripple's%20participation%20in%20the%20Hong,%245%20trillion%20in%20value%20by

In a recent Community meeting in Japan, CTO (Chief Technical Officer) David Schwartz gave a presentation about the present-day benefits and possible changes coming to the XRPL. His presentation highlighted the functionality, benefits and growth of the AMM (Automated Market Maker), as well as exciting EVM sidechain smart contract development.

A very interesting discussion also centred around the XRPL gaining smart contract capabilities at its base layer. Schwartz confirmed that no decision had been made as to the format of the smart contract base layer development or selection. He reiterated that this was not Ripple’s job to unilaterally change any functions of the XRPL. Proposed changes to the XRPL are submitted and through a decentralised voting consensus mechanism, are either adapted or rejected.

One could be reminded of the original Codius smart contract project Ripple eventually abandoned so as not to “clog up” the XRPL and its proven fast payments functionality. (White Paper https://github.com/codius/codius-wiki/blob/master/White-Paper.md)

It’s unclear what code or technology will support a potential XRPL base layer smart contract function, however, one already exists called “Hooks”. Hooks can use Java Script which has millions of potential coders ready to plug and play as opposed to 200,000 developers using Ethereum’s Solidity code.

Hooks has been battle-tested and proven on an existing XRPL sidechain called XAHAU.

“Hooks are more closely integrated with XRPL, operating directly on Layer 1 of the XRPL, so they are more tightly integrated with the underlying blockchain technology than the EVM-compatible sidechain to take advantage of the specific features and capabilities of the XRPL platform. With the inherent scalability and performance of WebAssembly, Hooks are optimal to enhance XRPL's functionality.” https://docs.xahau.network/readme-1

Again, it’s unclear which way the community with vote if and or when a base layer smart contract is proposed for the XRPL, but one thing is clear, things are evolving.

With the impending launch of Ripple’s RLUSD stablecoin, having XRPL smart contract capability will open up Defi (Decentralised Finance) optionality with a trusted, stable value asset. Ripple has confirmed that the RLUSD stablecoin will also be launched on the Ethereum blockchain, thus solidifying interoperability and liquidity potential.

Whilst in Japan, Ripple representatives stated that the RLUSD would only be available to institutional participants. This makes sense, considering stablecoins like USDC and Tether are available to retail through exchanges. Retail doesn’t go directly to Circle or Tether the companies to get their respective stablecoins.

In summary, the XRPL has exciting developments seeking to enhance its functionality, adaption and access to liquidity. Smart contract capability, connectivity, interoperability, tokenisation, and stablecoins like RLUSD and Defi yield-bearing products are puzzle pieces that could create a huge value proposition for the XRPL and its native token XRP.