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XRP is notable for its lack of fireworks when it comes to token burning. In contrast to Ethereum and Shiba Inu, where token burns are frequently cited as important factors influencing investor sentiment and supply reduction, XRP's burn rate is essentially insignificant. This makes many investors wonder if tokenomics on XRP can produce the same deflationary appeal as other assets.
Reasons for lower burns
The burning mechanism of XRP is essentially different. Unlike Ethereum's EIP-1559 fee model, or Shiba Inu's coordinated burn campaigns, which are community-led or protocol-driven burns, XRP burns are directly linked to transaction fees on its ledger. Only a tiny portion of XRP is used in each transaction, which eliminates it from circulation forever. Although this keeps spam at bay and guarantees the network's sustainability, the actual burn rate pales in comparison to the enormous supply of almost 100 billion tokens.
A portion of Ethereum's gas fees are burned in each transaction, during periods of high network activity this burn may even exceed issuance, leading to deflationary periods. In contrast, Shiba Inu members send SHIB to burn addresses in an effort to manually reduce supply as part of community-driven initiatives.
Key difference
However, XRP's business model is entirely functional rather than marketing-oriented. Burns don't happen as a marketing or deflationary tool, they are merely a consequence of using the ledger. This explains why, in contrast to campaigns that make headlines on other chains, the burn rate appears to be zero.
Investor expectations and price performance
XRP is presently trading close to $2.85, finding short-term support while remaining just above its 100-day EMA. Maintaining current levels could pave the way for a recovery toward $3, but a breakdown would risk another decline toward $2.5, according to the chart. The market's perception of utility-driven cryptocurrency assets, regulatory clarity and the uptake of its payments network are the factors that most directly affect XRP's value.
XRP holders should lower their expectations for burns for the time being. XRP is intended for efficiency, speed and payments, rather than for drastic supply reduction. Use cases, not tokenomics tricks, are probably where any benefits will be found.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team