XRP escrow explained. This is not dumping tokens by Ripple!
A BULB discussion on XRP has appeared. CryptoSpace wrote an article titled "Why I think that XRP is overvalued and I never touch it." In this article, he questions the decentralization of XRP, by criticizing escrow. With all due respect to CryptoSpace, in his article he presents a popular opinion about XRP. Unfortunately, he does not even distinguish that XRP and XRP Ledger are not Ripple. The very language he uses when he says that Ripple only serves banks shows his personal prejudice. Not everyone knows what escrow is and how it works. In this article I will try to explain:
- What is escrow, what is its purpose and how does it work?
- Does escrow have an impact on the price of XRP?
Every month Ripple protocol releases 1 billion XRP from escrow, but this does not affect the token price. The only thing that affects the low price of XRP is the case with the SEC. Let's take a look at how this is possible.
Let's go back to the beginning. When XRP was created in 2012, the total amount of tokens was 100 billion. 20% went into the possession of the creators and core team. That left 80% of XRP for distribution. Ripple's intention was to prevent these tokens from appearing on the market at one time, so the concept of escrow - the slow release of XPR - was created.
What is the purpose of escrow?
The goal of escrow is a controlled, programmed, predictable release of 55 billion XRP into circulation, 1 billion per month without flooding the market. This ensures the stability of the XRP supply. Ripple has decided to release all tokens by February 2027. Unused tokens will be locked back into escrow. So in September 2023, after releasing 1 billion tokens, 800 million were locked back into escrow. This ensures the stability of the ecosystem.
Does escrow have an impact on the price of XRP?
To some extent, escrow affects the price of XRP but not as CryptoSpace suggests, as Ripple dumps tokens into the market to manipulate the price. The token release is programmed and predictable, unused tokens will be locked back into escrow. Speculators knowing that every month 1 billion tokens will be released into the market can take advantage of this knowledge. Will the price necessarily fall sharply every month? As we see it, the price of XRP is very stable. As I said at the beginning, the price of XRP is mainly manipulated by the SEC case. When the price of XRP is released, the demand for XRP will be huge, far exceeding the current amount of tokens in circulation. Such monthly release of tokens will stabilize the ecosystem.
