- Ripple CTO has debunked an age-old myth about token burns.
- David Schwartz says burning the XRP escrow will not affect the cryptocurrency’s price.
- Ripple’s passive, automatic token burn model is designed to maintain the network.
Ripple’s Chief Technical Officer, David Schwartz, has rejected one of the biggest myths in crypto, leaving many users stunned about the logic of how burning tokens can affect a digital asset’s price.
Token Burn Alone Does Not Affect Prices
According to Schwartz, burning the XRP escrow is not enough to send the cryptocurrency’s price higher. Schwartz said this while responding to a crypto user who suggested that instead of a share buy-back, Ripple should burn the XRP escrow. The user, who added a bit of sarcasm to his post, suggested that Ripple executives wouldn’t tamper with the escrow because they’d prefer XRP’s price to remain low.
Schwartz responded to the user by explaining that burning tokens alone cannot influence a cryptocurrency’s price. According to him, crypto prices are not influenced by supply cuts alone. He explained that other factors, including real demand, liquidity, and actual usage, are the main crypto price boosters.
In the meantime, Schwartz cited Stellar’s historical 2019 token burn, when the project removed about half of its token supply from existence. Despite heightened user expectations, XLM’s price did not change dramatically, supporting his idea that simply reducing the amount of tokens in a crypto project’s ecosystem is not enough to boost the price.
Ripple’s Systematic Token Burn Model
However, it is worth noting that Schwartz’s statement does not demystify XRP’s ongoing token burn, which involves a passive, automatic process that removes a small portion of the crypto token from circulation with every transaction. According to Ripple, this model is designed to prevent network spam and ensure efficiency.
Unlike other cryptocurrency projects, Ripple’s XRP burn is neither scheduled nor manual. It is a continuous small-scale process that marginally reduces the cryptocurrency’s supply while acting as a long-term deflationary mechanism.
In the meantime, XRP traded for $1.39 at the time of writing, maintaining a narrow sideways range amid growing uncertainty in the broader crypto market, according to TradingView’s data.
Related: XRP Burn Narratives and Price Action Draw Scrutiny as Token Trades Near $1.90
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Source: https://coinedition.com/ripple-cto-says-burning-xrp-escrow-will-have-no-effect-on-the-price/
