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What is fiat?
Fiat is a type of currency that is not backed by a commodity. Its value is derived from the trust that it will be accepted by merchants and other people as a means of payment for goods, services and liabilities. All major currencies are fiat currencies including Euros, USD and GBP. They were issued by various governments to be used as legal tender and are regulated by their respective governments.
A stablecoin is a type of cryptocurrency where the value of the token is pegged to a reference asset.
For example, the Bitstamp exchange has issued a EUR stablecoin on the XRP Ledger. Its value is equal to Euro fiat currency since Bitstamp will accept and redeem the stablecoin and exchange it for Euro fiat upon request.
Another example of a stablecoin would be the BTC to ETH tokens issue on the XRPL by the Gatehub exchange. Their values are pegged to BTC and ETH coins issued on their blockchains. Either coin can be redeemed at the Gatehub exchange for BTC/ETH issued on their networks or they can be convert into various fiat currencies.
The value of a stablecoin (or any other token issued on the XRPL) is based on the trust of the issuer and the use case of the token.
For example, a company such as Gatehub is a government regulated financial business entity required to obtain and maintain licenses, legal compliance, auditing and business infrastructure in order to stay in business. They have a proven track record of trust and reliability. Any token issued by them needs to be weighed against the probability that it will be honored and redeemed by them in the future.
For a government issued currency, its value is based on how stable the issuing government is, how much currency is in circulation, how much currency is being created and the strength of their economies. (Among many other factors.) Unstable governments or poorly run governments can cause a fiat currency to collapse in value.
When deciding on which tokens to purchase, it is a good idea to investigate who issued them and see what information is publicly available. Companies who are transparent, have a good history and who are actively participating in the XRPL community is a good starting point.
One of the strengths of the XRP Ledger protocol is its efficiency as a payment network. Transferring value across the globe on a blockchain, that is fast, reliable, decentralized, inexpensive and is carbon neutral, is a valuable service. Stablecoins issued by trusted entities help enhance the value of the network as a whole. When considering how you want to participate in the XRPL ecosystem, please keep this in mind.
Understanding Payment Channels on the XRPL: A Simple Guide
Cryptocurrency and blockchain technology have revolutionised the way we think about transactions and financial systems. One fascinating aspect of this technology is the concept of payment channels, which plays a crucial role in making transactions faster and more cost-effective on the XRP Ledger (XRPL). In this article, we'll break down payment channels on the XRPL in simple terms, explaining what they are, how they work, and why they matter.
Imagine going to your favourite coffee shop every day and buying a cup of coffee. Instead of paying for each cup individually, you could open a tab and settle the bill at the end of the week. Payment channels on the XRPL work in a somewhat similar way. They enable users to establish a temporary, private connection for multiple transactions without recording each one on the public ledger.
Opening a Channel: To start using a payment channel, you first need to open it. This involves creating a transaction on the XRPL to "lock up" a certain amount of XRP or other assets. Think of this as putting money into a secure vault that only you and your transaction partner can access.
Off-Ledger Transactions: Once the channel is open, you can conduct off-ledger transactions with your partner. These transactions are like keeping a tab at your coffee shop. You and your partner can send XRP or other assets back and forth as many times as you want without recording each transaction on the public ledger. This saves time and reduces transaction fees.
Closing the Channel: When you're done with your off-ledger transactions, you can close the payment channel. This involves the counterparty claiming the funds you approved of with a separate transaction that includes the appropriate transaction hashes and signatures. At this point, the XRPL calculates the net result of all the off-ledger transactions, and the appropriate amount of XRP is settled on the public ledger.
Speed: Traditional blockchain transactions can take time to confirm, especially during times of network congestion. Payment channels enable near-instantaneous transactions because they don't rely on the blockchain for each transaction within the channel.
Cost-Efficiency: Using payment channels can significantly reduce transaction fees. Since you only need to record the opening and closing transactions on the public ledger, you save on fees associated with every individual transaction.
Privacy: Payment channels offer a higher degree of privacy because off-ledger transactions are not visible to the public. This can be important for businesses and individuals who want to keep their financial activities confidential.
Scalability: Payment channels are a key component in improving the scalability of the XRPL. They allow for a high volume of transactions without clogging up the public ledger.
While payment channels can be incredibly beneficial, they may not be the right choice for everyone or every use case. Here are some factors to consider before diving into payment channels:
Complexity: Setting up and managing payment channels can be more complex than standard on-chain transactions. Users need to be comfortable with the technical aspects of the XRPL and understand how channels work to avoid potential pitfalls.
Locked Funds: When you open a payment channel, you lock up a certain amount of XRP or other assets. This means those funds are unavailable for other purposes until the channel is closed. For individuals or businesses with limited liquidity, this could be a drawback.
Counterparty Risk: Payment channels rely on trust between the involved parties. If you open a channel with an untrustworthy partner, they might not cooperate when it comes time to close the channel and settle the funds. This risk can be mitigated through careful partner selection.
Maintenance: Payment channels require active management to ensure the security and fairness of transactions. Users must monitor the channel to prevent situations where one party might close the channel without the other party's awareness, potentially leading to loss of funds. Proper coordination and communication between parties are crucial to avoid unexpected channel closures and ensure that signed transactions are honoured as agreed upon.
Funding Channels: To use payment channels, you need to open channels and fund them with XRP. This process may involve some transaction fees and could be cumbersome for those unfamiliar with the XRPL.
Use Case Suitability: Payment channels are most beneficial for scenarios involving frequent, back-and-forth transactions between the same parties. For one-off or infrequent transactions, the benefits may not outweigh the setup and maintenance overhead.
Learning Curve: For newcomers to blockchain and XRPL technology, grasping the concept of payment channels might be a bit challenging. It's crucial to invest time in learning and understanding the mechanics thoroughly.
Regulatory Compliance: Depending on your jurisdiction and the nature of your transactions, you might need to consider regulatory compliance. Not all regions treat off-ledger transactions the same way, and compliance requirements can vary.
While payment channels offer compelling advantages in terms of speed, cost-efficiency, and privacy, they are not a one-size-fits-all solution. Careful consideration of the complexity, risks, and suitability to your specific use case is essential. For those willing to invest the time and effort to understand and manage payment channels properly, they can be a valuable tool in the world of blockchain and digital finance. However, for simpler or less frequent transactions, traditional on-chain transactions may remain the more straightforward option.
Understanding XRPL MultiSignature
The XRP Ledger (XRPL) offers a range of advanced features that go beyond basic cryptocurrency transactions. One of these powerful features is MultiSignature, which enhances the security and flexibility of managing XRP and other assets. In this article, we'll explore MultiSignature on the XRPL in a straightforward manner, explaining what it is, how it works, and why it's essential.
Imagine having a joint bank account with multiple authorized signatories. Multiple or all parties must provide their signatures to approve transactions. XRPL MultiSignature, or simply MultiSig, operates in a similar way. It allows multiple parties to come together and collectively authorize transactions, making it a crucial tool for businesses, financial institutions, and anyone seeking enhanced security in their digital asset management.
Setting Up MultiSignature: To use MultiSignature on the XRPL, multiple parties create a shared account. This shared account is associated with a specific MultiSignature configuration, specifying the required number of signers and their respective weights (how much influence each signer has in the process).
The Quorum: In the MultiSignature setup, the "quorum" defines the minimum number of signers needed to authorize a transaction. For example, if you have a quorum of 3, this means that at least three authorized signers must provide their approvals for a transaction to proceed.
Approving Transactions: When a transaction needs to be executed from the shared account, the required number of authorized signers must provide their signatures. For example, if the MultiSignature configuration specifies three signers with equal weights, all three must approve the transaction. This ensures that no single individual can unilaterally initiate transactions.
Increased Security: MultiSignature significantly enhances security. Even if one signer's private key is compromised, an attacker can't execute transactions without the consent of the required number of signers. This makes it highly resilient to theft or fraud.
Flexibility: MultiSignature can be customized to suit specific needs. You can set different signer configurations and change them as necessary. For instance, you might require only two out of three signers for routine transactions but demand all three for large transfers.
Enhanced Security: In a world where digital assets are prime targets for theft, MultiSignature provides an added layer of protection. It ensures that multiple parties must collaborate to authorize transactions, making it more difficult for malicious actors to gain control.
Risk Mitigation: For businesses and organizations, MultiSignature helps mitigate risks associated with key compromise or insider threats. It's a smart way to protect your assets while maintaining operational flexibility.
Control and Governance: MultiSignature allows for distributed control and governance. It's ideal for situations where decision-making power needs to be spread across different individuals or entities. This makes it suitable for collaborative financial environments.
Trust in Complex Transactions: In complex financial transactions, MultiSignature builds trust among parties by ensuring that each participant has a say in the process. This trust is vital for large-scale financial operations.
XRPL MultiSignature is a game-changer for enhancing security, trust, and flexibility in managing digital assets. It's not just a tool for the tech-savvy; it's a versatile solution that benefits individuals, businesses, and institutions in various ways. As the digital asset landscape continues to evolve, MultiSignature stands as a powerful ally, helping users navigate the complex world of blockchain with confidence and control.
Reserves and fees on the XRPL - Video 4 of 5
Also available in this video series:
Video | Description |
---|---|
Explaining the Xumm app
XRP is on the XRPL, not in Xumm
Tips on protecting your secret numbers
About Destination Tags/XRP Tags
Understanding reserves on the XRP Ledger
The XRP Ledger (XRPL) has some great features!
Environmentally responsible - Very low carbon emissions
Super fast settlement - Transactions take about 4 seconds to settle.
Extremely low fees - Transaction fees cost about 0.000015 XRP or about 67,000 transactions for 1 XRP.
Incredibility versatile exchange network - Over 8000+ issued currencies, native NFTs, Escrows, multi-signing, a built in DEX and more.
Decentralized - Run by a large group of community validators and node operators, it is one of the most democratic blockchains around.
In order to keep the network running safely, smoothly and efficiently, it was decided that a mechanism was needed to:
make it economically prohibitive to send spam
help protect the network from a distributed denial of service attack
help keep the footprint of the XRPL as slim as possible
The mechanism to achieve all of this is?
🎉🎉 XRPL Reserves 🎉🎉
If you interested in a quick explanation on how reserves work, check out this video...
...for a more indepth overview, keep reading.
The XRPL has two types of reserves:
This reserve is required to activate an XRPL account and needs to be maintained in order to submit transactions on the XRPL. The current base reserve is 10 XRP. Each XRPL account must contain at least 10 XRP, which is automatically marked as un-spendable by the XRPL, in order to be able to transact on the XRPL. The base reserve cannot be used or sent to other accounts. It can only be recovered by deleting account from the XRPL.
Fun fact! When the XRPL was first created the base reserve was 1000 XRP! It was reduced to 200 XRP, then to 20 XRP and has now settled to 10 XRP. (The XRPL validators monitor the state of the network and can vote to change the reserve amounts as the blockchain evolves.)
These reserves apply to objects on the XRPL that you own in your account. The owner reserve is currently set at 2 XRP per object.
Here is a list of objects that require an owner reserve:
An escrow
An open offer on the Decentralized EXchange (DEX)
A Trust Line for a token
SIgner list (Multi-sign)
Checks
Payment channels
NFT's (minted prior to the XLS-20 amendment)
NFTTokenpage ( 2 XRP per page)
Owner reserves can recovered when the object is removed from the account. (i.e.. By finishing an escrow, deleting or fulfilling your offer on the decentralized exchange, removing your Trust Line, etc.)
Many of these operations can be performed in Xumm or by visiting XRPL Services at:
No. The base reserve and owner reserves are a function of the XRP Ledger. They have nothing to do with Xumm. Reserves are automatically applied to your account or to the object you own in your account.
Any reserve that is applied to your account, stays in your account. The XRP Ledger simply marks the reserve amount as 'unspendable'. When the object is removed from your account, the reserve is marked as 'spendable' again. Xumm does not have access to your funds nor is Xumm involved in the XRPL reserves in any way.
On the main page of Xumm, press the Reserved button.
Xumm should display your Account balance, the amount of XRP Available for spending and a list of Reserved on ledger on your account.
In the above example, you can see that the account has 10 XRP marked as un-spendable to meet the wallet reserve and 2 XRP marked as un-spendable to meet the owner reserves for each of the Trust Lines created in the account.
When a NFT is minted on the XRPL, an object called NFTokenpage is created to 'store" it.
An NFTokenpage is an object on the XRPL so it requires a 2 XRP owner reserve.
If you would like to recover the 2 XRP for this object you need to get rid of all of the NFTs stored on this page. The site where you minted/purchased your NFTs will have instructions on how to do this.
NFTokenpage concept is a bit of a complicated topic but if you are interested in learning more about it, here's a link to an excellent resource:
As mentioned above, each XRPL account must contain at least 10 XRP to meet the base reserve requirement of the XRP Ledger. If you would like to recover the base reserve, the only way to do this is to delete your account from the XRPL.
There is a 2 XRP fee for doing this which is levied by the XRPL along with the normal transaction fee which applies to all transactions.
(These fees are part of the XRP Ledger and are in not related to Xumm.)
For more information about how to delete an account from the XRPL, please review this article: