Oct 45 min read

From Bots to Breakthroughs: The Ripple Effect of RLUSD on XRPL’s Growth

The XRP Ledger (XRPL) finds itself at a pivotal moment. As a decentralized blockchain known for its speed and efficiency, XRPL has been a cornerstone in the crypto world. However, recent trends suggest a shift in its ecosystem dynamics. The September 2024 XRPL Activity Report sheds light on emerging patterns in transaction volumes, user engagement, and the influential roles of bots and decentralized applications (dApps). This article delves into the report's key findings, the potential impact of Ripple's RLUSD stablecoin, and the urgent need for updates to Automated Market Makers (AMMs) to accommodate new financial instruments like RLUSD.

XRPL Metrics: When Bots Outpace Humans

In September 2024, XRPL experienced a 6% increase in total transactions. At first glance, this seems like a positive development. However, a deeper dive reveals that this growth is predominantly driven by bots rather than human users. Active wallets decreased by 2.2%, indicating that automated trading algorithms are fueling the surge in activity.

OfferCreate transactions surged by 20.2%, illustrating that bots are flooding the market with offers while canceling fewer. They're likely refining arbitrage strategies, creating an ecosystem where liquidity is abundant but genuine human interaction is waning.

This dominance of bot-driven growth raises concerns about the ecosystem's health. While bots contribute to liquidity and market efficiency, they often extract value from human users through high-frequency trading. This can diminish long-term user satisfaction and engagement. To foster a balanced ecosystem, XRPL must find ways to attract and retain human users, especially those interested in decentralized finance (DeFi) and dApps.

dApp Engagement: Power Users Hold the Fort

The report highlights a notable decline in dApp engagement. Unique active wallets interacting with dApps dropped by 13.6%, suggesting waning interest among casual users. Despite this, dApp-related transactions only fell by 2.4%, indicating that the remaining users are more active than ever.

These "power users" are driving a disproportionate amount of activity within the ecosystem. The percentage of users making 11-50 transactions rose by nearly 4%, while those with only one or two transactions per month dropped significantly.

This trend points to a centralization of activity among a dedicated group. While these users keep the ecosystem functional, the challenge remains: How can XRPL expand this base while re-engaging casual or first-time users?

Ripple’s RLUSD Stablecoin: A Potential Game Changer

Ripple's introduction of the RLUSD stablecoin could significantly alter XRPL's dynamics. Stablecoins, especially those designed for institutional use, are essential drivers of liquidity in decentralized ecosystems. RLUSD offers stability and security, which could help stabilize DeFi activities within XRPL, particularly in AMM pools.

Impact on AMM Liquidity and Transactions

Stablecoins like RLUSD are key to expanding liquidity due to their price stability. If RLUSD gains widespread adoption, we might see increased liquidity in XRPL's AMM pools, potentially reversing declines in AMM transactions. The report notes that while AMMDeposit transactions increased by 4.3%, the ecosystem struggles with a sharp decline in governance participation and the creation of new AMM pools.

However, RLUSD's clawback feature presents a technical challenge. This feature allows Ripple to revoke assets from holders for regulatory compliance, but XRPL's current AMM architecture doesn't support this function. For RLUSD to fully integrate, significant updates to the AMM protocol are necessary.

Effects on dApp and User Metrics

RLUSD could also rejuvenate dApp activity, especially in the DeFi space. dApps integrating RLUSD as a medium of exchange or collateral could attract institutional users seeking stable value. This might increase dApp-related transactions and reverse the decline in unique active wallets.

Automated Market Makers: An Urgent Call for Innovation

AMMs play a crucial role in XRPL's health, yet the report highlights areas of concern. Despite a slight increase in liquidity deposits, AMMCreate transactions decreased by 26%, and governance participation via AMMVote dropped by 45.8%. The high average AMM pool fee of 0.68%—double that of competing platforms—adds strain, as there's little incentive for liquidity providers to lower fees without competition.

The Path Forward for XRPL’s AMM Ecosystem

To remain competitive and fully integrate RLUSD, XRPL's AMM requires critical updates to support assets with clawback functionality. This change would not only enable RLUSD trading within AMM pools but also pave the way for other compliant financial instruments.

Addressing high fees and governance challenges is essential. Introducing incentives for governance participation and mechanisms encouraging lower fees could revitalize the AMM ecosystem. Without these updates, XRPL risks falling behind DeFi ecosystems quicker to adapt to new technologies and market demands.

NFT Market: Oversupply Amidst Lagging Demand

The NFT sector on XRPL saw significant growth, with NFTokenMint transactions increasing by 130%. More NFTs are being listed for sale, as indicated by a 26.2% rise in NFTokenCreateOffer transactions. However, buyer demand isn't keeping pace. NFTokenAcceptOffer transactions dropped by 3.4%, and the average price per NFT fell from 38 XRP to 25 XRP.

This oversupply could lead to liquidity challenges and market instability. The report suggests that some growth may be bot-driven, further complicating the situation. Without increased demand from human users, the NFT market may struggle to maintain interest and liquidity.

Ecosystem Health: The Centralization Conundrum

Overall, unique active wallets are declining, especially in the dApp space. Platforms like XPMarket, Magnetic, and Sologenic saw user engagement drop, with some losing up to a third of their active wallets. Conversely, emerging platforms like Bidds, which recently rebranded, experienced substantial growth, suggesting that innovation and niche marketing can still attract users.

The broader trend indicates a "centralization of activity," where a small group of highly engaged users drives most of the network's activity. While power users provide consistent transaction volume and liquidity, declining interest from casual users may limit long-term growth.

Conclusion: XRPL at a Crossroads

The September 2024 XRPL Activity Report underscores both strengths and weaknesses in the ecosystem. Transaction volumes are growing, but bot activity is outpacing human engagement. dApp participation is declining, despite a core group of power users. The AMM ecosystem grapples with high fees and low governance participation.

Ripple's RLUSD stablecoin could address some challenges by providing stable liquidity and attracting institutional users. However, for RLUSD to integrate fully, XRPL's AMM must support clawback functionality. Efforts to lower fees and enhance governance participation are crucial for the DeFi ecosystem's sustainability.

As XRPL navigates these challenges, balancing technological innovation with user adoption is essential. Without meaningful updates and a focus on attracting human users, XRPL risks being dominated by automated systems, limiting its appeal to the broader crypto community.

For more detailed insights into XRPL’s current metrics and AMM challenges, refer to Dr.

Artur Kirjakulov’s research: