Phil Kwok, co-founder of EasyA, recently offered insights on evaluating blockchain ecosystems. In a series of tweets, he introduced a three-step framework focusing on simplicity and experimentation, making it accessible for those new to blockchain technology.
Analyzing Token Supply
Kwok begins by exploring the sources of token supply and its potential for inflation. Unlike many tokens, XRP is not subject to inflation, as 100 billion XRP were created at launch, with no possibility of new minting. Moreover, XRP is deflationary due to transaction fees being 'burned', reducing the supply over time. However, it's important to note that Ripple holds a substantial amount of tokens, which can be sold on the market, introducing periodic supply pressures.
Factors Influencing Token Demand
Demand plays a crucial role in token valuation. XRP is used for fees in the XRP Ledger and as a bridging currency for cross-border payments. These factors create inherent demand for the token. Additionally, new developments such as automated market makers could increase XRP usage, enhancing demand.
Impact of Supply Shocks
While supply shocks are less applicable to XRP, Kwok notes that amendments to the XRP Ledger could introduce similar effects. For instance, new features could impact token availability on the market.
Kwok’s framework provides a practical approach to evaluating the sustainability of blockchain ecosystems. By applying it to XRP, the deflationary supply model, strong demand drivers, and potential for enhanced utility through development are highlighted. Kwok emphasizes that this framework is not meant for price speculation or investment advice but as a tool for assessing long-term blockchain viability.
