Every month, Ripple unlocks 1 billion XRP from escrow, sparking rumors of a possible price dump in the market. However, analysis shows that the unlocking mechanism of XRP is far more strategic.
How Monthly XRP Unblocking Works
Ripple uses a pre-programmed escrow system embedded in the XRP Ledger. Each month, 1 billion XRP is unlocked, but only a small portion enters the market.
Where the Unlocked XRP Goes
More than 80% of the unlocked XRP is re-locked into new escrow contracts. The remaining 10-20% is used for operational expenses and strategic partnerships. This approach helps to prevent sudden supply shocks.
XRP's Role in Ripple’s Liquidity System
XRP is utilized to power the On-Demand Liquidity (ODL) platform, enabling fast and low-cost international transactions. In this context, XRP is not held for speculation and is quickly bought and sold to complete real transactions.
Ripple does unlock 1 billion XRP each month, but only a small fraction is used for market liquidity, while the majority is locked back into escrow. This makes the claim of dumping XRP improbable.
