If you did not know yet, Bitcoin was introduced for us to have an option outside of traditional banking systems and even opt out of it if required.
However, after a surge in demands of Bitcoin, numerous cryptocurrencies proliferated and now there are more than 1300 as we speak today!
One of them is Ripple, which, at the moment of writing this article, is at number 3 on the CoinMarketCap and has even threatened Bitcoin’s dominance once in a while.
Just to put it in perspective, from January 2017 to January 2018, Ripple surged at a rate of +37,000%, an astonishing figure. To simplify it further, if you would have invested $100 at the start of 2017, the value of it today would be $37,000!
Keeping aside these insane rallies for a moment, there are a few fundamental differences when it comes to the usage of Ripple because it is not like Bitcoin or Litecoin. It is so because it is controlled by a company (Centralized) and made for banks. Also, for using Ripple in the day to day activities, you need to pay attention to few things which you don’t see in any other cryptocurrency as of now.
One of those things is ’20 XRP’ reserve that Ripple charges for using Ripple cryptocurrency which is quite confusing and mysterious to many of us until now. And this mystery is my motivation to write this article and tell you the actual reason behind the ’20 XRP reserve’.
In fact, this is one of the most common questions that we have been asked by CoinSutra readers. Whenever they try to set up any Ripple wallet, they are asked to transfer 20 XRP initially to activate the wallet. This also brings up other questions like:
- Is the 20 XRP gone or can we spend it in future?
- Is there is a way to bypass Ripple wallet’s 20 XRP fees?
What Is 20 XRP Ripple Reserve?
Ripple is a unique crypto asset which has built-in rules of minimum balance for using its ledger.
Similar to the minimum balance requirements of traditional banks, Ripple requires you to deposit and maintain a balance greater than 20 XRP at all times to use the ledger.
So once you fund you Ripple wallet address with 20 XRP or more, your account will be active and usable. This is a one-time requirement for a particular new ripple address which you always need to maintain. Once that is fulfilled, it is very similar to using Bitcoin or Litecoin.
Why Do Ripple Wallets Require A Minimum Of 20 XRP?
The 20 XRP fee structure is enforced on the Ripple blockchain to make it an anti-spam ledger where people don’t unnecessary open wallets. As of today, once you deposit 20 XRP, these cannot be withdrawn, something that may or may not change in the future.
Ripple’s Official Statement On The Reserve:
The XRP Ledger applies reserve requirements, in XRP, to protect the shared global ledger from growing excessively large as the result of spam or malicious usage. The goal is to constrain the growth of the ledger to match improvements in technology so that a current commodity-level machine can always fit the current ledger in RAM and the full ledger history on disk.
To submit transactions, an address must hold a minimum amount of XRP in the shared global ledger. You cannot send this XRP to other addresses. To fund a new address, you must send enough XRP to meet the reserve requirement.
What Do You Need To Do?
Now that you know that Ripple addresses or wallets have this special requirement, you should always first initialize/fund your ripple wallet address with at least 20 XRP.
- Thumb Rule: Always ensure that your outgoing XRP funds are at least 20 XRP when sending to an unfunded XRP wallet
The best yet easy way is to remember this thumb rule and you will never go wrong.
Also remember that if you send lesser than 20 XRP to an unfunded or initialized ripple address, your transaction will fail because the protocol level requirement is minimum 20 XRP on an unfunded or unused address.
What Happens If You Don’t Have The ‘Minimum 20 XRP’?
Nothing happens if you don’t have a minimum of 20 XRP reserve on your ripple address but you cannot use it until you have minimum 20 XRP on it. Any account under 20 XRP will be considered non-existent.
Some wallets and services will also show you a message reminding you of the unavailable minimum reserve and that your account is not active. To activate it you will need to send some XRP on it until it fulfils the minimum 20 XRP criteria.
This may seem confusing but I have done my best in uncovering the mystery behind the ‘minimum 20 XRP’ requirement.
To make matters more confusing, some exchanges like Poloniex charge you 20 XRP for deposit reserves, while others like Bittrex and Binance don’t.
I also know that 20 XRP is a lot in today’s time (approx 80-90 USD). So technically if you go to buy $100 worth of XRP, you will actually get Ripple worth $10 because the remaining $80-90 will be locked up as reserve.
That’s all from my side in this article. Do share your thoughts in the comment section below.
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