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Why we should be grateful for a 20 XRP reserve requirement

grateful for xrp reserve

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Today, I created a few wallets for family and I must admit this reserve requirement did bug me. If I am creating wallets with small amounts of XRP, why would I need to “pay” 20 XRP or over $30 at today’s rate just to create a wallet! I know compared to banks this is usually a better rate. The Bank of America’s Core Checking account requires a minimum of $1,500 and if you go below that you pay $12.00 each month! But this is not why we should be grateful we have a reserve requirement (plus I can ultimately take out all my cash from the bank). Let me walk you through why.

As of today, that minimum reserve balance is 20 XRP, Ripple that is locked away forever until the reserve requirement is lowered. At some point, the Ripple Validators will successfully vote to lower the reserve amount and every Ripple wallet in the world will be able to spend more XRP.

How much XRP is locked worldwide?

How much XRP is locked up. As of January 20, there were about 1.1 million Ripple wallets. At the current market price, that means about $35 million worth of XRP is locked away and can’t be used.

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The reserve requirement is really an inexpensive service fee for Ripple transaction services

Ripple’s blockchain design centers around the XRP Ledger Consensus Process. This process includes a peer-to-peer network that has information about every single activated Ripple wallet. We need these peer-to-peer servers to validate all of our ongoing Ripple transactions. In a way, all of these servers are processing and validating our transactions for free! Well technically for several “drops” of Ripple or just fractions of a cent worth of Ripple for every transaction. And these drops of XRP don’t even go to these Validators. They are volunteers. No Validator servers, no Ripple transactions. We don’t pay those that maintain these servers for the hardware, software, the labor, the overhead, the electricity, etc.

Ripple set up the specs for a “Rippled server” to just 4 gigs of RAM. They set this low bar to ensure entry-level servers could participate in the consensus algorithms, and the entire set of accounts (not the entire blockchain of transactions) should fit within RAM. I am not sure there is a process to remove an activated wallet from the Ripple accounts ledger so once activated, your account number sits in RAM across all of these consensus servers.

By keeping the RAM requirements low, Ripple created an architecture that democratizes the consensus protocol allowing just about anyone to participate. If you wanna build one yourself, check out their documentation. If you are running on CentOS, setting up a server needs just four lines of commands.

If Ripple allowed no reserve amounts or worse yet allowed you to transfer out the reserve to a new account, a malicious user could create an unlimited number of wallets flooding and overwhelming the Rippled servers worldwide.If I could simply move out my reserve to another wallet, I could write a script to create millions of wallets by simply moving that 20 XRP from wallet to wallet. In other words, that locked in an amount per wallet guarantees that this type of malicious flooding could only occur at an enourmous cost to an attacker.

Bottom line

Like most other currency accounts, you have a minimum balance. Ripple’s right now is 20 XRP. And what you get for that is access to unlimited transactions, done within a few seconds, publically validated, and for fractions of a cent per transaction. That I think is one damn good deal! And at some point, I get some of these 20 XRP back when the reserve requirement is lowered. Until then, I’m grateful for this small cost to access a worldwide transaction engine.

A huge appreciation goes out to all who run Rippled servers to validate all of our transactions.

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