Ripple CTO Backs Transaction Fee Increase: Could This Be The Solution To XRP’s Woes?

The post Ripple CTO Backs Transaction Fee Increase: Could This Be The Solution To XRP’s Woes? appeared first on Coinpedia Fintech News

Ripple’s lawsuit with the Securities and Exchange Commission has hurt XRP by creating investor anxiety. If the SEC wins and XRP is declared a security, Ripple might be fined and restricted from selling and trading it. XRP’s price has fallen due to investors’ reluctance to buy or hold it. This might boost the XRP market, naturally.

Many significant exchanges like Coinbase, Binance.US, Bitstamp, and Bittrex all suspended or delisted trading of XRP, citing concerns about the legal and regulatory status of the cryptocurrency.

This had a significant impact on the price of XRP, as it made it more difficult for investors to buy or sell the token, which further reduced demand and put downward pressure on its value.

As people wait for a resolution, Ripple’s CTO seems to be offering a novel way to enhance the price. Here’s his outlook.

Is backing transactional fees “fair or unfair”?

In an effort to improve the value of the divisive token, the XRP community is heatedly debating a plan to hike transaction fees. It all started when a Twitter user going by the handle @Kneteknilch started the discussion by proposing to raise transaction fees in proportion to the value of transactions in order to improve the value of XRP.

The #XRPL is too cheap!
Burning transaction fees just doesnt have enough impact to catapult #XRP to a double digit price.
Should there be an amendment to increase the fees by a factor that takes into account the value of the transaction?
(More value($)transferred=more fees?)
/s

— FloFlo (@Kneteknilch) March 4, 2023

David Schwartz, CTO of Ripple, has spoken out in response, arguing that transaction fees should reflect the true cost of transactions on the network. Yet, the XRP Ledger’s original developer has reservations about the plan to use transaction fee destruction to artificially boost the XRP price.

Schwartz elaborated on his stance, saying that the XRPL’s key benefit is that it can confirm transactions quickly and cheaply. Even yet, he thinks it’s unfair to force node operators to subsidize transactions that cost less than their entire expense.

The downside of SWIFT money

Moving ahead with the discussion Schwartz elaborated on why he believes transaction fees should reflect the network’s transaction cost. If transaction costs are too low, nodes may not be run. If fees are overly high, it creates unnecessary friction.

Twitter user Chris Thompson said that the price should be high enough to deter a purchase. Thompson asked if a hefty transaction type was needed to discourage such usage.

Schwartz said the XRP Ledger’s answer is better. He said that if a transaction is outside the node’s capabilities, it can flag it off and prevent it from being processed. The network can manage huge transaction volumes without compromising efficiency or security with this approach.

My thinking is that if the txn fee is less than the actual cost of a txn, then we’ll be destroying value by executing txns and discouraging people from running nodes. Whereas if the fee is more than the cost, we’re adding needless friction.

— David “JoelKatz” Schwartz (@JoelKatz) March 5, 2023

The transaction fee argument emphasizes the need to balance cost and value in cryptocurrency transactions. To maintain the token’s long-term success, the XRP community must continue to talk and collaborate.

I don’t want to lose the advantage of low cost, high speed transaction confirmation. But I also don’t think node operators should be subsidizing transactions whose value is less than their actual total cost.

— David “JoelKatz” Schwartz (@JoelKatz) March 5, 2023

Conclusion

The XRPL community as a whole has mixed feelings about the proposal to raise transaction fees in order to enhance the price of XRP.