- Ripple’s XRP escrow holdings spark renewed debate about centralization and supply transparency.
- David Schwartz clarifies that escrowed XRP cannot circulate until release despite potential ownership transfers.
- Analysts argue the real circulating supply may be smaller than reported, with much of XRP locked or inactive.
Ripple’s management of its massive XRP escrow holdings has once again become a focal point of discussion within the crypto community.
Market commentator Digital Assets Investor suggested that Ripple’s control over its escrowed tokens has been used to question XRP’s decentralization for nearly a decade.
Related: Bill Morgan Defends Ripple’s XRP Escrow as Key to Its Market Price Stability
According to him, Ripple could change this narrative by revealing that the escrowed XRP is already allocated to financial institutions and even governments.
Such a move, he said, would effectively counter claims that the company maintains centralized control over the token’s supply.
Developer Questions Market Cap Accuracy
The discussion started when blockchain developer Vincent Van Code criticized how cryptocurrency market capitalizations are calculated.
He pointed out that XRP’s total supply is 100 billion tokens, with about 35 billion locked in escrow. Market cap figures, he said, are typically calculated using the remaining 65 billion multiplied by the latest traded price.
Van Code compared this to Bitcoin, which calculates its market cap using all coins ever mined, even those that are permanently lost or held long-term in inaccessible wallets.
He argued that at least one million Bitcoins are sitting dormant in wallets attributed to Satoshi Nakamoto, making them effectively non-circulating assets.
“Deduct that, and you’d likely see a 15% lower Bitcoin market cap,” Van Code said. He added that such inconsistencies make market capitalization “a pointless lie” shaped by exchanges and trading platforms.
In response, another commentator, Stealth, countered that Bitcoin’s approach makes sense because every coin ever mined could, in theory, be liquidated at any time. He questioned whether Ripple could do the same with its escrowed XRP.
“So are you implying that Ripple can liquidate their entire escrow?” Stealth asked. “And that we should assume it’s possible?”
David Schwartz Clarifies Escrow Flexibility
Ripple Chief Technology Officer David Schwartz weighed in on the conversation. He explained that the company could legally sell the rights to future XRP releases or transfer control of entire escrow accounts.
Yet, he stressed that tokens locked in escrow cannot be circulated before their scheduled release dates, meaning they remain excluded from active supply figures.
Van Code Insists Circulating Supply Metrics Are Misleading
Van Code echoed Schwartz’s comments, noting that the escrow mechanism is well understood within the XRP community. He added that reassigning escrow accounts effectively represents a sale of future XRP rights.
However, he went further to question the accuracy of market capitalization figures based on circulating supply. Van Code estimated that only around $15 billion worth of XRP is genuinely in circulation, while the remainder is either locked in utility applications, stored long term, or held in private wallets.
Exchange order books, he noted, typically show a trading depth of just three to four million XRP, a small fraction of total supply.
XRP Ledger validator Vet elaborated on a unique feature of the XRP Ledger (XRPL) that allows account “rekeying.”
This process enables an account’s control to be reassigned to another party, allowing Ripple to transfer full control of an escrow account to a buyer without prematurely releasing tokens. Vet described this as an “all-or-nothing” operation, applicable on a per-account basis.
Related: XRP Escrow Is Bullish, Not a Dump; and the SEC’s Own Words Prove It
Despite the technical explanations, some in the community remain skeptical. Commentator Toro Digital Asset expressed frustration over what he described as the XRP community’s tendency to focus on hypothetical scenarios rather than tangible adoption.
He called for more evidence of XRP’s real-world use beyond Ripple’s corporate partnerships and stablecoin initiatives.
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