XRPL Activity Report - September 2024

Abstract

This report examines the XRP Ledger (XRPL) ecosystem's evolution from August to September 2024. Transaction volumes, user engagement, and decentralized application (dApp) interactions were analysed. The findings demonstrate a shift towards automated trading and specialised dApp usage, alongside significant changes in NFT and AMM sectors. Transformation in user behaviour, with a trend towards a smaller but more engaged user base was observed. This research provides insights into the challenges and opportunities facing the ecosystem, particularly in balancing technological efficiency with genuine user adoption and engagement. The analysis contributes to the broader understanding of how XRPL evolves and adapts to changing market conditions and user needs.

Highlights

1. Protocol revenue: ~$77,000 in September
2. Total transactions: +6.0%, but active wallets -2.2%
3. Total XRP(L) users: 115,487 (-2.2%)
4. dApp users: 10,082 (-13.6%)
5. DApp transaction share: 0.75%
6. XRP in AMM pools: 12.3M XRP (-2.0%)
7. AMM volume: -47.6% ($5.4M to $2.8M)
8. Users with 11-50 monthly transactions: 22.2% (+3.9%)
9. Single-transaction users: 24.2% (-4.0%)
10. XRPL Marketcap: <100M USD

1. Basic XRPL Metrics

1.1. General Statistics

1. Bot-Dominated Growth:
   The 6.0% increase in total transactions coupled with a 2.2% decrease in Unique Active Wallets suggests that the growth is driven by increased bot activity rather than new user adoption or increased human user engagement.

2. dApp Engagement Decline:
   The significant drop in users interacting with dApps (-11.6%) is concerning, as it indicates a reduced engagement with the ecosystem's applications.

3. Efficiency of Remaining dApp Users:
   While the number of dApp users decreased by 11.6%, their associated transactions only dropped by 2.4%. This suggests that the remaining dApp users are more active, potentially indicating a presence of engaged power users.

4. Marginal Role of dApps:
   dApp transactions account for less than 1% of total network activity (0.8% in September), highlighting the dominant role of bot-driven transactions. The further decrease in dApp transaction share (-8%) emphasises the growing gap between bot and human activity.

5. Transaction Density:
   While the mean number of transactions per Unique Active Wallet increased, the median tells a different story. The median number of transactions for all users remains at 2, while for dApp users it's 4. This stark contrast between mean and median highlights the extreme skew in transaction distribution because of arbitrage, front running, and other bots. The higher median for dApp users (4 vs 2) indicates that dApp interactions do drive more activity among human users.

1.2 High-Volume Transactions

1. Bot-Driven Market Activity:
   The significant increase in OfferCreate transactions (+20.2%) coupled with a decrease in OfferCancel transactions (-30.6%) suggests intensified arbitrage bot activity. This pattern indicates bots are creating more offers and letting fewer expire.

2. Market Efficiency:
   The ratio of OfferCreate to OfferCancel transactions increased from approximately 7.93:1 in August to 13.72:1 in September. This could indicate higher market efficiency, with bots finding more profitable trades and cancelling fewer orders.

3. Ecosystem Impact:
   While bot activity can provide liquidity, the dominance of bots raises questions about the ecosystem's health, diversity, and security for human users (as bots tend to extract value from human users in most cases).

1.3 AMM-Related Transactions

1. Liquidity Growth:
   The increase in AMMDeposit transactions (+4.3%) coupled with a decrease in AMMWithdraw (-3.9%) shows a net inflow of liquidity into AMM pools. A reversal in general market sentiment combined with attractive yield opportunities can be one of the growth drivers.

2. Deposit-to-Withdraw Ratio:
   The ratio of deposits to withdrawals increased from 3.84:1 in August to 4.17:1 in September, further emphasising the trend of liquidity accumulation in existing AMM pools. However, this metric does not take into account the $USD or $XRP values of such transactions and should be cross-referenced for a better result.

3. Slowing Expansion:
   The significant decrease in AMMCreate transactions (-26.0%) points to a slowdown in the establishment of new AMM pools. The ecosystem is likely saturated with existing pools. It can be observed, based on other metrics, that new projects do not actively launch on XRPL, hence there is a shortage of new tokens and hence nothing new to create more AMM pools.

4. Reduced Governance Activity:
   The sharp decline in AMMVote transactions (-45.8%) indicates a substantial decrease in governance participation. Secondary metrics indicate that this feature is not well known for wider audience and lags in adoption.

5. Average AMM pool fee:
   The average AMM pool fee remains extremely high at 0.68%. This is at least double the fees seen on other protocols, which raises concerns. The design of the AMM on XRPL makes it unlikely that this will change. With no competitive element in place, there is little incentive to lower the fee. In fact, liquidity providers are encouraged to keep the fees elevated, as users have no way to bypass them.

6. Current State of AMM Ecosystem:
   The overall trends suggest increased engagement with established pools but decreased expansion and governance activity. Users appear to be favouring existing, proven AMMs over creating or simply governing new ones.

1.4 NFT-Related Transactions

1. NFT Market Expansion:
   The significant increase in NFTokenMint transactions (+130.1%) indicates a surge in new NFT creation. Such spikes are expected when new NFT projects are launching or existing projects expanding their offerings.

2. Increased Market Activity:
   The rise in NFTokenCreateOffer (+26.2%) and NFTokenCancelOffer (+32.03%) suggests more active trading and price discovery in the NFT market. Users are creating more sale offers but also cancelling new and old offers at a higher rate. It can be speculated that the more cancelations there are, the less liquid market is. This is partially supported by the fact that average price of 38 XRP/NFT in August decreased to 25 XRP/NFT in September.

3. Minting-to-Sales Ratio:
   In August, the ratio of NFTokenMint to NFTokenAcceptOffer was about 0.74:1. In September, this ratio increased to 1.77:1. This indicates that new NFT creation is outpacing sales, potentially leading to oversupply or the launch of new collections that haven't yet found buyers. However, this is very crude metric and should be taken with caution.

4. Market Saturation Signs:
   Despite the increase in minting and offer creation, there's a slight decrease in NFTokenAcceptOffer transactions (-3.4%). This might suggest that while there's growing interest in creating and listing NFTs, buyer demand isn't keeping pace.

5. Potential Bot Activity:
   The sharp increases across most transaction types, particularly in minting and burning, could partially be attributed to automated processes or bots involved in NFT creation, listing, and management. However, no research was performed to investigate the matter.

2. dApp Interactions

2.1. Unique Active Users per dApp

• * On-chain data showed that DexFi has substantial activity related to volume and user inflation, so their numbers have to be evaluated with care.

1. Established Platforms:
   Well-known dApps like XPMarket (-11.8%), Magnetic (-27.1%), Sologenic (-9.2%), and XRP Cafe (-38.5%) all experienced a decreases in Unique Active Wallets (UAW), with some losing up to a third compared to the last month. This consistent decline across established platforms suggests a broader trend affecting the whole ecosystem, rather than underperformance of a single platform.

2. Emerging Platform Growth:
   Bidds displayed growth with a 118.0% increase in UAW. Recently Bidds rebranded from onXRP, hence this could be associated with a successful marketing, new features, and/or newer offerings on the platform.

3. DexFi Anomaly:
   While DexFi shows significant growth (+52.2%), the asterisk and note about potential inflation in their numbers suggest caution in interpreting this data. This highlights the importance of verifying on-chain data and the potential for manipulated metrics in the ecosystem. Reference: https://x.com/Kirjakulov/status/1838242785394069866

4. Niche Platform Challenges:
   Orchestra, a smaller platform, experienced a sharp decline in Unique Active Wallets (UAW), dropping by 30.2%. This has placed it far behind in the competitive landscape. The gap between Orchestra's UAW (189) and its closest competitor, DexFi (1,134 UAW), highlights the significant disparity between market leaders and smaller projects within the XRPL Ecosystem.

5. Overall Ecosystem Health:
   The total Unique Active Wallets (UAW) across all listed dApps dropped from 11,668 in August to 10,082 in September. While this decrease is not entirely unexpected, it remains concerning. The small number of users interacting with the ecosystem poses a significant challenge for monetisation, creating an entry barrier for many developers. This, in turn, slows down the overall growth and expansion of the ecosystem.

2.2. Power Users in Numbers

1. The number of casual users (those who interact with only 1 or 2 dApps per month) decreased significantly in September, both showing a decline of about 14%.

2. Users with 3 dApp interactions remained relatively stable with only a slight decrease of 1.07%.

3. "Ultra Users", those who use more than 3 dApps, despite being the smallest group, showed remarkable growth with a 95% increase from August to September.

4. The total number of engaged users (sum of all categories) decreased from 11,668 in August to 10,082 in September, a 13.6% overall decline.

5. Despite the overall decrease, the growth in Ultra Users suggests a trend towards a more dedicated and active core user base.

2.3. Cross-Platform Comparisons

1. Platform Specialisation:

   • XPMarket and Magnetic show balanced activity across payment, DEX, NFT, and AMM operations.
   • Sologenic is heavily used on DEX trading with high OfferCreate and OfferCancel counts.
   • XRP Cafe and Bidds dominate in NFT transactions, with minimal activity in other areas.

2. NFT Market Dynamics:

   • XRP Cafe leads in NFTokenCreateOffer (38,244), followed by Bidds (25,929).
   • XPMarket shows the highest NFT offer acceptance rate (59.2% of created offers).
   • Bidds has the highest NFTokenMint (12,819) and NFTokenBurn (9,669) counts, suggesting active NFT lifecycle management.

3. DEX Trading Efficiency:

   • OfferCancel to OfferCreate ratios: XPMarket (12.9%), Magnetic (49.87%), Sologenic (22.6%).
   • XPMarket's low cancellation rate might indicate are more decisive user behaviours across the markets.
   • Magnetic's high rate suggests frequent order adjustments.

4. AMM Activity:

   • Magnetic leads in AMMDeposit transactions (15,261), indicating strong liquidity provision.
   • XPMarket and Magnetic demonstrate more AMM governance participation (AMMVote and AMMCreate).
   • Orchestra is unable to catch up with other DeFi platforms since the launch of AMM, despite having a rather good start.

5. Payment Transactions:

   • XPMarket and Magnetic process the most payment-based transactions, suggesting utility-focused user bases and high engagement and loyalty with the platforms.
   • Sologenic, XRP Cafe, and Bidds show limited payment activity, aligning with their niches.

6. Transaction Volume Distribution:

   • XPMarket and Magnetic have the highest total transaction counts, indicating diverse and active user bases, as well as overall high dApp activity and market involvement.
   • Despite specialisation, XRP Cafe and Bidds also show high transaction volumes, driven by NFT activity.

7. Cross-Platform Comparisons:

   • XPMarket shows the most balanced activity across transaction types, suggesting a versatile platform.
   • Magnetic leads in AMM operations while maintaining strong DEX and payment activities.
   • Sologenic dominates in DEX transactions but has limited engagement in other areas.
   • XRP Cafe and Bidds lead the NFT space.

8. Ecosystem Health:

   • The diversity of platform within the XRPL ecosystem is broad enough to cover all basic needs that are technically supported by the XRPL as L1 blockchain and even beyond that.
   • High transaction volumes across multiple platforms indicate a competitive environment. However, the list of top players remains unchanged, without any new platform observed.
   • The emergence of AMM activities alongside traditional DEX operations points to evolving DeFi capabilities within the XRPL ecosystem.

2.4. Activity Patterns

1. Transaction Frequency Distribution Shift:

   • Single-transaction accounts decreased significantly (-4.0%), indicating a potential consolidation of the user base.
   • Moderate-to-high activity accounts (11-50 transactions) increased substantially (+3.9%).
   • Marginal increases in 2-5 and 6-10 transaction ranges (+0.1% each) imply stability in low-to-moderate activity sectors.

2. User Base Composition Analysis:

   • September data shows 68.7% of accounts engaged in 2-50 transactions, up from 62.6% in August.
   • The ecosystem is experiencing a "centralisation of activity" where engaged users are becoming more active while less engaged users are either increasing activity or departing.

3. XRP Ledger Ecosystem Implications:

   • The decrease in single-transaction accounts may indicate reduced speculative behaviour or decreased new user onboarding rate.
   • Increase in 11-50 transaction accounts suggests growing adoption of DeFi activities.
   • Stability in 2-5 and 6-10 transaction ranges implies a consistent base of occasional users, who are potentially observing and exploring the ecosystem, but are still hesitant to engage with it pro-actively.

3. XRPL Ecosystem Economics Analysis

1. Overall Market Activity:

   • NFT Volume (USD) decreased by 11.4%
   • AMM Volume (USD) decreased significantly by 47.6% (this excludes volume that goes through the orderbook DEX)

2. Fees Generated:

   • NFT Issuer Fees (XRP) decreased by 17.1%, hitting 68,538.67 XRP (about 37.5k USD).
   • NFT Broker Fees (XRP) decreased by 17.3% hitting 11,749.77 XRP (about 6.5k USD).
   • AMM Fees (USD) decreased by 42.6% hitting 32,930.11 USD.
   • Total protocol generated fees: around 77k USD (excluding gas fees, only AMM + NFTs related).

4. Methods

4.1. Data Collection

• Transaction data was collected directly from the XRPL using API endpoints, as well as https://xpmarket.com/.
• dApp interaction data was gathered through analysis of on-chain transactions associated with known DApp Source Tags.

4.2. Analysis

1. Transaction numbers were aggregated and compared month-over-month.
2. User activity was categorised based on transaction frequency.
3. DApp engagement was measured by tracking interactions with known dApp Source Tags.
4. AMM volumes were calculated by summing the value of all trades routed through the AMM only.
5. Fee generation was counted by summing all fees paid by users associated with AMM and NFTs (there are no other possible protocol fees).
6. Bot activity was identified through the analysis of transaction patterns.

4.3. Limitations

• The study assumes that wallet addresses represent unique users, which may not always be the case.
• dApp identification relies on known addresses and may not capture all dpp activity on the network, but their impact is estimated to be less than 5%.
• Transactions count analysis does not differentiate failed transactions, as those are still recorded and stored on the chain, hence considered as legitimate activity.

Supplementary Material: Transaction Type Counts

XRPL Transaction Type Glossary

1. OfferCreate: Create an offer to exchange assets (fungible tokens)
2. Payment: Send currency from one account to another, token mint, and AMM transactions
3. OfferCancel: Cancel an existing exchange offer
4. TicketCreate: Create a ticket for future use in transactions
5. TrustSet: Add or modify a trust line between accounts
6. NFTokenCreateOffer: Create an offer to buy or sell an NFT
7. NFTokenCancelOffer: Cancel an existing NFT offer
8. AMMWithdraw: Withdraw liquidity from an Automated Market Maker pool
9. AccountSet: Modify account properties or settings
10. AMMCreate: Create a new Automated Market Maker pool
11. AMMDeposit: Add liquidity to an Automated Market Maker pool
12. NFTokenMint: Create a new Non-Fungible Token
13. AccountDelete: Delete an account from the ledger
14. NFTokenAcceptOffer: Accept an offer to buy or sell an NFT
15. NFTokenBurn: Destroy a Non-Fungible Token
16. SignerListSet: Modify the list of signers for an account
17. EscrowFinish: Complete an existing escrow
18. EscrowCreate: Create a new escrow
19. PaymentChannelFund: Add funds to a payment channel
20. AMMVote: Vote on Automated Market Maker parameters
21. EscrowCancel: Cancel an existing escrow
22. SetRegularKey: Assign a regular key pair to an account
23. AMMBid: Place a bid in an Automated Market Maker auction
24. CheckCreate: Create a check for future redemption
25. Clawback: Reclaim issued currency from an account
26. PaymentChannelClaim: Claim funds from a payment channel
27. DepositPreauth: Preauthorise an account to send payments
28. PaymentChannelCreate: Create a new payment channel
29. EnableAmendment: Enable a new feature on the network
30. CheckCash: Cash a check created by another account