Ripple CTO Explains Role of Trust Lines and ILP in XRP Ledger

Ripple CTO David Schwartz emphasized the importance of institutional trust lines for secure and authorized token transactions on the XRP Ledger.

Schwartz highlighted that the Interledger Protocol enables seamless value exchange between different payment networks without requiring XRP for settlement.

Trust lines on XRPL require a small XRP reserve and allow issuers to authorize accounts that can hold their issued tokens.

Ripple CTO David Schwartz has shared fresh insights into how institutions can leverage trust relationships within the XRP Ledger without directly transacting in XRP. The discussion emerged during a conversation on X, where he addressed how trust lines and the Interledger Protocol (ILP) can expand payment connectivity.

An X user had outlined scenarios where XRP would be used solely for transaction fees, with institutions forming direct trust relationships. Schwartz responded by confirming his support for such arrangements. He noted that this approach was part of the original vision for trust lines and is central to the ILP concept. He added that it offers significant advantages for all participants.

How Trust Lines Work

Trust lines are ledger objects on the XRPL that link entities and their associated tokens. They require a reserve of 0.2 XRP per line. Through authorized trust lines, token issuers can set which accounts are permitted to hold their tokens. This structure ensures controlled token distribution and supports compliance requirements for institutional participants.

Schwartz explained that ILP enables different payment networks to interoperate. He described a scenario where two entities regularly extend credit to each other and settle balances periodically. In such arrangements, the entities could exchange various forms of value, including cash and cryptocurrency, with XRPL or ILP ensuring transaction discovery, quoting, atomicity, and accounting.

Practical Example of Network Linking

He illustrated a case in which one participant accepts bitcoin and another delivers cash in person. Using XRPL or ILP, the Bitcoin payment could be converted to cash efficiently. This mechanism, he said, supports a wide range of settlement methods without the requirement to use XRP as a medium of exchange.

By leveraging trust lines and ILP, institutions can integrate their payment processes more directly while maintaining control over who can transact with their issued tokens. Schwartz stated that such arrangements align with the foundational purpose of trust lines and help strengthen cross-network settlement options.

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