Comprehensive guide to XLS-20 proposals

Comprehensive guide to XLS-20 proposals

In 2022, as the dust settles around the phenomena of non-fungible tokens (NFTs), it is becoming apparent that this concept is here to stay. Meanwhile, the majority of NFTs are still issued on a single blockchain: Ethereum (ETH) or EVM-compatible blockchains Polygon Network (MATIC), BNB Chain (BSC) and so on.

XRP Ledger, one of the oldest and most popular blockchains globally, is almost ready to challenge Ethereum (ETH) supremacy in the NFT segment.

NFTs on XRP Ledger: Introducing XLS-20

In 2022, Ripple developers are betting big on NFT functionality: the proposal designed to implement built-in NFT support for the XRP Ledger is ready for approval by XRPL validators. Ripple also exploded into the NFT segment with its $250 million fund focused on supporting NFT-centric products.

As such, the XRPL is on the verge of its first major updates in many years, i.e. the implementation of the XLS-20 proposal. What do we know so far?

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  • XRP Ledger markets itself as a pioneer in the tokenization concept;
  • In May 2021, a proposal to enable native NFT functionality (XLS-20 or XLS-20d) was published by Ripple’s software engineer Nik Bougalis;
  • It is proposed to implement two new objects and a new ledger structure in the XRP Ledger design;
  • In January 2022, Ripple engineers released a custom-made tool for NFT research;
  • Ripple has already released XRPL software with NFT support;
  • An NFT-centric fund with $250 million in funding is live, while the first celebrity collaborations have been founded.

As such, the XRP Ledger has never been as close to native NFT support as early as Q3 2022.

What are NFTs?

Non-fungible tokens, or NFTs, are digital assets (blockchain-based tokens or cryptocurrencies) designed to confirm ownership of this or that content (image, video, text, and so on). “Non-fungible” means that unlike Bitcoin, Ethereum or other “fungible cryptocurrencies”, each non-fungible token is unique and cannot be replaced by an equivalent.

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NFTs became popular in 2017-2018 with the beginning of the Crypto Kitties game. But its mainstream adoption made headlines in 2021: prices for high-end digital art objects were symbolized as NFTs surged into eight-figure waters. The Bored Ape Yacht Club (BAYC) collection – tokenized avatars of fictional monkeys – became a symbol of this craze.

The ongoing NFT euphoria was catalyzed by celebrities and brands: almost every big name in the entertainment industry created their own NFT collection or released a video/album/series in the form of digital tokens.

What is the XRP Ledger?

The XRP Ledger, or XRPL, is a decentralized distributed ledger system (blockchain) launched in 2012 by David Schwartz, Jed McCaleb and Arthur Britto. The XRPL blockchain is underpinned by XRP, its core native token. In late 2012, three key figures in the XRP Ledger, along with Chris Larsen, founded Ripple Inc., a digital payment operator. XRPL founders transferred 80 billion XRP tokens to Ripple to facilitate handling various use cases.

The XRP Ledger leverages the Consensus validation method; a distributed ecosystem of validators is responsible for the integrity of the blockchain and reliable transaction confirmation. XRP Ledger achieved 3-5 second transaction latency.

In 2020-2022, XRP Ledger engineers worked on adopting smart contracts, so-called “Hooks”. “Hooks” have basic smart contract functionality that makes the XRP Ledger suitable for some decentralized finance protocols.

XRP Ledger has a large and passionate community called “XRP Army”; its “soldiers” aggressively promote XRPL, XRP and Ripple on social media channels.

NFTs on XRP Ledger: New opportunities for veteran blockchain

Since 2012, the XRP Ledger has been known as a pioneer in “tokenization”, that is, creating on-chain units associated with this or that off-chain object. That’s why XRP Ledger and Ripple are betting big on NFTs in 2022.

Basic

The first steps in enabling native NFT functionality on the XRP Ledger were made in the first quarter of 2021, when Wietse Wind of the XRPL Labs software development studio proposed XLS-14d, the first ever dedicated proposal for NFTs on the XRP Ledger.

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Initially, XRP Ledger’s NFTs were supposed to be “indivisible XRP IoUs”, i.e. XRPL-based tokens that cannot be split. Unlike Ethereum’s NFTs (which can be traded, exchanged, transferred and stored), XRPL designed users to “opt in” to receive a token by explicitly signing a transaction.

This design came with too many limitations. As such, on May 24, 2021, Ripple Labs’ Nik Bougalis released the XLS-20d proposal to replace the XLS-14d as it deprecated. XLS-20d’s NFTs are more “generalized”, i.e. they do not work differently from NFTs on large programmatic blockchains.

In May 2022, this proposal was “expanded” by XLS-29d: XRPL enthusiasts proposed to rethink the transaction logic of NFTs to remove the possibility of “spam” transactions.

Technical details

According to Mr. Bougalis’ proposal – which is the key design document for XRPL-based NFTs so far – the XRP Ledger codebase will receive two new objects and a new ledger structure.

Picture

Picture of XRPL.org

An NFToken is an object describing a new non-fungible token; an NFTokenOffer is an object associated with the offer to buy/sell a single non-fungible token. Also, NFTokenPage is a financial structure that lists all NFTs stored by the same XRP Ledger account.

In addition, NFTokenMint and NFTokenBurn types of transactions will be added to allow XRP Ledger to support minting and burning of non-fungible tokens. NFTokenCancelOffer transaction cancels the authorization of NFT creation while, with NFTokenOfferAccept transaction, an XRPL account accepts the transfer of non-fungible tokens (NFT).

The XLS-29d proposal suggests that NftToken itself should contain information about whether this or that NFT is for sale.

As such, the implementation of native NFT support involves minor changes to the XRP Ledger codebase.

Adoption

XRP Ledger developers and Ripple have already announced a number of initiatives designed to catalyze the growth of XRPL’s NFT ecosystem.

In March 2022, Ripple launched Ripple’s Creator Fund, a $250 million initiative designed to support digital artists interested in NFT distribution to the XRP Ledger. Each team can apply for grants and create an NFT collection or marketplace on the XRP Ledger.

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Picture of Ripple

Ripple’s Creator Fund has already partnered with Mintable, Ethernity, MomentoNFT and NFT Pro, well-known projects in the NFT segment.

Recently, Ripple partnered with British luxury car maker Lotus and NBA star Michael Jordan; they will release their first NFT collections on the XRP Ledger.

Time line

In early July 2022, Ripple’s CEO, Monica Long, announced that the XLS-20d proposal is awaiting approval by XRPL validators. As such, we can recall the most crucial milestones in the NFT implementation of the XRP Ledger:

2012 – XRP Ledger is launched as protocol focused on “tokenization”;

26 February 2021 – XLS-14d proposal released by Wietse Wind as first concept for NFT on XRP Ledger;

24 May 2021 – XLS-20d proposal published by Nik Bougalis; this concept drives the NFT progress on the XRP Ledger so far;

11 January 2022 – NFT-Devnet with XLS-20d enabled launched by RippleX;

11 April 2022 – XRP Ledger software v1.9.0 with XLS-20 support released;

March 2022 – Ripple’s Creator Fund begins accepting applications from NFT developers;

12 May 2022 – XLS-29d proposal published to promote XRP Ledger logic;

Q1-Q2, 2022 – Major ecosystem partnerships entered into for NFT adoption on XRP Ledger;

July 2022 – XLS-20 proposal reviewed by validators: Ripple’s Monica Long.

Final thoughts

All in all, the XRP Ledger may get its native NFT functionality as soon as the coming weeks. The XLS-20 proposal conceptualized XRP Ledger’s approach to tokenization in the NFT era.

To implement native NFTs, XRP Ledger code should undergo minor changes. Prior to the release of NFTs, Ripple launched a $250 million ecosystem fund for digital artists and developers.

The activation of NFTs will be the most important update for Ripple and the XRP Ledger in years.

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