Why Is XRP Not Allowed to Be Backed by Gold?

Many investors often ask: Is XRP a token backed by gold? The answer is clear – no. Developed by Ripple, XRP, considering the protocol's architecture and core functions, cannot be directly linked to physical gold.

**The Real Role of XRP**

In the XRP Ledger ecosystem, the XRP token is primarily used for providing liquidity and facilitating on-network payment exchanges. This structure differs radically from gold-backed tokens like PAX Gold or Tether Gold. These gold-backed tokens are issued based on the holding and safekeeping of physical gold for each token issued. In contrast, XRP has an independent structure and is not backed by any physical asset.

**Bridge Function and Risk Management**

Paradoxically, XRP can serve as an intermediary for gold-backed tokens on the XRPL. This does not change the fact that XRP itself remains independent of gold. In fact, this allows XRP holders to access gold-backed assets without the risks associated with custody or counterparty risks.

**Meld Gold Example**

Projects like Meld Gold utilize this very mechanism. These platforms position XRP as a liquidity and transaction intermediary to facilitate the creation and trading of gold-backed tokens on the XRPL network. Thus, investors can benefit from XRP’s simplicity and efficiency while also taking advantage of the traditional store of value that gold provides.