XRPL Labs Drops ‘IOU’ Term for Tokens Issued on XRP Ledger

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In Brief
  • XRPL Labs has decided to stop using the term "IOU" for issued tokens on the XRP Ledger.

  • By using the term, its users may somehow misunderstand how to use the ledger optimally.

  • Issued currencies are intended to be used with gateways.

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XRPL Labs has decided to stop using the term “IOU” for issued tokens on the XRP Ledger.

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On the Ledger, all currencies other than XRP can be represented as issued currencies, which are sometimes called “IOUs.” These are tracked in accounting relationships called “trust lines” between addresses.

Once shared between multiple addresses from a single hub, ‘IOUs’ of the same issued currency can ‘ripple’ between addresses via the shared hub.

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Despite some tokens actually serving as an “I owe you,” The Netherlands-based XRP ledger software development firm feels that by using the term, its users may somehow misunderstand how to use the ledger optimally.

Understanding the XRP Ledger

One reason the company may feel this way is because of the confusion some users have expressed over what an ‘IOU’ represents exactly. Despite having a symbol and being tradeable, these tokens are actually just declarations of debt, or as the XRP Ledger states:

“I’ll allow you to owe me up to this much money outside the XRP Ledger.”

XRP Ledger also states that issued currencies are intended to be used with gateways and financial institutions that custody outside-world assets and allow them to be used in the Ledger. It cited one such gateway, GateHub as a proper case using issued tokens as ‘IOUs.’

Accordingly, XRPL Labs said it would now refer to issued currencies as ‘tokens.’ XRPL Labs developed the XUMM wallet for the Ledger.

After reclaiming the fourth spot on the market capitalization list on Valentine’s Day over Polkadot (DOT) and Cardano (ADA), XRP has since fallen behind both back to sixth place. Since yesterday, DOT and ADA have jumped 6.3% and 5.3%, respectively, while XRP fell nearly 2%. The three projects have been changing places for the past two weeks, below Bitcoin (BTC), Ethereum (ETH), and Tether (USDT).

Ripple has been in the spotlight over the last several months. More recently, notable exchanges delisted the token while it was pumping and dumping. The Securities and Exchange Commission has lobbied criticism on the firm for the sale of unregistered securities.

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