XRP Ledger (XRPL), one of the world’s oldest decentralized ledgers, has witnessed an unprecedented increase in account deletions, one of the biggest spikes in its history.
The activity was mainly related to Poloniex, a well-known crypto exchange that reportedly deleted around 15,000 old XRP accounts, resulting in the recovery of approximately 275,000 XRP tokens. As a reminder, when deleting an account, XRPL is equal to the owner’s reserve, which is 2 XRP per account.
What’s more, as the process continues, the amount of recovered tokens increases, which is accompanied by the burning of more than 30,000 XRP in fees. Thomas Silkier, Head of Analytics and Compliance at XRP Ledger Foundation, noticed to this trend.
It is worth noting that the news came shortly after Poloniex paid $7.6 million to settle charges of violating sanctions with the US Treasury Department.
Poloniex account deletion and token burning
Poloniex’s decision to remove individual accounts and maintain a minimum reserve balance for each user resulted in significant token burning in fees. With the deletion of 15,000 accounts, a significant number of XRP tokens have already been burned.
However, the impact could be even more significant given that the exchange owns 84,000 accounts. If all of these accounts are deleted, it will result in a burn of 168,000 XRP.
This process includes identifying inactive or abandoned accounts and obtaining the XRP tokens associated with them. The recovered tokens can then be used by Poloniex for various purposes such as increasing liquidity or supporting other exchanges.
Surprisingly, it turned out that the exchange created separate accounts for each of its users, maintaining a minimum reserve balance for each. This outdated practice appears to have been the result of ignorance or oversight regarding the use of destination tags, a feature in the XRP Ledger that allows for efficient grouping and identification of transactions for a particular party. It appears that Poloniex has since moved to a destination tag based model.