Ripple, the company behind the XRP Ledger (XRPL), is introducing avenues for XRP holders to earn directly on the blockchain. A recent proposal from RippleX developers Aanchal Malhotra and Vytautas Vito Tumas introduces a native lending protocol designated as XLS – 66d.
Enhanced DeFi Capabilities
The proposed protocol expands the XRPL’s decentralized finance (DeFi) offerings by allowing peer-to-peer lending and borrowing of cryptocurrencies, removing the need for centralized intermediaries. The system will offer fixed-term loans using pooled funds, with interest rates determined in advance.
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Unlike in traditional financial institutions where collateral is needed before a loan is issued, the protocol will bypass this requirement and instead focus on off-chain processes for underwriting and managing risk.
How it Works
The protocol enables users to deposit XRP or other supported tokens into designated lending pools to earn interest. Borrowers can then negotiate loan terms directly with a pool delegate who oversees the pool’s operations. The design supports lending pools where a single borrower can access funds from multiple lenders.
Flexibility and Reusability are Central
RippleX developers prioritize flexibility and reusability in the lending protocol design. This focus is evident in the system’s upgradeability, allowing for future enhancements, and in the creation of reusable objects that other XRPL protocols can leverage.
Protocol Specifications
The lending protocol comprises three specifications:
XLS-64d: Facilitates associating a pseudo-account with multiple ledger entries, essential for balance tracking and token issuance.
XLS-65d (“Single Asset Tokenized Pool”): Introduces a ‘Pool’ ledger entry for managing a tokenized asset pool, allowing efficient interaction with minimal ledger records.
XLS-66d: This specification outlines the core lending mechanism, building upon XLS-65d for liquidity provider asset management.
CTO Enthusiastic About Potential
Ripple CTO, David Schwartz, reacting to the proposal expressed positive sentiments about the proposed lending protocol. Schwartz views the potential adoption as a significant value-add for the XRP Ledger, suggesting new opportunities and growth prospects for the ecosystem.
David Schwartz noted:
“Very excited to see the XRP Ledger Native Lending Protocol proposal up for review and feedback – if passed, this could bring new utility to the XRPL. Together with the native DEX, this lending protocol forms a critical pillar in enabling more accessible, efficient, and transparent financial services.”
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Bitrue Ambassador, XRPcryptowolf, echoed the CTO’s view, in his words “The XRP Ledger needs DeFi more than ever. That’s how it will bring millions of users to actually use the XRPL”
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Building on Recent XRPL Advancements
This lending protocol announcement follows the recent implementation of automated market maker (AMM) functions on the XRPL. AMMs enable XRP holders to act as liquidity providers and earn passive income. Enthusiasts rapidly provided over 1.8 million XRP to liquidity pools following an amendment enabling this new feature.
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