Ripple is making a strong statement about its intentions to enter the DeFi space with the announcement of the XRP lending protocol for the XRP Ledger (XRPL). This initiative, named XLS-66d, aims to develop a censorship-proof DeFi ecosystem on the network.
A New Era for the XRP Ledger
The roadmap now makes public the first milestone of a native lending mechanism on the XRPL. However, this feature can change the perception of XRPL in the DeFi space, allowing XRPL to be an active participant in financial inclusion and transparency.
The suggested system consists of a direct lending and borrowing unit, with its main features being flexibility and reusability. Significantly, the system allows users to contribute XRP, wBTC, and wETH interchangeable tokens to the lending pool to generate interest.
Ripple: More Efficient Loan Agreements and Improved Security
The platform will also enable loan terms to be discussed off-chain and then securely recorded on-chain. Moreover, this enhanced procedure will make the process easier to follow and will also provide transparency and security.
“The Lending Protocol makes it possible to have fixed-term loans with pre-determined terms for interest-accruing loans. It avoids the necessity for collateral by using off-chain underwriting, risk management, and capital protection in the first-loss case of default,” RippleX added.
Developers will benefit from the integration, and the XRP ecosystem will continue to grow with adoption. First and foremost, the proposed plan will be highly beneficial to blockchain developers as they will be able to access the advantages. As it has been announced, “Modular design and expandability make it easy to build and integrate decentralized lending applications on XRPL.” This creation embodies the wide range of benefits that the XRPL platform can offer.
Potential Impact on XRP and Regulatory Considerations
While the proposal undergoes review and refinement, there is optimism regarding its potential impact on XRP. Ripple CTO David Schwartz expressed his belief that it could introduce a new utility layer without discouraging traditional financial institutions from using it.
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… https://t.co/jgv4iRuPwR
— David “JoelKatz” Schwartz (@JoelKatz) April 12, 2024
“If approved, this could bring new functionality to the XRPL. Alongside the native DEX, this lending protocol forms a crucial pillar in enabling more accessible, efficient, and transparent financial services,” Schwartz remarked.
However, Schwartz also acknowledged that some companies might be hesitant to use the feature. He noted these firms would be apprehensive about participating in an unregulated lending product. This development follows a series of advancements within Ripple’s ecosystem. Last month, the network introduced Automated Market Maker (AMM) pools, although encountering launch challenges. Additionally, Ripple revealed plans to launch a stablecoin fully backed by US dollar deposits and other cash equivalents.
