More avenues for XRP holders to earn on the XRP Ledger (XRPL) are emerging as Ripple recently proposed a native Lending Protocol.
On Friday, Aanchal Malhotra, the Head of Research at RippleX, and Ripple’s software engineer Vytautas Vito Tumas jointly proposed an XRPL-native lending protocol under the “XLS – 66d” specification.
1/ Today, devs @aanchalmalhotre and Vito Tumas introduced a proposal for a Native Lending Protocol on the XRP Ledger that would further expand its DeFi capabilities. Let’s break down what this means for the ecosystem 🧵
— RippleX (@RippleXDev) April 12, 2024
This announcement comes four weeks after The Crypto Basic first disclosed that efforts are underway to introduce an XRPL native lending protocol.
Notably, the unveiled proposal seeks to expand the XRPL’s DeFi capabilities, offering users more earning opportunities. It will enable peer-to-peer borrowing and lending of crypto assets without intermediaries.
Moreover, this protocol will offer fixed-term loans with pooled funds and pre-set interest rates. While bypassing the need for collateral, it relies on off-chain underwriting and risk management.
Notably, liquidity providers deposit XRP or other tokens into a lending pool to earn interest, while borrowers negotiate loan terms with a pool delegate who manages the lending pool. The protocol supports multiple-lender-single-borrower lending pools for fixed-term loans.
Specifications of the XRPL Lending Protocol
RippleX developers emphasize flexibility and reusability in the design of this proposed XRPL native Lending Protocol. First, they pointed out that flexibility is ensured by designing the protocol to be upgradeable. Also, reusability is attainable by introducing usable objects across multiple future protocols.
The RippleX developers introduced three specifications for the proposed lending protocol to cater to these features: XLS-64d, XLS-65d, and XLS-66d
Firstly, the XLS-64d specification enables the association of a single pseudo-account with multiple ledger entries, allowing for tracking balances and issuing tokens.
The XLS-65d specification, or “Single Asset Tokenized Pool,” introduces a new Pool ledger entry representing a single tokenized asset pool. This facilitates interaction with minimal, extendable ledger entries and flexible transactions.
Meanwhile, the XLS-66d introduces the actual lending protocol. It leverages XLS-65d for managing liquidity provider assets.
Ripple CTO Reacts
David Schwartz, Ripple’s CTO, has voiced enthusiasm for the proposed XRP Ledger Native Lending Protocol. He highlighted its capacity to bring fresh utility to the XRPL, suggesting that its adoption could notably elevate the ecosystem.
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
Notably, this proposal comes hot on the heels of XRPL implementing an automated market maker (AMM) functionality that allows XRP holders to provide liquidity and earn passively.
Following an amendment two days ago, enthusiasts committed over 820K XRP tokens to liquidity pools. However, the latest figures indicate that over 1.8 million XRP are now locked in liquidity pools.
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