Bittime - Ripple is leading an initiative to enhance decentralized finance (DeFi) capabilities on the XRP Ledger (XRPL). They released a lending and borrowing protocol (XRP Lending Protocol) directly on the blockchain.
This proposal is named 0066 XLS-66d and aims to build a censorship-resistant DeFi ecosystem within the XRPL network. Currently, the proposal is open for public review on GitHub.
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New Lending and Borrowing Protocol on XRP Ledger
Ripple announced a proposal for a native lending and borrowing protocol on XRPL. The protocol is designed to strengthen XRPL's interactions with the DeFi ecosystem, marking a significant step towards greater financial inclusivity and transparency.
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The proposed protocol introduces a direct lending and borrowing mechanism that prioritizes flexibility and repeated use. Participants can deposit fungible tokens such as XRP, wBTC, and wETH into lending pools to earn interest.
The platform also allows loan terms to be negotiated off-chain (outside the blockchain) and then securely recorded on-chain (inside the blockchain). This streamlined process will simplify user engagement and ensure transparency and security.
“Lending Protocol allows fixed-term loans with pre-set terms for interest-bearing loans. "This protocol avoids the need for collateral by using off-chain underwriting, risk management, and a first-loss capital protection scheme in the event of default," according to RippleX.
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Blockchain developers will greatly benefit from this proposal, as its “modular design and extensibility make it easy to create and integrate decentralized applications (dApps) for lending and borrowing on XRPL.”
This innovation promises a variety of practical applications, further enriching the XRPL ecosystem.
Also read: Ripple vs SEC: XRP Community Defends Ripple from Regulator Attacks
Potential Impact on XRP
While the proposal is being reviewed and refined, there is optimism regarding its potential impact on XRP. Ripple CTO David Schwartz said this could introduce a new layer of utility without hindering use by traditional financial entities.
"If accepted, this could bring new utility to XRPL. Together with a native DEX, this lending and borrowing protocol forms an important pillar in enabling more accessible, efficient and transparent financial services," said Schwartz.
However, Schwartz also acknowledged that some companies may be reluctant to use the feature. He said these companies would be wary of participating in unregulated loan products.
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This development follows a series of advances in the Ripple ecosystem. Last month, the network introduced its Automated Market Maker (AMM) pool, despite facing launch challenges.
Additionally, Ripple revealed plans to launch a stablecoin fully backed by US dollar deposits and other cash equivalents.
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