XRPL On-Chain Lending Protocol Design Proposed by Devs

With the new mechanism, on-chain accounts on XRP Ledger will be able to benefit from decentralized lending in a censorship-resistant manner without middlemen.

XRP Ledger on-chain lending protocol introduced by Aanchal Malhotra and Vito Tumas

The novel proposal, XLS-66d or "XRP Ledger-Native Lending Protocol," was published yesterday, April 12, 2024, on RippleX devs' GitHub. It is designed to equip the XRP Ledger blockchain with the opportunity to host on-chain lending/borrowing pools.

This proposal is expected to enable XRPL users to borrow and lend digital assets directly, fostering financial inclusion, transparency and efficiency, and eliminate the role of intermediaries.

Technically, the activation of XLS-66 requires the implementation of two new entities within XRPL, i.e., "Pseudo-Account" and "Single-Asset Tokenized Pool."

The list of key features of potential XRPL lending/borrowing protocols is similar to that of top existing DeFis. Its users will be able to seamlessly deposit fungible tokens (XRP, wBTC, wETH and others) into a lending pool to earn interest.

Then, pool delegates, on-chain actors of a new type, will manage the operations of lending pools, attract liquidity and provide loans.

Native lending on XRPL to unlock wide range of use cases

The novel design is 100% decentralized: Borrowers and pool delegates will agree on loan terms off-chain, then record them on-chain.

A "loan" will be a completely new ledger object. It will be responsible for loan financing and withdrawing, payments and interest rates specifications.

The team of Ripple's technical development arm RippleX highlighted the paramount importance of this accomplishment for XRP Ledger and the DeFi scene as a whole:

The Lending Protocol enables fixed-term loans with pre-set terms for interest-accruing loans. It bypasses the need for collateral by using off-chain underwriting, risk management, and a first-loss capital protection scheme in case of default (...) For developers, the protocol's modular design and extensibility make it easy to build and integrate lending dApps on the XRPL, unlocking a wide range of use cases

XRP community speaker @WKahneman noticed that the implementation of native on-chain lending for XRPL will give its real-world assets segment a boost:

As covered by U.Today previously, last week, XRPL enhanced its AMM design with a major amendment.