Despite the popularity of XRP, it has essentially been absent from the decentralized finance (DeFi) space due to the technical limitations of the XRP Ledger (XRPL).
XRPFi is a DeFi ecosystem centered around Ripple's XRP, aimed at bridging this gap. It leverages the bridging and smart contract technology of Flare Network to bring XRP into the realm of programmable finance.
Flare Network is a full-stack layer blockchain designed for data-intensive applications, serving as a crucial bridge connecting non-smart contract assets like XRP with the DeFi ecosystem.
At the core of Flare's infrastructure is FAssets, a system for creating fully collateralized representations of these assets. A notable example is FXRP, a wrapped version of XRP that allows holders to deploy their XRP within DeFi protocols on the Flare network.
By staking FXRP, holders will receive stXRP, a liquid staking token that represents a claim on the staked FXRP.
Max Luck, Head of Growth at Flare, told Cointelegraph: "This setup allows XRP holders to earn native-like staking rewards on an asset that would otherwise not support staking, enabling passive income without sacrificing liquidity."
The digital currency platform Uphold, which holds over 1.8 billion XRP, has expressed plans to participate in the FAssets ecosystem, while Nasdaq-listed VivoPower recently announced a $100 million deployment of XRP on Flare, highlighting how major players are validating and accelerating the momentum of XRPFi.
With a market capitalization of over $130 billion, even bringing a small portion of that liquidity into DeFi could unlock a significant new source of capital for the broader ecosystem. Flare's technology expands the utility of XRP, encouraging more participation from institutional investors and retail holders.
Liquid staking will make its debut in the XRP ecosystem with the launch of stXRP through the Flare-supported Firelight protocol. Similar to how protocols like Lido provide liquid staking tokens stETH for staked ETH, Firelight will allow users to stake FXRP and receive stXRP, a liquid staking token that can be used within Flare's growing DeFi ecosystem.
The process is achieved by depositing FXRP into Firelight's Launch Vault, which mints stXRP on a 1:1 basis. These ERC-20 tokens are fully transferable and can be used in decentralized exchanges, lending markets, and other yield-generating DeFi protocols.
Importantly, the underlying FXRP will remain staked on Secured Service Networks, which help protect decentralized protocols across multiple ecosystems while potentially earning rewards for users.
As holders of stXRP, users may also earn Firelight Points, which could influence future reward distributions. In the long run, this dynamic could enhance the composability of stXRP within the XRPFi ecosystem, allowing it to be used as collateral, liquidity, or yield-generating assets across a wide range of DeFi applications.
Related: Analyst: If certain conditions are met, the price of Ripple (XRP) could break through and surge 530% to $14
Original article: “Flare Network Brings Ripple (XRP) into DeFi to Unlock Dormant Liquidity”
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