Ripple Seeks to Introduce Institutional On-Chain Collateralized Lending on XRP Ledger
Summary
- Ripple is pursuing the introduction of the 'XRPL Lending Protocol', which would allow institutions to borrow against assets they hold on the XRP Ledger.
- The protocol is structured so the blockchain automatically handles funding pool management, interest calculations, repayment and default procedures, while financial institutions are responsible for off-chain credit assessments and loan approvals.
- The protocol uses a Single Asset Vault to provide liquidity, while the Lending Layer manages loans under predetermined terms.
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Ripple is seeking to introduce an on-chain collateralized lending protocol for institutions on the XRP Ledger.
CoinDesk reported on June 29 that Ripple is developing the XRPL Lending Protocol, which would allow institutions to do more than issue or transfer assets held on the XRP Ledger. It would also let them borrow against those assets as collateral.
The protocol separates the roles of the blockchain and financial institutions. Once a loan is originated, the blockchain automatically manages funding pools, calculates interest, processes repayments and handles default procedures. Financial institutions, meanwhile, would conduct borrower credit assessments, approve loans and set terms off-chain.
The protocol consists of a Single Asset Vault and a Lending Layer. The Single Asset Vault provides liquidity for a specific asset, while the Lending Layer deploys those funds into loans under predetermined terms.
JH Kim
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