Ripple Seeks to Launch Institutional On-Chain Collateral Lending Protocol on XRP Ledger

Ripple is seeking to introduce an institutional on-chain collateral lending protocol on the XRP Ledger, or XRPL.

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 XRPL. The protocol 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 executed, the blockchain automatically manages the funding pool, calculates interest, processes repayments and handles default procedures. Borrower credit assessments, loan approvals and term-setting are handled off-chain by financial institutions.

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.