The XRP Ledger (XRPL) is on the verge of a significant decentralized finance (DeFi) upgrade that could potentially open up new lending possibilities and liquidity for the XRP Ledger network.
According to Vet (@Vet_X0), a notable XRPL validator and community member, the much-anticipated Lending Protocol amendment has now gained two more Yes votes from validators, moving one step closer to activation.
The Lending Protocol amendment now boasts 21 Yes votes from a total of 35 trusted validators (60%). The amendment needs eight more Yes votes to reach the minimum threshold of 29 validators.
Reaching this threshold doesn’t mean that the upgrade will instantly go live. Instead, reaching the supermajority threshold will initiate the mandatory two-week activation period, which requires a minimum of 80% of validators to support the amendment.
XLS-66, explained
The upgrade, known as XLS-66, is geared towards adding a native lending feature to the XRP Ledger.
In contrast to most crypto lending services, where borrowers are typically required to provide more collateral than the loan amount, XLS-66 is specially crafted to enable fixed-term and non-collateralized lending.
This will enable qualified borrowers to secure loans without the need to hold cryptocurrency collateral that exceeds the loan amount.
According to the official XLS-66 document, the Lending Protocol will enable the pooling of funds via so-called Single Asset Vaults, which can then be loaned to borrowers under set terms.
The proposed lending system involves three key actors: depositors, loan brokers and borrowers.
While depositors are in charge of depositing crypto or supported assets into a vault, loan brokers are tasked with brokering lending deals as well as evaluating borrowers.
For their part, borrowers would receive the loans and pay them back based on the set schedule.
The upgrade could potentially empower financial institutions and other entities to put capital to use on the XRP Ledger, as opposed to just holding or moving around assets.
It may also open up new prospects for earning interest on deposited assets in lending vaults. The amount of interest, however, would largely depend on the actual lending activity and risks.
According to the latest validator data, this amendment has reached 23 out of 35 votes. It still requires six more votes to hit the threshold.
Furthermore, the LendingProtocolV1_1 amendment, which offers upgrades including closed-ended vaults, updated interest accounting, etc., also currently has 21 Yes votes.
All three amendments are currently being considered, and none has yet reached supermajority.