The XRP ledger ecosystem benefits from contributions from developers and validators worldwide. Their impact on its development is immense. With more than 1.500 apps and exchanges built on the blockchain, XRP prides itself on innovation in infrastructure, developer tooling, and NFTs.
Since Ripple, the organization behind XRP, focused its tools on business infrastructure, real-time payments, and tokenization, efforts have also been made to meet regulatory compliance standards. This adaptation is intended for easier adoption. In time, the XRP Ledger became a reliable tool for companies and a blockchain accelerator for development.
This led to increased trust, which is why we’re introducing the first regulated XRP futures in the US, backed by the Commodity Futures Trading Commission (CFTC). The new regulation allows investors, traders, and partners to gain exposure to XRP. This is done while sustaining market integrity safely.
However, there’s more to what the XRP ledger can do. That is why it explores institutional DeFi adoption by establishing an appropriate architecture. Here’s what it looks like.
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Live features on the XRP ledger
The XRPL is about to become a leader in regulated on-chain finance by approaching institutional DeFi. The new project will boost programmability and support institutional onboarding. The following features already lay the foundation of the project:
- AMM (Automated Market Maker) launches protocol-level liquidity for tokenized assets, stablecoins, and real-world assets (RWAs). Benefits include institutional liquidity provisioning, trading of tokenized Real World Assets (RWAs), and arbitrage and cross-chain swaps.
- DID (decentralized identity) on the Ledger that ensures security, privacy, and compliance. The feature will serve for privacy-preserving Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. It will offer permissioned finances and access control, as well as support institutional onboarding.
- Protocol-native oracles will bring off-chain data on the chain, including stablecoin rates and RWAs valuations. Oracles are embedded into the chain for enhanced security, ensuring cross-chain interoperability and establishing institutional-grade risk management.
What’s next on the XRP ledger agenda?
In the future, institutions collaborating with the XRPL will be able to meet regulatory requirements while driving innovation in lending and building on-chain financial products. One example is the decentralized identity standard. It will receive an upgrade through credentials that will clear the path toward permissioned domains and permissioned decentralized exchanges (DEX).
Another notable development is the Multi-Purpose Token (MPT) standard. This enables the interoperability of fungible and non-fungible tokens through associated metadata. The feature will settle tokenized bonds or fixed-income assets on XRPL. It will establish better-grade asset management regarding tokenized securities.
Finally, the XRPL will expand its capabilities towards DeFi through a new lending protocol. This will allow credit-based financing for institutions. The protocol-native solution will reduce companies’ reliance on intermediaries. It will do so by creating an institutional lending market and integrating stablecoins and regulated wealth accounts (RWAs).
The importance of programmability on the XRPL
Due to the industry’s relative newness, blockchain programmability and customizability may be limited at present. However, Ripple is making considerable efforts to collaborate with the community and enhance permissionless programmability on the ledger. This would enable native building blocks to integrate with custom on-chain business logic, thereby maintaining efficiency and reliability.
Therefore, developers should expect the start of native programmability on the ledger, through which they could attach code to existing XRPL primitives. They won’t have to create new smart contracts to connect with the original code. Instead, they will approach customization of escrows, AMMs, and tokens. Such an example would include “Smart Escrows” for developers to enable custom conditions, such as price-based triggers.
The deployment of the XRP ledger EVM Sidechain
Another feature to enhance programmability on the XRPL is the EVM Sidechain, scheduled to launch in the second quarter of 2025. Developers will be able to leverage it to launch protocols written in code, such as Solidity. Currently, such coding approaches are not possible on the XRPL.
Cross-chain technology will give the ledger a competitive advantage by enabling EVM dApps to operate within a vast ecosystem. Seamless development will also play a crucial part in building, porting, and forking dApps within an established blockchain community.
Is institutional DeFi important for the future?
Decentralized finance offers a diverse range of solutions to address the issues created by traditional finance. Outdated systems, slow innovation, and bureaucracy are leading to considerable disruptions, but DeFi has the potential to change that.
The DeFi ecosystem enables users to manage their assets through specialized dApps and digital wallets secured by private keys. They benefit from the permissionless nature of blockchains. Ethereum and Solana have made significant contributions to DeFi, establishing smart contracts as the leading tools. This move has enabled the ecosystem to grow and expand into decentralized exchanges and automated market makers.
However, institutional DeFi focuses on institutional investors who lend and borrow on decentralized protocols or yield farming. This allows them access to a broad range of investments and trades. These support the growing ecosystem and deliver additional tools for institutions, including key custody, multisig key security, and algorithmic trading automation.
Challenges in adopting institutional DeFi
Institutional DeFi may be the future of modern finance, but it will encounter several challenges before reaching that point. The opportunities of financial inclusion, no middlemen, and transparency will be achieved after navigating:
- The ever-changing regulation. Categorizing DeFi protocols and technologies is already a complex task. Therefore, it may take some time for governments to establish a proper legal framework.
- Security risks that target smart contract vulnerabilities. DeFi hacks are possible due to vulnerabilities in ledgers. These issues are likely a result of the industry’s relative newness and a lack of top-tier professionals.
- Scalability issues are among the most challenging to manage. Even blockchains like Ethereum struggle with scalability after improvements.
- Liquidity fragmentation is a prominent issue on decentralized exchanges, which can lead to slippage. Therefore, institutions must exercise caution when executing large transactions to avoid affecting market prices.
What are your thoughts on the XRP institutional DeFi development?
XRP is approaching the adoption of one of the most essential features of modern finance, institutional DeFi. With additions like protocol liquidity in AMMs, decentralized identity, and protocol-native oracles, the XRP ledger paves the way for credentials, multi-purpose tokens, and credit-based lending protocols. Contributing to the growth of DeFi is essential. However, developers will encounter challenges in XRP price prediction due to the changes in regulations and security risks.
