Flare Network bridges XRP to DeFi to unlock dormant liquidity

Despite its massive popularity, XRP (XRP) has remained largely absent from decentralized finance (DeFi) because of the technical limitations of the XRP Ledger (XRPL).

XRPFi, a DeFi ecosystem centered on XRP, aims to narrow that gap. It leverages Flare Network’s bridging and smart contract technology to bring XRP into the realm of programmable finance.

Flare Network, a full-stack layer-1 blockchain designed for data-intensive applications, serves as a crucial bridge connecting non-smart-contract assets like XRP to the DeFi ecosystem. 

At the heart of Flare’s infrastructure is FAssets, a system that creates fully collateralized representations of these assets. One notable example is FXRP, a wrapped version of XRP that enables holders to deploy their XRP in DeFi protocols within Flare’s network.

By staking FXRP, holders 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 unlock native-like staking yields on an asset that otherwise doesn’t support staking, enabling passive income without sacrificing liquidity.”

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Institutions are showing growing interest in XRPFi: Digital money platform Uphold, which holds over 1.8 billion XRP, has signaled plans to engage with the FAssets ecosystem, while NASDAQ-listed VivoPower recently announced a $100 million XRP deployment on Flare, underscoring how major players are validating and accelerating the momentum of XRPFi.

With XRP’s market capitalization exceeding $130 billion, directing even a fraction of that liquidity into DeFi could unlock a significant new capital source for the broader ecosystem. Flare’s technology expands XRP’s utility, encouraging greater participation from both institutional investors and retail holders.

Liquid staking is set to make its debut in the XRP ecosystem with the launch of stXRP on the Firelight protocol, powered by Flare. Much like the liquid staking token stETH (stETH) for staked ETH (ETH) offered by protocols like Lido, Firelight will allow users to stake FXRP and receive stXRP, a liquid staking token that can be utilized across Flare’s growing DeFi ecosystem. 

The process works by depositing FXRP into Firelight’s Launch Vault, which mints stXRP at a 1:1 ratio. These ERC-20 tokens are fully transferable and can be used across decentralized exchanges, lending markets, and other yield-generating DeFi protocols.

Importantly, the underlying FXRP will remain staked on Secured Service Networks (SSNs), which help secure decentralized protocols across multiple ecosystems while potentially earning rewards for users.

As holders of stXRP, users may also earn Firelight Points, which can influence future reward distributions. In the long run, this dynamic could increase the composability of stXRP within the XRPFi ecosystem, enabling its use as collateral, liquidity or a yield-bearing asset across a wide range of DeFi applications.

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