Crypto expert James has highlighted what this is XLS-66 change what it is about and what it would mean for XRP holders in terms of earning returns. This comes as XRP Ledger validators prepare to vote on the change that will introduce the institutional lending protocol.
How XRP holders can earn returns through the XLS-66 change
In one X contributionJames pointed out that, contrary to what XRP holders might think, the XLS-66 change is not just about depositing your tokens and collecting interest. Rather, it is a structured, institutional credit protocol where investors’ income is generated within the single-asset vault and is only realized when they decide to repay their deposits.
Therefore, the XLS-66 amendment will not be valid XRP holders automatic payments or dividends. Instead, they receive an MPT token that represents the altcoin they deposited in the vault. The redemption value of these MPT shares increases over time. James noted that the borrowers are not retail investors, but rather banks, market makers, fintechs and payment providers who are lending short-term working capital on neutral tracks.
Therefore, the owners do not lend their capital to outsiders. Instead, they participate in the same transparent on-chain pools alongside institutions. He added that the redemption and deployment cycle across multiple vaults is how they manage risk and generate regular revenue without locking everything up indefinitely.
How the safes work
Expert Bodhi had also broken down how the XLS-66 change works and how holders can benefit from the returns from these individual asset vaults. He noted that borrowers repay both principal and interest when repaying their loans. The interest remains in the vault and increases the total amount of the pool XRP holdings. This causes the redemption value of each MPT to increase over time.
As to how the loans work, he explained that a connected loan broker bundles the XRP in the vault and makes it available for lending. The LoanBroker provides temporary loans with a term between 30 and 180 days. The loans are uncollateralized, meaning borrowers do not deposit any collateral on-chain. Traditional underwriters are responsible for handling off-chain lending decisions.
Fig, the co-founder of Squid’s UNL validator, said You will vote yes to the XLS 66 amendment. He noted that a strong feature of the lending protocol is that difficult aspects such as credit checks remain off-chain. The XRPL validator added that this is a contemporary approach DeFi protocol design This is becoming more important.
Fig also mentioned that DeFi protocols have in the past attempted to create autonomous systems that calculate interest rates and manage loan details via smart contracts. However, this process can often be manipulated and is more susceptible to attacks.
At the time of writing, XRP price is around $1.46, up over 2% in the last 24 hours Data from CoinMarketCap.
Featured image from Adobe Stock, chart from Tradingview.com
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