Ripple Considers Staking to Integrate XRP into DeFi on the XRP Ledger

Ripple is examining the potential of introducing staking to the XRP Ledger (XRPL), a significant step that could strengthen its position in the growing decentralized finance (DeFi) sector. The company is considering how staking might enhance network security and encourage participation among validators and token holders.

Key Takeaways

Ripple is assessing the impact of staking on XRPL's security and community engagement.
Ripple's CTO, David Schwartz, proposed two theoretical models for implementing staking.
Despite rising interest and utility for XRP, implementation of staking might not happen in the near future.

The conversation surrounding this development was sparked by a blog post from J. Ayo Akinyele, head of engineering at RippleX. In it, he discussed how the introduction of staking could increase XRP's utility and change the incentives for both validators and token holders.

Ripple Considers Staking to Integrate XRP into DeFi on the XRP Ledger

Enhancing Security on the XRPL with Staking

Akinyele suggested that the idea of staking emerged as new functionalities are introduced on the XRPL. He believes that staking could encourage “long-term participation” and improve network security by rewarding those who assist in achieving consensus.

However, enabling staking would necessitate significant changes to the ledger’s structure. Currently, the XRPL operates a deflationary model by burning transaction fees, and converting these fees into rewards would require a fundamental overhaul of the existing systems.

Historically, the XRP Ledger was designed primarily for efficient value transfer, focusing on cross-border payments. As XRP finds favor among corporate treasuries and shows up in exchange-traded products, Ripple is exploring how new features like staking could keep the network competitive.

Transitioning XRPL to a rewards-based framework raises important questions about its original principles, particularly its Proof of Association model, which values trust over economic incentives.

Ripple's CTO, David Schwartz, further discussed the concept of staking, outlining two theoretical avenues for implementing it on XRPL.

The first model suggests a dual-layer consensus system. This would include an incentivized “inner” layer composed of approximately 16 validators chosen based on their stake, allowing this group to use slashing and staking mechanisms to progress the ledger. Meanwhile, an “outer” layer would maintain governance and oversee the network.

The second proposed method retains the current consensus structure while utilizing transaction fees to support zero-knowledge proof (ZKP) verification. ZKPs enable participants to authenticate facts without exposing sensitive information, providing a trust-minimized approach to confirming involvement.

Schwartz pointed out that while these models are intriguing, they face significant engineering challenges, and significant modifications are necessary, making it unlikely that staking will be integrated into XRPL in the near future.

Ripple Applauds Fed Proposal for Crypto Companies

In another development, earlier this month, Ripple's chief legal officer, Stu Alderoty, expressed support for a proposal from Federal Reserve Governor Christopher Waller. This initiative aims to grant crypto companies access to “minimalist” Fed accounts, a change that could significantly alter the U.S. digital asset landscape.

Waller advocated for stablecoin issuers and other crypto firms to gain direct access to the Federal Reserve's payment systems, thus reducing their dependence on traditional banks that are often reluctant to service the cryptocurrency sector.

He encouraged regulators to "embrace the disruption," suggesting a shift towards a more welcoming approach to decentralized finance.

Ripple, which has previously sought a Fed master account to support its RLUSD stablecoin, views this proposal as potentially revolutionary.

Alderoty stated that this change could facilitate quicker settlements, lower costs, and help RLUSD become more competitive in the stablecoin market, currently dominated by Tether and Circle.

Additionally, he noted that direct access to the Federal Reserve would enhance stability and redeemability, allowing firms to transition swiftly between U.S. Treasuries and dollars without the need for banking intermediaries.