After BTCFi, will XRPFi also become a new narrative?

Author: Haotian, Source: Author's Twitter @tmel0211

It's interesting that @FlareNetworks proposed to provide a set of staking services for the XRP network, aiming to allow XRP holders to participate in other web3 application scenarios such as oracles and L2. Many people only saw the continuous surge of $XRP, but they didn't know that $FLR also followed the 3-fold increase. I can't help but ask, what is the relationship between Ripple and Flare Network? After BTCFi, will XRPFi also become a new narrative? Next, let's briefly sort it out:

1) Ripple XRP is a typical old currency. It was born in 2012 (much earlier than Ethereum). Its goal is to replace the traditional interbank SWIFT payment and settlement system and realize high-speed and low-cost cross-border payment applications.

Perhaps because of this, the design of the XRP network did not adopt the network mechanism of smart contracts, perhaps to focus on high-scalability payment performance, or perhaps there was no condition at the time for the XRP network to carry more additional functions.

In short, XRP does not have a series of DeFi staking-related functions that are well known in the web3 environment.

2) XRP and @FlareNetworks met around 2021, and Flare announced that it would airdrop 15% of FLR, or 15 billion, to XRP holders. Why did FlareNetwork do this?

As mentioned above, the XRP network does not have smart contract functions, and FlareNetwork has launched the FAssets protocol, which can provide a set of cross-chain asset interoperability services for the XRP network, helping XRP to connect through the Flare network and other EVM environments.

This is similar to @babylonlabs_io providing a POS staking income network for the Bitcoin network through a set of encryption algorithm protocols, allowing a network whose underlying assets do not have staking mining to indirectly realize the staking function.

3) Specifically: users can deposit XRP into a specific address, and the Data Connector, a cross-chain "node" role, monitors and verifies the user's deposit transaction on the XRP chain, and then mints F-XRP on FlareNetwork with a 1:1 anchor relationship, and requires a certain amount of FLR tokens as collateral. The collateral rate will also be adjusted dynamically, and there is a certain liquidation mechanism to ensure security. Correspondingly, users can redeem the original XRP at any time to unlock the corresponding collateral.

It sounds similar to the concept adopted by many Bitcoin layer2 solutions to provide network expansion services for the Bitcoin network, that is, to use a relatively technology-native method to allow an asset that does not have smart contract constraints to circulate in another heterogeneous network.

It's just that, curiously, three years ago, FlareNetwork locked in to provide services for the XRP network. No wonder, this wave of Ripple's surge also indirectly boosted everyone's market expectations for FLR.

4) However, Flare is not satisfied with only providing "FAssets' asset cross-chain services". According to the idea of ​​its founder @HugoPhilion, Flare wants to provide a similar set of native services for the XRP network, just like Babylon provides staking services for Bitcoin. This will allow XRP to flow into other public chain systems to expand the web3 application scenarios of XRP tokens, such as: oracle services, Layer2, DID, etc.

This is actually just a continuation of Flare's vision of providing network expansion for the XRP network at the beginning, but if you think about it more deeply, you will find that it is not simple.

Because Bitcoin is no longer limited to the original reserve asset attributes, a BTC large-scale expansion ecosystem with hundreds of chains has been generated around Bitcoin. Babylon, as a key position, provides a set of native asset "cross-chain" services for the Bitcoin ecosystem, intending to support the entire Bitcoin layer2 ecosystem.

If the network effect of the XRP token is further enhanced, will there be a corresponding Ripple network enhancement and expansion ecosystem? Will it be the next XRPFi narrative trend after BTCFi?

If that is the case, it is conceivable how significant it will be for Flare to play the role of Babylon in the Bitcoin ecosystem.