Flare’s DeFi Ecosystem Is on Fire Right Now and XRP Is the Spark

DeFi is everywhere. It’s integrated into your web browser, your crypto wallet, and your dapp store. Not only is it onchain but it’s even accessible on centralized exchanges under the banner of CeDeFi. What started out on Ethereum a little over five years ago has permeated industry-wide, finding a home on hundreds of distinct chains, from Solana to Sui.

But while DeFi’s TVL has waxed and waned all year in line with broader market movements, there’s one network where it’s been in Up Only mode only of late. On Flare’s blockchain for data, the Total Value Locked into decentralized finance protocols has risen by 40% since late September, driven by demand for an asset that for most of its history has had little to do with DeFi – XRP.

This is the story of the reinvention of XRP, from a fast and cheap payment currency to becoming the backbone of thriving financial markets that have caught fire on Flare.

Slowly then All at Once

Back in May, Flare launched its XRPfi portal with the promise of transforming XRP into a multi-purpose asset capable of supporting an array of DeFi activities, from staking to liquidity provision. Doing so called for making XRP transferable from its native XRP Ledger to Flare’s EVM-compatible network where smart contracts could take care of the rest, unlocking the true value of the time-served cryptocurrency.

To achieve this, Flare developed its FAssets protocol which allows old-school digital assets such as XRP and DOGE to be locked into a smart contract and a corresponding amount of F tokens – such as FXRP – to be minted. This trustless bridging protocol has been operating smoothly ever since, with first retail users and increasingly now institutions taking advantage of the ability to use their XRP as a yield-generating asset.

While solving the technical challenges to unleashing XRP were the first step to enabling DeFi on Flare to flourish, building the infrastructure alone was not enough. The next phase has called for ensuring there are sufficient incentives in place for users to take the plunge and onboard in serious numbers. These puzzle pieces are now rapidly falling into place thanks to a slew of initiatives that have ramped up the rewards and enhanced the ways in which XRP can be utilized on Flare.

Flare Targets Treasury Yield

One of the reasons why Flare’s TVL has been rising more rapidly than other DeFi ecosystems is because it’s shrewdly identified ways in which to distinguish itself from the rest of the market over and above the novelty of being able to use XRP. Specifically, it’s taking aim at treasury yield, with the goal of attracting blockchain projects – as well as institutions – looking to grow their assets under management.

In the past couple of months, Flare has scored a number of successes here, firstly with VivoPower deploying $100M in capital, and then with Everything Blockchain, a U.S.-listed public company that’s agreed to adopt Flare’s XRPfi framework for its digital asset treasury. This enables them to allocate XRP across decentralized lending, staking, and liquidity protocols on Flare. The fact that institutions are entering the fray and deploying serious capital attests to the faith they have in the security and sustainability of the framework that Flare has developed.

Ramping up the Rewards for Retail

Amidst all this institutional courting, Flare hasn’t overlooked its existing retail userbase, who were among the first to take the plunge and mint FXRP. There’s been significant progress made recently in making it easier for this process to be completed thanks to integrations such as Xaman, whose non-custodial wallet now supports XRP bridging and FXRP minting.

It also helps that once they arrive on the other side, retail is finding that the yields on offer are rather attractive, boosted by a 2.2B FLR program that’s added additional incentives to FXRP stakers and liquidity providers. Messari recently reported on the spike in demand for FAssets on Flare, XRP especially, noting that the initial 5 million FXRP mint cap filled in under four hours, and when this was subsequently raised to 15 million FXRP, it filled just as fast.

Mesari notes that “As XRP's market presence continues to grow, Flare's technology offers a pathway to unlock this dormant value and integrate it into the broader DeFi landscape. This potential has attracted attention from both retail users and institutional players, setting the stage for what could be one of the most significant developments in the XRP ecosystem since its inception.”

That in essence is the bull case for Flare and for XRP. They now enjoy something of a symbiotic relationship, with demand for one fueling demand for the other. While the total amount of XRP that’s been minted on Flare is still a fraction of the asset’s total market cap, it’s a promising start that’s seen the network’s TVL increase by more than 5x in the past year.

There is, of course, a certain irony in Flare arguably doing more to increase XRP’s utility and adoption in the last 12 months than Ripple has achieved in the last 12 years. That said, the two entities are not in competition with one another. Flare benefits from XRP’s deep liquidity, relative stability, and global accessibility. 

In turn, XRP benefits from all of the features that the XRP Ledger can’t natively support, from staking to lending to perps. With Flare busily adding even more ways for its community to earn yield, including the XRP Earn Account developed with MoreMarkets, the incentives for turning simple XRP into supercharged FXRP are starting to stack up.

And this is just one of the cryptocurrencies Flare’s FAssets protocol supports. Should it crank up its efforts with other cryptos such as BTC and DOGE, it’s conceivable that Flare could evolve into a major multi-asset DeFi hub. That remains to be seen, but in the here and now, this much is certain: Flare has proven that there is genuine demand for XRPfi. Some people scoffed at the idea a few years ago, when Flare first sketched out its vision of building a DeFi ecosystem centered around XRP. They’re not laughing now.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.