Ripple’s XRP will soon be expanded to include critical functionalities, including DeFi, NFT and smart contract functionality.
If the speculations are to be believed, there is more at stake than just DeFi and smart contracts. Ripple confirms that federated sidechains are coming. The implementation will significantly expand the use cases of the XRP ledger, including the addition of DeFi, NFT and smart contract functions.
“You asked, we listened. We introduced Federated Sidechains for the XRPLedger so that you can enjoy the performance of the XRPL on a sidechain that acts as its own blockchain. Learn more about new use cases such as native #Defi functions and smart contracts. “
While the company confirms that cross-border payments will remain its “bread and butter” business, federated sidechains will open up a world of opportunity for Ripple going forward.
Additionally, speculation is mounting that Ripple has a bigger goal in mind. Namely, the use of sidechains to capture the digital central bank currency (CBDC) market.
Ripple CTO explains why sidechains are necessary
In an interview with the YouTube channel Thinking Crypto, David Schwartz, CTO of Ripple, said the following about federated sidechains:
“The general idea is to increase the usefulness of the XRP ledger by essentially having additional ledgers that are literally sitting on the side.”
The idea behind this concept is to divide the functionality into different chains. That way, the mainchain that Ripple uses for payments remains fast and inexpensive.
“Trying to put everything on a single chain makes the chain slow, expensive, and it degrades people’s ability to use it for simple payments.”
According to Schwartz, they could have built smart contracts etc. into the mainchain. But neither he nor the XRP community would have accepted that because it comes down to being “the best digital asset for payments”.
Playing with the digital central bank currency
Ripple announced a pilot for CBDCs in March of this year. This project is based on the XRP Ledger, which has proven itself as a reliable, secure and highly scalable payment system for over eight years.
However, as an offering to central banks, it also provides transaction protection and more control than a standard public ledger.
The interoperability aspect of the project is even more interesting. According to Ripple, these private ledgers are able to connect to the existing legacy infrastructure – and also to each other.
This is an interesting perspective when you think of cross-border billing that takes place via sidechains in the same network.
“We are also working on a new approach whereby central banks can join a network of CBDC ledgers that allows full settlement interoperability, while each member can maintain their monetary and technological independence.”
While today’s announcement didn’t mention CBDCs, adding two and two together isn’t difficult.
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