Hugo Philion, CEO of Flare Labs, recently announced that $134 billion worth of XRP will soon be eligible to earn a yield on Flare through FXRP and native XRP staking. While this development is exciting, it has raised concerns, regarding yield sources and potential risks for participants.
Vet (@Vet_X0), an XRPL dUNL validator, raised key questions about how these yields are generated and whether participants face risks such as impermanent loss and slashing penalties.
Where does the yield come from?
— Vet (@Vet_X0) February 7, 2025
Yield Sources for FXRP and Native XRP Staking
Philion explained that FXRP yield will be generated through decentralized exchange (DEX) liquidity provision and lending. This means participants who provide FXRP as liquidity on a DEX or for lending markets will earn returns based on trading fees and interest payments from borrowers. This mechanism aligns with Flare’s broader strategy to integrate XRP into decentralized finance (DeFi).
For native XRP staking, Philion stated that the yield comes from securing decentralized services, such as an oracle network or a decentralized AI protocol. In this model, staked XRP would contribute to the stability and functionality of these services, and in return, participants would receive rewards.
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Concerns Over Impermanent Loss and Slashing Risks
Vet quickly pointed out a potential risk associated with FXRP yield: impermanent loss. This occurs when the value of assets in a liquidity pool changes compared to when they were initially deposited, potentially leading to losses for liquidity providers. Impermanent loss is a well-known risk in DeFi and could impact users seeking stable returns.
However, Vet’s most significant concern was slashing rules for native XRP staking. In most staking models, slashing refers to penalties imposed on validators or participants who fail to meet network requirements.
Vet’s question implied a need for clear guidelines on how XRP stakers could be penalized if their provided capital was used to secure decentralized services.
So far, Philion has not provided a detailed explanation of these slashing mechanisms. Given the substantial amount of XRP that could be involved, this remains a key area of interest for the community.
Implications for XRP Holders
The ability to stake XRP and earn a yield on Flare could significantly expand XRP’s utility in the DeFi space. With FXRP, users will engage in DeFi applications, while native staking will provide an additional layer of functionality for decentralized services.
Recently, Flare integrated XRP into its test network, marking an important step toward full implementation. With the potential full launch that could accommodate XRP’s entire market cap of over $130 billion, the XRP community is about to take a step into the future.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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