Evernorth announced on January 29 that it plans to leverage the XRP Lending Protocol (XLS-66) to create institutional-grade yield on idle XRP assets. The move targets the $100+ billion market cap of the token, much of which remains in cold storage or on centralized exchanges.
For over a decade, the Ripple’s token has been a cornerstone for payments and cross-border settlements, but it has lacked a native mechanism for generating yield. Unlike Proof-of-Stake networks, the token holders have not been able to earn passive returns directly on the ledger.
Evernorth’s goal in adopting XLS-66 is to make use of underutilized resources while keeping them on the XRP Ledger. This is a major change for institutions, as it provides a secure and regulated environment for lending on-chain.
The press release also emphasizes the efficiency, compliance, and auditability of using native protocol features over moving assets to other blockchains.
How the Lending Protocol Works
The protocol allows institutional lenders to deposit the token into Single-Asset Vaults (SAVs). Borrowers can take loans to finance activities such as market making, managing collateral, or optimizing the treasury.
The ledger system automatically manages repayment schedules, interest rates, and penalties for late repayment, which are prone to errors when lending between wallets in an off-chain wallet-to-wallet lending system.
Manual off-chain lending can also lead to a “triple database problem” where lenders, borrowers, and custodians maintain their own databases. This can result in a dispute over the amount of interest or repayment.
XLS-66 resolves this issue by allowing all parties to view one source of truth in real-time. According to analysts, if the protocol achieves its target yield, it could open up billions of dollars per year to institutional participants who were not able to access it before.
Bridging XRP Poses Tax and Smart Contract Risks
Linking the token to other networks to generate yield means there are tax implications, and that institutions are using unproven smart contracts. XLS-66 offers a native solution that has the benefit of 13 years of experience on the network.
The solution improves security, auditability, and predictability for institutional treasury management. The adoption of Evernorth could create a supply utility flywheel. This would utilize idle XRP and ensure that the XRPL ecosystem remains healthy.
Developers and validators are encouraged to stress test the amendment to ensure that the contract integrity, repayment logic, and vault functionality are as secure as the ledger.
Also Read: Can AI Run a $1B XRP Treasury? Evernorth and t54 Are Testing the Limits
