Top Validator Says This Article Is a Must-Read for XRP Holders

The XRP Ledger is moving toward a lending structure that could let depositors control how their capital enters lending markets. XRPL validator Vet has urged validators to review the latest Lending Protocol changes as the network considers the amendments required to activate lending on mainnet.

XRP Ledger Lending Protocol Adds Closed-Ended Vaults

Closed-ended vaults introduce a fixed structure for the credit lifecycle. Vet explained that these vaults operate through three phases: subscription, investment, and redemption.

During the subscription phase, the vault remains open for deposits. Users can provide assets to the vault and receive shares in return. The vault then enters the investment phase, closes to new deposits, and deploys capital into loans.

The redemption phase follows the investment period. Once the vault reaches its redemption date, it reopens for withdrawals. Depositors can then redeem their shares based on the final value of the vault.

RippleX Developers Explain How Closed-Ended Vaults Work

The article explains that both vault types use the same Vault ledger object and transaction types. The main difference involves when users can move capital into and out of the vault.

The closed-ended structure also changes how interest affects the vault’s accounting. Under LendingProtocolV1_1, interest counts as income when the borrower actually makes the payment. The vault therefore records received interest rather than expected future interest.

The protocol sends interest payments back to the vault through VaultDeposit with the tfVaultDonation flag. These payments increase the vault’s total assets without creating additional shares, which increases the price per share for existing holders.

Three Amendments Must Activate Together

Vet also advised validators to consider LendingProtocol v1 and v1.1 together when voting on the lending framework. RippleX Developers explained that three amendments must activate for lending to go live on XRPL mainnet: LendingProtocolV1_1, LendingProtocol, and SingleAssetVault.

LendingProtocol provides the core lending functions, including loan brokers, loan origination, repayment, default handling, and first-loss capital. SingleAssetVault provides the underlying vault structure for both open-ended and closed-ended vaults.

LendingProtocolV1_1 adds closed-ended vaults and cash-basis accounting while restricting new loan brokers to closed-ended vaults.

The RippleX Developers article explains that the restriction addresses how continuous deposits and withdrawals could affect share pricing. A closed-ended structure prevents users from entering a vault midway through its lending cycle and receiving value from interest generated before their participation.

For now, XRPL’s lending framework will use closed-ended vaults for lending while open-ended vaults remain available for other purposes. Vet’s recommendation places the upcoming validator votes at the center of the process required to bring the lending functionality to mainnet.