Flare Network has launched the first-ever XRP-backed stablecoin through a partnership with Web3 software development entity Enosys, marking a significant advancement for XRP's utility in decentralized finance (DeFi). The stablecoin utilizes a Collateralized Debt Position (CDP) protocol called Liquity V2, which has been forked and upgraded for deployment on the Flare network.
The system allows XRP holders to mint overcollateralized stablecoins without selling their underlying assets, preserving their cryptocurrency value while accessing liquidity. The stablecoins are designed to maintain a value close to $1, backed by XRP holdings. Initial support includes Flare XRP (FXRP) and Wrapped Flare (wFLR), with plans to expand to staked XRP (stXRP) soon.
Key features include protocol-incentivized liquidity, capital efficiency improvements, and user-set borrowing rates. Borrowers can set their own annual percentage rate (APR), though loans with the lowest interest rates will be redeemed first if the stablecoin falls below its $1 peg. The system also utilizes Flare Time Series Oracle (FTSO) for decentralized collateral pricing.
Hugo Philion, CEO of Flare Network, stated: "This allows the coin to be used in the digital economy." The Enosys team added: "This is just the beginning. By bringing a proven model like Liquity V2 to Flare, we're laying the foundation for stable, decentralized liquidity powered by XRP and enhanced by liquid staking."
The Liquity protocol has secured billions of dollars in collateral since its 2021 launch and maintained its stablecoin peg through extreme market conditions, providing credibility to this new implementation.
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