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Crypto commentator James said the XLS-66 amendment is often misunderstood by XRP holders, emphasizing that it is not simply a deposit-and-earn interest mechanism. Instead, it is designed as an institutional lending protocol tied to how yields are generated and realized within the XRP Ledger.
In an X post, James said XLS-66 centers on a structured lending setup where investors’ yields accrue inside a single-asset vault and are realized only when they redeem their deposits.
He noted that the amendment does not provide automatic payments or dividends to XRP holders. Rather, participants receive an MPT token representing the XRP they deposited into the vault. Over time, the redemption value of these MPT shares increases.
James added that the borrowers are not retail investors. He described them as banks, market makers, fintechs, and payment providers borrowing short-term working capital using neutral rails.
Pundit Bodhi explained that as borrowers repay their loans, they repay both principal and interest. The interest remains in the vault, increasing the pool’s total XRP holdings, which in turn raises the redemption value of each MPT over time.
Bodhi also outlined the loan structure. An associated LoanBroker pools the XRP in the vault and makes it available for lending. The LoanBroker originates fixed-term loans lasting between 30 and 180 days.
He said the loans are uncollateralized, meaning borrowers do not post collateral on-chain. Credit decisions are handled off-chain by traditional underwriters.
Fig, co-founder of Squid’s UNL validator, said the validator will vote yes on the XLS-66 amendment. He highlighted that a key feature of the protocol is that difficult components such as credit assessment are handled off-chain.
Fig also argued that this approach reflects a contemporary direction in DeFi protocol design that is gaining traction. He contrasted it with earlier attempts to use smart contracts to compute interest rates and manage credit details autonomously, noting that such systems can be manipulated and may be more vulnerable to attacks.
At the time of writing, XRP was trading at around $1.46, up over 2% in the last 24 hours, according to CoinMarketCap.
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