Ripple Proposes Federated Sidechains for Implementing DeFi

Jafrin  |  Jun 12, 2021

Ripple’s Chief Technology Officer (CTO), David Schwartz has proposed introducing federated sidechains to allow developers to implement smart contracts and decentralized finance (DeFi) capabilities adjacent to the XRP Ledger. Each sidechain would operate as its own blockchain with the support to transfer XRP and issued tokens to move from one chain to another.

Ripple CTO Proposes Implementing Federated Sidechains

David Schwartz, one of the original architects of the XRP ledger and the current Chief Technology Officer of Ripple has proposed to enable the implementation of smart contracts adjacent to the XRP Ledger, according to a new blog post.

Per Schwartz, the advantages of federated sidechains include unlocking “new use cases like native DeFi capabilities and smart contracts.”

"This will enable developers to implement new features, such as native smart contracts that interoperate seamlessly with XRP and the XRP Ledger, while also allowing the XRP Ledger to maintain its existing, ‘lean and efficient feature set" read the blog post.

Federated sidechains for the XRP Ledger would enable developers to implement native smart contracts without compromising the security or efficiency of the ledger, said Schwartz.

Each sidechain having an account on the XRP Ledger which can hold assets on behalf of its sidechain’s users.

Risks Associated with Changing the Software

“Federated Sidechains allow for experimentation and specialization, so developers can enjoy the power of the XRPL on a sidechain that acts as its own blockchain. For example, imagine the potential to branch out into new functionality by slimming down the XRPL’s features to a specific subset for a particular use case — or even creating a private, parallel network for a permissioned blockchain”, the blog post continued.

Schwartz noted that Ripple has been resisting adding smart contracts capabilities to the XRP Ledger because of the risk of compromising the ledger’s focus on payments, saying:

“Making these changes is probably the biggest part of this effort because even though they won’t be enabled on XRPL, there is still risk associated with changing the software. For example, some existing code may need to be moved or adjusted which carries the risk of inadvertently changing behavior.”

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