Ripple continues to develop its ecosystem as it has announced a new development. This new development is likely to thrust XRP Ledger (XRPL) as a challenger to ETH and BSC in the smart contract arena – XRPL is planning to enable smart contracts on the XRPL.
David Schwartz, the Chief Technology Officer (CTO) of Ripple revealed this feature to the public while sharing his vision on the 7th of June. This new feature is called Federated Sidechains. This new addition is very beneficial for the cryptocurrency community as they would be able to operate a sidechain to XRPL easily.
The main focus of Federated Sidechains is to let developers implement more amazing features such as smart contracts. Moreover, the developers of XRP will also have an opportunity to conduct trials on a sidechain while utilizing the complete power of the XRPL.
The rapidly growing decentralized finance (DeFi) space and smart contracts’ popularity are the main reasons behind the introduction of Federated Sidechain.
Furthermore, David also stated that the software name Federator is going to serve as a bridge between Sidechain and the XRPL. The concept would allow each sidechain to have its own ledger and transactions, as well as a federation system that allows XRP and sidechain issued tokens (BTC, fiat, CBDC) to move from one sidechain to another.
XRP will be used as the native token to power the main XRPL as usual. In addition, XRP can also be used as the native token for running the sidechains, or any application built on the sidechains may also opt to issue their own tokens which is compatible with XRPL – these new tokens shall be named Federated Assets. Federated assets imported onto XRPL itself would trade on the XRPL’s integrated decentralized exchange (DEX). XRP imported onto sidechains would be used for liquidity on the XRPL integrated DEX as well.
This is a bit similar in nature to other smart contract blockchains like DOT which calls their sidechains parachains. Perhaps the overwhelming demand for the impending launch of DOT parachains has given Ripple the motivation to do their own sidechains. Even Cardano (ADA) is upgrading its blockchain to enable smart contracts. In order to survive and thrive, Ripple sees the need to innovate and improve on XRPL.
Allowing sidechains on the XRPL opens up a wave of new opportunities that XRPL in its previous form could not tap on, and is in fact a lot more powerful to XRPL than it is to any other blockchains. For instance, countries will now be able to issue Central Bank Digital Currencies (CBDC) on XRPL. With XRPL the most adopted ledger amongst financial institutions, having the sidechain upgrade will allow banks, financial institutions, central banks, even governments, to issue their own bank-issued tokens, CBDCs, or other forms of digital money and financial products on the XRPL. Hence, this upgrade is a lot more significant as it may seem at first glance. It could propel XRPL to become the most powerful blockchain due to the good relationship with banks which Ripple has painstakingly took years to build.
Hence, this sidechain additional feature is very exciting news for the XRP token since this will create new demand for XRP. Expect XRP to rise in the crypto ranking once this additional feature is deployed. However, the upgrade is still in its consultation stage with XRPL developers and will need XRPL’s validators to agree before the developers can even start working on it. Usually, if an amendment proposal gets an 80% approval rating or more for two weeks, it is activated. I have no doubt that this upgrade will be approved since it is extremely beneficial to everyone in the XRPL ecosystem.
Should XRPL gets the approval to go-ahead, the price of XRP could soar once again, just like how the ADA token soared after the Cardano blockchain decided to implement smart contract capability.
While the SEC lawsuit has been keeping the price of XRP down, another event keeping a lid on the price of XRP has been the relentless selling of XRP by Jed McCaleb, the former CTO of Ripple who was given 8 billion XRP. Jed has been selling XRP since 2014, and has been extremely aggressive in offloading his XRP stash in the past few months. In May alone, Jed sold over 400 million units of XRP, and is continuing to sell at the same pace. The good news is however, that Jed has only around 600 million units of XRP left, and will run out of XRP to sell by August if he were to sell at the same rate he did in May. This means that the pressure on XRP price will be lifted by a huge extent come August. With the outcome of the SEC lawsuit expected to come around August as well, and the voting of the sidechain to be complete (and most likely approved) by July, the next couple of months could be quite favourable for the price of XRP.
The current lawsuit with the SEC has caused a great reduction in media coverage on XRP, to the point where even news as significant as a blockchain upgrade has not been featured on most crypto media. The only place writing about the proposed upgrade is the Ripple Blog. Hence, investors may want to take advantage of the current market decline to accumulate XRP with the price still weak and the market still not quite in-the-know.
About Kim Chua, PrimeXBT Market Analyst:
Kim Chua is an institutional trading specialist with a track record of success that extends across leading banks including Deutsche Bank, China Merchants Bank, and more. Chua later launched a hedge fund that consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who developed her own proprietary trading curriculum to pass her knowledge down to a new generation of analysts. Kim Chua actively follows both traditional and cryptocurrency markets closely and is eager to find future investment and trading opportunities as the two vastly different asset classes begin to converge.
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