XRP holders could earn new yield, but getting out may take up to 60 days

Firelight is preparing to turn XRP-linked assets into capital that backs protection for DeFi users, offering holders a new source of yield in exchange for putting their collateral at risk.

The Flare-based protocol lets holders deposit FXRP, an XRP-linked asset on Flare, into a vault and receive stXRP representing their position. Firelight's next phase would use that deposited FXRP to back coverage sold to DeFi protocols. Customers pay premiums for the protection, and those payments generate income for the holders supplying the collateral.

The trade-off is that getting the collateral back could take much longer. Firelight's withdrawal rules say its current one-day periods produce a withdrawal wait of roughly one to two days. Once the protocol introduces 30-day coverage periods, the same process would extend that wait to just over 30 days and, depending on when a holder asks to leave, nearly 60 days.

Rewards also stop when the withdrawal process begins, while an eligible claim tied to the period when the holder's FXRP was backing coverage can still reduce the amount eventually returned.

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