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XRP Ledger lending model can leave depositors exposed to 90% losses

A CryptoSlate model shows that with the same reserve and protection settings, one large default can drive a 90,000-token vault write down, versus 4,500 tokens if the same bad debt is spread across ten smaller loans.

Reported · Written up by our desk · Market Structure

CryptoSlate analyzed how an XRP Ledger lending model routes losses to vault depositors, finding that the effect on depositor shares depends heavily on loan sizing even when total debt and available reserves are unchanged at the start.

In the model, both scenarios begin with 1 million tokens of bad debt, a 200,000-token reserve, and identical protection settings, but depositor exposure diverges sharply: a single default wipes out 90,000 tokens backing depositors, while ten smaller loans produce a 4,500-token loss.

CryptoSlate attributes the 20-fold gap to the lending design, where the broker’s reserve protection is applied separately for each default, with payouts capped by minimum required cover and the liquidation rate tied to the reserve.

The comparison uses protection fields such as CoverAvailable, CoverRateMinimum, and CoverRateLiquidation, and applies a rule that calculates cover paid as the smallest of updated broker debt times minimum cover rate times liquidation rate, the defaulted loan’s debt, and available reserve. CryptoSlate notes the figures are hypothetical, tied to documented rules and code matching XRPL release 3.3.0, with mainnet activation unconfirmed at the time of the check.

Latest closeXRP $1.398 ▼1.7%

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