XRP Holders Face Up to 60-Day Wait for Collateral Withdrawal

XRP holders may soon be able to earn new yields on their assets, thanks to Firelight's protocol, which is preparing to turn XRP-linked assets into capital that backs protection for DeFi users. This process will give holders a new source of income in exchange for putting their collateral at risk.

Firelight's vault allows holders to deposit FXRP, an XRP-linked asset on Flare, and receive stXRP representing their position. The protocol then uses the deposited FXRP to back coverage sold to DeFi protocols, generating income for the holders supplying the collateral.

The trade-off is that getting the collateral back could take much longer, with withdrawal wait times potentially extending from one to two days to up to 60 days depending on when a holder asks to leave. Rewards also stop once the withdrawal process begins, and an eligible claim tied to the period when the FXRP was backing coverage can reduce the amount eventually returned.

Firelight has already attracted substantial XRP-linked capital ahead of this transition, with $71.74 million in Firelight total value locked as of September 13th. However, it's essential for holders to understand that the longer withdrawal period comes from the role Firelight gives depositors' FXRP, which can be used to support protection sold to DeFi protocols.