XRP Lending Model Exposed: Reserve Size vs Loan Structure Matters

The XRP Ledger's lending model has been found to leave depositors with significant losses despite having twice the reserves of a bad loan's size. In a hypothetical scenario, when one loan defaults on the XRP Ledger, the value backing depositors' shares in the loan book falls by 90,000 tokens.

However, if the same amount of debt is divided into ten smaller loans, only 4,500 tokens are lost. This means that there's a 20-fold gap in the losses faced by depositors depending on how the loans are structured.

The reason behind this discrepancy lies in how the lending rules release the reserve. Each default gets a separate cover calculation, and loan size affects how much loss reaches depositors even when the total unpaid debt and available capital remain the same.