Ripple continues to develop its ecosystem as it announced a new development. This new development is likely to boost the XRP Ledger (XRPL) as a challenger for ETH and BSC in the smart contracts arena, and XRPL is planning to enable smart contracts in XRPL.
David Schwartz, Ripple’s Chief Technology Officer (CTO) unveiled this resource to the public by sharing his vision on June 7th. This new feature is called Federated Sidechains. This new addition is very beneficial to the cryptocurrency community as they would be able to operate a side chain for XRPL easily.
The main focus of Federated Sidechains is to enable developers to implement more amazing features like smart contracts. In addition, XRP developers will also have the opportunity to run tests on a side chain, utilizing the full power of XRPL.
The rapidly growing decentralized finance (DeFi) space and the popularity of smart contracts are the main reasons behind the introduction of the Federated Sidechain.
In addition, David also stated that the Federator software name will serve as a bridge between Sidechain and XRPL. The concept would allow each sidechain to have its own ledger and transactions, as well as a federation system that would allow tokens issued by XRP and sidechain (BTC, fiat, CBDC) to move from one sidechain to another.
The XRP will be used as the native token to feed the main XRPL as usual. In addition, XRP can also be used as the native token to run the side chains, or any application built on the side chains can also choose to issue their own tokens that are XRPL compliant, and these new tokens will be called Federated Assets. Federated assets imported into XRPL itself would be traded on XRPL’s integrated decentralized exchange (DEX). Imported XRP for side chains would also be used for liquidity in the integrated DEX XRPL.
This is somewhat similar in nature to other smart contract blockchains like DOT, which calls their side chains parachains. Perhaps the huge demand for the imminent release of DOT parachutes has given Ripple the motivation to make its own side chains. Even Cardano (ADA) is updating its blockchain to allow smart contracts. To survive and thrive, Ripple sees the need to innovate and improve XRPL.
Allowing sidechains in XRPL opens up a wave of new opportunities that XRPL in its former form could not take advantage of and is actually much more powerful for XRPL than for any other blockchains. For example, countries will now be able to issue Central Bank Digital Currencies (CBDC) in XRPL. With XRPL the most widely adopted ledger among financial institutions, having the side chain update will allow banks, financial institutions, central banks and even governments to issue their own tokens issued by banks, CBDCs or other forms of digital money and products financials in XRPL. Therefore, this update is much more significant as it might seem at first glance. He could propel XRPL to become the most powerful blockchain due to the good relationships with banks that Ripple painstakingly took years to build.
So this additional sidechain feature is very interesting news for the XRP token as it will create a new demand for XRP. Expect XRP to increase in cryptoactive ratings as soon as this additional feature is deployed. However, the update is still in its consultation stage with XRPL developers and will need XRPL validators to agree before developers can start working on it. Typically, if an amendment proposal gets an approval rating of 80% or more for two weeks, it is activated. I have no doubt that this update will be approved as it is extremely beneficial to everyone in the XRPL ecosystem.
If XRPL gets approval to go ahead, the price of XRP could rise again, just as the ADA token skyrocketed after blockchain Cardano decided to implement smart contract capability.
While the SEC lawsuit keeps the XRP price low, another event that keeps the XRP price in check is the relentless sale of the XRP by Jed McCaleb, the former CTO of Ripple who received 8 billion XRP. Jed has been selling XRP since 2014 and has been extremely aggressive in unloading his XRP stock in recent months. In May alone, Jed sold over 400 million XRP units and continues to sell at the same rate. The good news, however, is that Jed only has about 600 million XRP units left and will run out of XRP to sell in August if he is to sell at the same rate as in May. This means that pressure on the XRP price will increase to a large extent in August. With the outcome of the SEC process set to take place in August as well, and the side chain vote to be completed (and likely passed) in July, the next few months could be quite favorable for the XRP price.
The current SEC lawsuit has caused a huge reduction in media coverage of XRP, to the point that even news as significant as a blockchain update has not been featured in most cryptoactive media. The only place to write about the proposed update is the Ripple Blog. Therefore, traders may want to take advantage of the current market slump to accumulate XRP with the price still weak and the market not yet fully informed.
About Kim Chua, Principal Market Analyst at PrimeXBT:
Kim Chua is an institutional trading specialist with a successful track record that spans major banks including Deutsche Bank, China Merchants Bank and others.
Over time, Chua launched a hedge fund that consistently delivered triple-digit returns for seven years. Chua is also an educator at heart who developed her own trading curriculum to pass her knowledge on to a new generation of analysts.
Kim Chua closely follows the traditional and cryptocurrency markets and is eager to find future investment and trading opportunities as the two very different asset classes begin to converge.
