XRP Holders Earn Fees from Kraken DeFi Vaults

XRP holders can now earn yields by providing collateral to the Firelight protocol. The system uses a portion of the profits from Kraken USDC vaults to compensate those who agree to cover losses in decentralized protocols.

This mechanism operates through the Flare network. Participants provide FXRP, which is a representation of XRP within the FAssets system, to form a reserve fund. This fund absorbs losses resulting from failures or exploits in protected investment strategies.

Fees paid by Kraken vault users are converted into FXRP. This process increases the collateral of each provider in the system. The financial return accumulates in the redemption value of the stXRP token, which represents the stake in the hedge fund.

Kraken distributes the investment product but does not guarantee payments or retain the fees. The annual yield offered to exchange depositors already accounts for the cost of this protection, which features rates that are adjusted monthly.

This integration creates a recurring income stream for those utilizing XRP capital on the Flare network. Demand for this protection may influence the need for fee conversions into FXRP to maintain the solvency of the reserve fund.