Ripple: Building the World Central Bank Digital Currency needs Sidechains on the XRPL

  • The Federated Sidechains on the XRP Ledger will provide the necessary infrastructure support to host CBDCs.
  • Ripple CTO said that the XRP Ledger has an extremely good operational speed, amazing scalability, an attractive fee policy, and much more as its key USPs.

Some of the top economies across the world are exploring the idea of a central bank digital currency (CBDC) and blockchain startup Ripple is closely watching the developments. As per reports, Ripple’s XRP Ledger could be home to a number of CBDCs developed.

The report notes that XRPL’s Federated Sidechains could play a crucial role in the development of Central Bank Digital Currencies (CBDCs). On Twitter, Mr. Janke explained that central banks would prefer having centrally controlled networks for their CBDCs. However, it would be difficult to build such platforms from scratch as they would lack liquidity inflow and a user base. In his Twitter thread last week, Mr. Jake wrote:

In any new up-and-coming network, on-boarding users and value will always be a challenge. @RippleXDev‘s new Federated Sidechain (XBridge) concept may play an incredible role for interoperability between different payment networks maintained by governments and the XRPL.

XRP Ledger’s Federate Sidechains can easily handle the logic, idea, and governance infrastructure required by CBDC users. Furthermore, they are more flexible and adjustable for different use cases. The Federated Sidechains by XRP Ledger can also establish interoperability with mainstream blockchains.

Mr. Jake explained: “XBridge enables the transfer of assets across different ledgers (ie. XRPL<->USD-L). A federated sidechain can be centralized or decentralized, open or private, its validators can follow any consensus mechanism. Any feature can be implemented to enforce law and regulation”.

XRPL is better than other blockchains

Speaking at the Apex Developer Summit 2022, Ripple CTO David Schwartz threw his weight and support for the XRP Ledger. He also unveiled the “secret sauce” behind the success and popularity of the XRP Ledger. During his talk, Mr. Schwartz said that XRP Ledger’s adoption has been on fire in 2022. “There’s no comparison to XRP and the XRP Ledger,” he added.

Explaining the reason behind it, the Ripple CTO said that the XRP Ledger has an extremely good operational speed, amazing scalability, an attractive fee policy, and much more as its key USPs. Additionally, XRP Ledger is also popular for having an environment-friendly validator structure.

Mr. Schwartz further added that XRP Ledger is the first ever blockchain having a built-in decentralized exchange (DEX). XRPL features a rich ecosystem of tools for tokenization and liquidity management. Mr. Schwartz has been one of the earliest contributors to XRP’s design. He added that all of these advantages can “differentiate” XRP Ledger from other blockchains.

However, XRP Ledger has still to gain enough maturity to deal with a complex infrastructure of hosting CBDCs. The XBridge amendment in Q4 2022 would activate the Federated Sidechains design which is currently in the review and the testing phase.

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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