Messari Report Highlights How Flare Enables XRP’s Entry Into DeFi
In Brief
Messari’s report highlights how Flare is enabling XRP’s entry into DeFi, unlocking new utility, liquidity, and institutional engagement while laying the groundwork for innovations like liquid staking within the emerging XRPFi ecosystem.
Market research firm Messari published a report analyzing how the Layer 1 blockchain Flare is facilitating new use cases for XRP by enabling its participation in decentralized finance (DeFi), thereby activating previously untapped liquidity.
Flare is a Layer 1 blockchain optimized for handling external data. It introduces a framework for integrating assets from blockchains without native smart contract functionality into the DeFi space. This is achieved through a combination of three core components: the Flare Time Series Oracle (FTSO), which delivers decentralized data feeds; the Flare Data Connector (FDC), which validates data originating from external networks for use in Flare’s EVM-compatible environment; and FAssets, a system that creates fully collateralized versions of non-smart-contract assets on the network.
The leading application of this framework is FXRP, a 1:1 representation of XRP that operates within Flare’s smart contract ecosystem. FXRP plays a central role in enabling the development of XRPFi, a DeFi infrastructure based on XRP. Given XRP’s sizable market capitalization and user base, the integration of this asset into programmable finance via Flare’s architecture introduces new layers of utility. The system is gaining interest from both individual and institutional participants, indicating a potential shift in how XRP may be utilized within broader digital finance ecosystems.
As outlined in the report, the FAssets system differs from conventional wrapped token models by removing the need for centralized custodians. Instead, it relies on a decentralized architecture designed to ensure security and trust minimization. To generate FXRP—Flare’s on-chain representation of XRP—users initiate a process that begins with sending XRP to an approved agent’s address on the XRP Ledger. These agents, who operate across both the XRP Ledger and the Flare Network, then lock collateral on Flare to support the issuance of FXRP. Once the Flare Data Connector confirms the transaction and verifies the receipt of XRP, the system proceeds to mint and distribute the equivalent FXRP on Flare.
Agents within the FAssets ecosystem are responsible for supplying collateral that underpins the minted tokens. These participants are verified through identity checks and are permitted to use various assets as collateral, including stablecoins such as USD₮0 and native tokens like FLR and SGB. The system enforces dynamic collateralization ratios that respond to market fluctuations, and real-time price information is sourced from Flare’s built-in oracle network, the Flare Time Series Oracle.
Version 1.1 of the FAssets protocol introduced the Core Vault, a mechanism designed to improve both capital efficiency and system scalability. This vault functions as a liquidity aggregation point where agents can deposit XRP and, in return, release locked collateral for additional utility within the ecosystem, such as minting more FXRP.
Safety mechanisms within the protocol include a layered security framework that employs escrow-based fund management and multi-signature verification. To reduce exposure to risk, the escrowed XRP is released incrementally. In the event of a potential security incident, the Flare Foundation retains the ability to trigger a system halt through an emergency mode. Supplementary measures such as third-party audits and ongoing bug bounty programs also contribute to the protocol’s security posture.
For blockchain networks like the XRP Ledger that lack native smart contract capabilities, FAssets provide a method for integrating their tokens into DeFi. This allows XRP holders to engage in lending, borrowing, yield farming, and other financial activities without relinquishing control over their base assets. Given XRP’s historically limited role in DeFi despite its global liquidity footprint, this development marks a notable shift in how the asset could be used in decentralized applications.
FAssets have continued to advance through their development lifecycle, with FXRP currently active on Songbird, Flare’s canary network designed to test protocol upgrades under real economic conditions prior to mainnet deployment. The rollout of FXRP on Songbird represents the first implementation of the FAssets protocol involving real capital, marking a considerable operational benchmark.
The Songbird deployment reached its $2 million testing capacity within four days, suggesting elevated interest in using XRP within DeFi frameworks. This activity is seen as an early indicator of potential demand for FXRP once it becomes available on the Flare mainnet. Preparations for the mainnet release are ongoing. Meanwhile, the broader FAssets ecosystem is gaining momentum, as demonstrated by interest from entities such as Uphold, a digital asset platform with XRP holdings, and VivoPower, a publicly listed company allocating $100 million in XRP for deployment on Flare. These developments point to growing institutional alignment with the FAssets model, particularly as it relates to integrating XRP into DeFi infrastructure.
Flare Accelerates Liquidity Growth With USD₮0 Integration, Driving Over 220% TVL Increase And Launching Incentive Program
In parallel, Flare has prioritized liquidity growth across its network. The recent integration of USD₮0—an omnichain stablecoin issued under LayerZero’s Omnichain Fungible Token standard—has introduced a stable medium of exchange and supported the formation of asset pairs within decentralized applications. Approximately two weeks after the introduction of USD₮0, Flare’s total value locked (TVL) expanded by more than 220%, increasing from around $37.1 million to $120.9 million. As of June 6, 2025, that figure stands at approximately $148.8 million.
USD₮0 has emerged as the dominant stablecoin on Flare, comprising roughly 63.2% of the stablecoin market share. Additional options such as USDC and USDX also exist, holding shares of about 19.1% and 17.7% respectively. This distribution has introduced diversity into Flare’s stablecoin landscape, which may help reduce systemic dependency on any single issuer.
In order to incentivize adoption, Flare has introduced the USD₮0 Boost program, which offers annual percentage yields of up to 30%, paid in the network’s reward token, rFLR. Complementing this initiative are gas fee subsidies for USD₮0 transactions and exchange support through Kraken. Collectively, these measures are designed to enhance usability and reduce barriers to stablecoin interaction within the Flare ecosystem.
XRP’s DeFi Expansion And Upcoming Liquid Staking Launch
Despite XRP’s consistently high market capitalization and a large base of retail holders, its integration into DeFi has been limited by the technical constraints of the XRP Ledger, which does not natively support smart contracts. The introduction of XRPFi—a decentralized financial ecosystem centered around XRP—is enabled by Flare’s infrastructure, which provides a trust-minimized mechanism for deploying XRP within programmable financial environments.
Through the use of Flare’s FAssets protocol, XRP can now be utilized in DeFi applications such as lending, borrowing, liquidity provisioning, and yield generation, while still maintaining ownership of the original asset. This system enables a broader range of financial activity using XRP, without requiring reliance on custodial solutions.
For institutional stakeholders, the model presents opportunities to generate returns on idle XRP reserves, which have historically served more as strategic assets for cross-border transactions than as revenue-generating instruments. Entities such as VivoPower, Uphold, and Webus have already indicated interest or involvement, suggesting that there is early institutional momentum in the XRPFi space.
The approach also broadens access to DeFi services for individual participants. Retail users can engage in the same set of decentralized financial operations as larger players, enabling yield opportunities previously unavailable to them. This represents a shift in how XRP holders interact with their assets, moving beyond passive holding toward active financial participation.
Flare has developed the XRPFi framework through a measured and security-conscious strategy, emphasizing resilience and scalability over fast deployment. The infrastructure has undergone multiple rounds of technical validation and auditing, reflecting a deliberate process intended to ensure system stability and user trust. This approach has laid the groundwork for what may become a scalable and sustainable ecosystem centered around XRP.
The implications of enabling XRP within DeFi extend beyond individual use cases. Given XRP’s market capitalization, which exceeds $125 billion, even partial integration into decentralized finance could unlock liquidity and potentially expand the scope and scale of the broader DeFi sector.
Additional functionality is being introduced through the Firelight protocol on Flare, which brings liquid staking to the XRPFi ecosystem. Users will be able to stake FXRP and receive stXRP, a token that maintains a one-to-one representation of the staked asset. stXRP, as an ERC-20 token, is compatible with a variety of decentralized applications and can be traded or used across DeFi protocols while the underlying FXRP remains staked.
This mechanism enables users to earn staking rewards without compromising liquidity, effectively combining passive yield with active asset utility. Participation in Firelight’s staking system may also allow users to accrue Firelight Points, which will have influence over future incentives. The introduction of liquid staking infrastructure introduces additional composability, with stXRP potentially serving roles in collateralization, liquidity pools, and yield-bearing positions within the evolving XRPFi environment.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
