The CTO of Ripple proposes to deploy the functionality of “federated” sidechains, which can open the possibilities of smart contracts and the launch of government cryptocurrencies.
According to an article published by Ripple CTO David Schwartz, one of the most requested features among XRP developers and investors is the ability to run smart contracts online as the DeFi industry grows.
The number of DeFi developers has grown 110% since 2019 and is projected to continue to grow. However, according to Schwartz, Ripple has long opposed features that could jeopardize the XRP Ledger’s focus on payments. Therefore, he proposes a strategy for using “federated” sidechains in the XRP Ledger. This will allow developers to implement new features, such as proprietary smart contracts that interoperate seamlessly with XRP and XRP Ledger, and will also enable XRP Ledger to maintain a “lean and efficient” feature set.
As Schwartz notes, “federator” in the case of sidelines is software that connects to at least two instances of XRPL software. The federation software allows anyone to run a sidechain for an XRP Ledger. On the one hand, the federation is connected to the main XRP Ledger network. On the other hand, it connects to one or more sidechains. A federator will only be triggered by parties that manage validators on at least one sidechain.
“The idea is that each sidechain will function as its own blockchain. They will have their own ledger and transactions just like the XRP Ledger. They are made sidechains by a ‘federated’ system that allows XRP and issued tokens to move between chains. ”
Sidechains can either issue their own crypto assets or use XRP. According to Schwartz, the new functionality will allow smart contracts to be implemented outside the XRP Ledger, thus avoiding potential security risks.
Federated sidechains will allow central banks to create their own networks and connect to the main ledger to issue government cryptocurrencies, according to Matt Hamilton, director of developer relations at Ripple.
According to a recent report from analysts Ernst & Young (EY), Ripple could put “competitive pressure” on India’s traditional banking system as it makes payments faster, cheaper and more transparent.
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