As such, holders are not lending their capital to strangers. Instead, they are participating alongside institutions in the same transparent on-chain pools. He added that the redeem-and-deploy cycle across multiple vaults is how they manage risk and realize periodic income without locking everything up indefinitely.
How The Vaults OperateAs to how the loans work, he explained that an associated LoanBroker pools the XRP in the vault and makes it available for lending. The LoanBroker originates fixed-term loans lasting between 30 and 180 days. The loans are uncollateralized, meaning borrowers do not post any collateral on-chain. Traditional underwriters are responsible for handling the credit decisions off-chain.
Fig also mentioned that DeFi protocols have, in the past, tried to create autonomous systems that compute interest rates and handle credit details through smart contracts. However, this process can often be manipulated and is more vulnerable to attacks.
