The Chief Technology Officer (CTO) of Ripple, David Schwartz, has proposed the implementation of smart contract-enabled federated sidechains, Ripple said in a blog post on 7 June.
According to Schwartz, the company has so far avoided adding smart contract capabilities to its network due to fears it might compromise the “XRP Ledger’s highly efficient focus on payments”. This feature, however, has been heavily requested by developers and contributors of the XRP Ledger (XRPL) — spurred by the exponential growth of decentralized finance (DeFi) — and Ripple is finally exploring the option.
In order to maintain its existing “lean and efficient” XRPL, Ripple plans to implement smart contract capabilities through the so called “federated sidechains”, which are parallel ledgers that act as their own blockchains. Through their use, developers can expand the functionality of the XRP ecosystem — with the addition of smart contracts and other features — while leaving the main XRPL streamlined and efficient. Schwartz wrote in the blog post:
“Each sidechain would have a ‘trust’ account on the XRPL Mainnet. This account can hold assets on the XRPL on behalf of users of the sidechain. The account would use a multisign or threshold key with the signers being the validators of the sidechain. Each sidechain validator operator registers a signing key that signs transactions on XRPL; thus, the validators of the sidechain can collectively create transactions to manage the sidechain’s Mainnet account.”
Schwartz further explained that this approach offers a number of advantages, such as its low-risk approach, capacity for horizontal scaling, and simple support. Ripple’s “federator” software will offer interoperability between the main XRPL and the side chains, and will also support the transfer of XRP between them. In order to make all this happen, Ripple has said it only needs to make “two trivial changes” to the operations of the XRPL network.