According to Woofun AI, Wrapped XRP (FXRP) within the Flare ecosystem is experiencing unprecedented capital intensive use. DeFiLLama data shows that out of 145 million FXRP in circulation, up to 129 million have been deployed in various decentralized finance protocols, and the utilization rate is close to 90%.
This phenomenon marks that holders have turned almost all of the XRP encapsulated into Flare into productive capital rather than idle in their wallets, reflecting a surge in market demand for XRP smart contract applications, even though its total volume accounts for only 0.23% of XRP's circulation.
FXRP's cross-chain liquidity architecture is the foundation for its high utilization rate. In September 2025, FXRP launched on the Flare mainnet via fAssets, an overcollateralized cross-chain bridge. Users are required to send XRP to a designated agent, and after the data connector confirms the transaction on the XRP Ledger, the equivalent token is minted on the Flare network. These tokens are supported by stablecoins, ETH, and FLR, and can be exchanged back to the original XRP at any time. Release 1.3, released in May 2026, simplified the minting process, requiring only one XRPL payment, allowing direct access to regulated custodians such as Hex Trust.
As a LayerZero full-chain universal token, FXRP's cross-network distribution rapidly expanded. As of October, the number of DeFi systems held outside of Flare's main network surged from about 4 million on July 9 to about 20 million, widely distributed across the seven blockchains of Ethereum, Base, BNB Chain, Monad, Katana, HyperEVM, and HyperCore. In January 2026, FXRP also became the Hyperliquid platform's first spot market, filling the gap where the platform previously only offered XRP perpetual contracts.
However, this cross-chain expansion has both advantages and disadvantages for Flare: part of the demand flows to a more complete chain in the credit market, and FXRP's trading and borrowing behavior itself does not generate revenue for Flare; the costs are only reflected in the minting process.
In specific application scenarios, the lending business dominates. According to data compiled by Woofun AI, about 52% of deployed FXRP is in the lending market, covering Morpho and Kinetic on Flare, Morpho on Ethereum, and Euler platforms on Monad, and holders mainly use it as collateral to obtain cash loans. In Morpho's Sentora RLUSD escrow service, 10.6 million FXRP provided collateral for the $7.9 million Ripple RLUSD stablecoin issued at the end of September.
Additionally, 39% of FXRP exists on the Firelight platform in the form of stakes, and around 8% is used by decentralized exchanges to provide liquidity. This structured capital allocation shows that FXRP is deeply embedded in the multi-chain lending ecosystem, yet its value capture mechanism still relies on the activity of external agreements rather than the direct benefits of Flare's native network.
The economic model of the Flare ecosystem is facing severe inflation and destruction imbalances. During the fAssets incentive program from July 2025 to July 2026, Flare consumed 2.2 billion FLR, causing the number of FXRP in the DeFi sector to peak at 142 million units in May and then drop by about 5% with the end of the rewards.
Although the FIP.16 proposal passed in April 2025 (supported by 98.06%) reduced the annual inflation rate to 3% in May, created a FIRE mechanism to collect agreed revenue to reduce supply, and data connector fees have become the fastest source of growth accounting for 45% of total revenue, there is a huge gap between revenue and new issuance. The July 2025 hard fork made direct staking five times the weight of delegated staking, driving the share of staked FLR to half from around 32% in April.
However, based on the value of each FLR of $0.0067, the total amount of new issuance is around $18 million per year, while the tokens are burned at only about $154,000. DeFilLama notes that only a significant increase in trading activity can the fee revenue offset inflation.
Flare's most ambitious confidential computing feature has been running on the Songbird testnet since July 2025 and aims to process private data through a secure hardware isolation environment, uploading only signed results to the chain. The first application is to verify Hex Trust's USDX stablecoin reserves. The quarantine environment compares the public reserve value with the amount of private cash, and verifies whether the support ratio has reached 1:1.
Although DeFilLama believes that it is expected to develop as a basic component for oracles that process private data, the system's limitation is that it can only prove that the code is operated as input, the authenticity of the input cannot be guaranteed, and cash information still relies on Hex Trust disclosure. The initial quarantine environment was managed by the Flare Foundation on Google Cloud (GOOGL.US). Future goals include launching confidential computing on the main network, providing FBTC services to Bitcoin holders, and releasing fAssets v2, but none of these features have been launched. Only when all of these projects are implemented will it be finally verified whether Flare's data layer can be self-profitable without relying on XRP.