XRP Ledger proposes amendment to lending protocol, targets fair loan payment rounding

The XRP Ledger, an open-source blockchain specializing in fast, low-cost payments, is introducing an update to its lending protocol aimed at refining how loan repayments are rounded. According to an official Github pull request, the planned amendment seeks to ensure individual loan payments precisely align with the scheduled repayment plan.

Planned protocol amendment

Developers described the change in the LendingProtocolV1_2 amendment, which targets discrepancies in how loan balances are calculated after repayments. Currently, minor variances due to rounding can accumulate across payments, sometimes resulting in the final installment being slightly higher than the regular periodic amount.

With the new update, once a borrower overpays, the TotalValueOutstanding figure resets to match the scheduled value for the next payment period. This adjustment ensures that after each on-time payment, TotalValueOutstanding consistently drops to the correct scheduled value, capping the reduction at the rounded periodic amount.

Loan repayments will now bring the outstanding value down to the scheduled level with each payment, with rounding more tightly controlled so that the last payment matches the rounded periodic payment.

The technical work started by moving scheduled-value calculations into a dedicated function called scheduledValue, separating it from computeLoanProperties. This restructuring does not change core behavior but ensures consistency in rounding between different processes including LoanSet and LoanPay. For zero-interest loans, the protocol introduces a minimum floor on the principal component, since the total value is rounded to the nearest unit while principal figures are rounded upward.

Mini dictionary: ScheduledValue function — This function is designed to strictly compute the expected remaining loan value at each payment interval, providing a standardized way to calculate both scheduled and outstanding loan balances. Its purpose is to support precise and consistent repayment management across the protocol.

Impact on borrowers and investors

In practice, each payment’s value under the current system is calculated separately, which can lead to cumulative rounding errors. Sometimes, this results in the final payment being one unit higher than planned, and the distribution of value parts can alternate unpredictably between payments. The amendment introduces a method called telescoping, ensuring every on-time payment is either rounded down or up to the closest periodic payment and is never less than one unit. The final scheduled payment will thus consistently match the rounded periodic value.

For most users and investors, this adjustment is expected to have negligible immediate effects. Those with existing loans carrying a one-unit excess will keep this arrangement, requiring the last payment to be the regular periodic amount plus a single unit, unless an overpayment occurs earlier. Minor overpayments will be processed with no additional XRP charge, and transactions remain uninterrupted.

Next steps and activation requirements

The activation timeline for the proposed amendment remains open. For LendingProtocolV1_2 to take effect, at least 80% of XRP Ledger validators must approve it for two consecutive weeks. So far, there has been no public announcement regarding a vote among validators, leaving the exact implementation schedule uncertain.

The protocol amendment forms part of the XRP Ledger’s ongoing technical upgrades, designed to improve stability and predictability for its lending product users. Updates are tested across different vault types, including Legacy, CashBasis, and FixedPrecision, both with and without the amendment in place.