Will depositing XRP really make money? Are fees greater than profits?

▲ Ripple (XRP), Dollar (USD) ©

An analysis has emerged suggesting that, contrary to expectations of '10% annual' returns, XRP (Ripple) deposit products may take a significant amount of time to realize profits due to high fees and structural risks.

According to the cryptocurrency media outlet Bitcoinist on May 2 (local time), crypto analyst Iso Ledger pointed out that investors need a cautious approach to 'earnXRP', a new yield product linked to Upshift and Flare Network. He comprehensively analyzed the yield, fees, and structural risks, concluding that the actual efficiency is lower than the apparent profitability.

According to the analysis, when depositing XRP, it is first converted to FXRP, a Flare Network-based wrapped asset, incurring a fee of 0.5-1% in this process. Additional fees are imposed when depositing into the Upshift vault, and network and service costs of approximately 1.149875 XRP are deducted. Finally, a redemption fee of about 0.5% is applied upon withdrawal, resulting in a total cost of approximately 13 XRP for a 1,000 XRP deposit.

In contrast, the expected returns fall short. While the platform suggests a maximum yield of 10%, Iso Ledger presented a more realistic annual yield of around 4%. This translates to an annual profit of approximately 40 XRP for a 1,000 XRP deposit, and it would take about 4 months just to recover the initial fees. Even if the deposit amount is increased to 10,000 XRP, the fee structure and break-even point remain the same.

Structural risks were also highlighted as key variables. The system operates on smart contracts, making it vulnerable to bugs or hacks, and there is a risk of impermanent loss due to market volatility. Furthermore, if price discrepancies narrow during asset management across multiple markets, the yield could decrease, and the fact that withdrawals can take up to 72 hours is also considered a liquidity risk.

Particularly, the reliance of FXRP on a bridge system as a wrapped asset was pointed out as an additional vulnerability. Iso Ledger cited the case where approximately $290 million worth of assets were stolen from Kelp DAO due to a bridge vulnerability, emphasizing that similar risks exist. He also noted that most of his inquiries to Upshift were not clearly answered, adding that waiting for the XLS-66d upgrade, which could provide direct earning functionality on the XRP Ledger, might be a better option.

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