XRPwinning reacted to RikkiTikki in Mark Phillips Believes XRP Was Designed To Be $10,000/XRP
I really don't post many vids from youtubers as I find most of them more entertaining and fluff than anything else. There is no reason there should be a video once a day or even once a week that goes over an hour in length, if most of these guys would just cut the fluff and shout out's and stick to the topic they could cut their time to 30 minutes or less and keep their audience engaged. I found this video to be rather good, relevant information minus the fluff, we all have our own opinions on what the price is going to be so no need for the back and forward on that, this vid just gives you a logical what if scenario.
XRPwinning reacted to Hodor in Deep Roots: The Crypto Spring Will Reveal Progress
Blog URL: https://xrpcommunity.blog/deep-roots-the-crypto-spring-will-reveal-progress/
The use case is king! Today's blog covers how real utility provides roots for crypto projects, and lists the latest news impacting XRP:
𝐆𝐞𝐧𝐞𝐫𝐚𝐥 𝐂𝐫𝐲𝐩𝐭𝐨 𝐍𝐞𝐰𝐬: Pacte Law is passed in France, allowing Insurance enterprises to invest in crypto.
𝐑𝐢𝐩𝐩𝐥𝐞 𝐍𝐞𝐰𝐬: Ripple tweets about a new Ripple Regionals event in Dubai, and releases two videos from Ripple Regionals: APAC; and Ripple is entering Europe, and specifically aims to work with Luxembourg.
𝐗𝐑𝐏 𝐍𝐞𝐰𝐬: The XRP Meetup in Amersfoort took place on Saturday, April 20th; Wietse, Tristan, and Ali publish the XRPayments application; Genesis, a popular OTC platform, notes that XRP is the second-most-popular collateral for loans; and a new Japanese crypto exchange opens, with initial support for XRP;
I hope you enjoy the read: Please feel free to share my blog with a friend or share it on any other platform - and thanks for doing so!
My blog announcement links on other platforms:
Twitter Reddit r/Ripple Reddit r/CryptoCurrency Reddit r/CryptoMarkets Reddit r/xrp Reddit r/RippleTalk Reddit r/alternativecoin Bitcointalk - alt coin sub forum Bitcointalk - XRP speculation thread
XRPwinning reacted to JannaOneTrick in Increase in small - medium payments - [Galgitron]
Today Galgitron posted a very interesting snapshot from his spreadsheet.
I analyzed it quickly to give a better understanding of the numbers behind the chart.
The main focus are:
Remittances And Payments between: 20 - 1,500 XRP (6 - 500$) Medium Payments between: 1,500 - 15,000 XRP (500 - 5,000$) Multiple things are interesting:
The increase for both segments began at the same time, around mid February (Some event may have happened to trigger such strong surges) The increases are proportionally similar, slightly stronger for small payments, which seems logical in regards to remittances There are twice more small payments of 500$ max than payments of 15,000$ max, which again seems logical (low value, high volume)
XRPwinning reacted to Julian_Williams in Standard Charter ASEAN/Ripplenet/GPI integration 136 pgs presentation
Found by Crpto Eri - 136 page presentation about how Standard Charter ASEAN Economic Outlook Growth and how they expect to integrate Ripplenet and GPI into their payments/settlements systems of the future.
ASEAN Economic Outlook Growth in the fast :https://www.sc.com/global/av/id-asean-bankers-conference.pdf
XRPwinning reacted to Kpuff in Ripple's employees dumping their stash?
This thread reminds me of when the overhyping happened last year now it’s hyper fudding. Basically try to find some obscure information and turn it into a negative and it’s happening only because the price isn’t moving up like other crypto’s like come on get over it. The price will go up when it’s time. Just sit back and enjoy the ride and if you can’t handle it GTFO!
XRPwinning reacted to JannaOneTrick in New 4 year cycle, consolidation and up trend to come ?
I don't believe in BCH leading the market, it is just noise to me or some crypto satellite.
Alts do some random huge increase out of nowhere, all the time.
I only pay attention to BTC and XRP prices.
XRPwinning reacted to anubhavsingh in The Recent Instigations are going to make Ripple (XRP) future More Bright
Ripple has been sending ripples for a while in the cryptocurrency landscape. It has become one of the most popular cryptocurrencies in the last few years.
While the massive fluctuations in the cryptocurrency market are due to the predominance of big guns like Bitcoin, Ripple’s XRP seems to be catching up lately.
The digital currency that began its journey as a blockchain transaction protocol offering speedy transaction capability in exchanges at cost-effective prices now stands at the second spot on Coinmarketcap.
The XRP holders are now keenly waiting for the initiation of various projects that are in Ripple’s pipeline for several months. A few of these projects include acceptance of XRP as a legit digital currency for cross-border payments by MoneyGram and Western Union, introduction of XRP by Santander Bank, and the like. After the realization of these recent developments in Ripple, trading is likely to become more convenient and alluring for XRP users.
Read full story here
XRPwinning reacted to tvde in The Recent Instigations are going to make Ripple (XRP) future More Bright
I'm not convinced that we need this kind of nice write ups over here...
If you want likes, just tell us and we'll try to transfer some.
XRPwinning reacted to zerocool in Spotted in my neighborhood...
I suppose nothing really surprises me anymore, however, I was caught off guard (and surprised) a couple weeks ago by this restaurant a few blocks away from me:
I've lived in what's now considered an "up and coming" part of Brooklyn, and had to ask someone at this restaurant about their crypto payments. One of their owners told me they've been accepting XRP for almost 2 years. Kind of shocking for the neighborhood, trust me.
And then today, I saw this guy walking in front me wearing this hat:
I thought to myself, "This has to be a fluke" (something else "XRP"), so I walked a bit faster in front of him to casually look at the front of his hat, and sure enough it had the new XRP logo.
As an aside, I've noticed a huge influx of "low fee money transfer" bus ads within the last 6+ months too... The general public here seems to be aware and are embracing the future of payments, specifically XRP.
XRPwinning reacted to BobWay in Chat: General
The current running ledger was launched in late December of 2012. It was designed and built in the 9 months preceding that.
It can live as long as people continue to find value in it. It is perfectly reasonable to update it to new technologies as they are invented and become useful. They've already added new cryptographic signing techniques, so that should continue into the future as well.
XRPwinning reacted to BobWay in Chat: General
Bob's Note: I expanded on this answer a little bit in the patent thread. I think any discussion should continue there.
The primary reason for talking about "my mechanism" is to convince everyone that "at least one mechanism exists" that could drive XRP into its prime position as a bridge currency. Now lots of people in the cryptocurrency space presume that is true. They also presume that their favorite cryptocurrency is going to become a bridge just because it is awesome and had (X special feature) that other currencies don't have.
But people that study the economics of the ecosystem are rightfully skeptical that ANY cryptocurrency could actually become a de facto bridge currency. If you try to write down the sequence of steps needed for that to happen, there are almost always significant logical or conceptual gaps in most cryptocurrency fan theories.
So what I set out to determine was, "Is there really a plausible path to make that happen?" And also, "What are the necessary requirements and 'forces' needed to actually make that happen." That is what I documented inside the company. That was also what we patented and I assigned to Ripple. (I've discussed this elsewhere on this site so I won't rehash the back story.) The company has hinted at these techniques, but has not detailed any particular strategy that they will employ. (At least based on what I've read in their press releases and public statements.)
I think I've discovered "the last algorithm" that RippleNet needs to drive XRP into the bridge currency position. And also to maintain it there in perpetuity. But that algorithm won't necessarily be the first one employed to help XRP along on that path. There are other ad-hoc ways that might be simpler to implement and more effective for the initial corridors that companies want to deploy.
Now keep in mind, saying "I discovered the last algorithm" isn't very humble. Also note that once you find "a way" of doing something thought impossible, it becomes much, much easier to find a second even better way. That was the lesson of bitcoin's consensus algorithm. No one could find a good consensus algorithm because no one thought it could be done. So no one thought they should bother looking. Once the bitcoin algorithm was found, then boom! The ripple algorithm, a re-emergence of other known 'academic' algorithms, proof of stake, proof of space... Expect the innovation to continue.
So, there is no guarantee that Ripple will ever deploy my exact algorithm. They may have even better ideas in mind. Ones that I'm not privy to. But what I do know for sure, is that most of the other cryptocurrency teams don't have the resources they need to drive their currency into the bridge position. Nor do they even understand the economics of the ecosystem well enough to know why that is true.
XRPwinning reacted to BobWay in Chat: General
I don't really know enough to comment.
So many researchers are doing very interesting work in the space. This includes "blockchain technology" without cryptocurrencies at all. Non-blockchain projects using a token and chain added in for operator payment. Others with smart contracts or chain code and a "build it in our chain based cloud" attitude. Often these projects have potentially interesting use cases and ideas behind them. Cardano seems to be one of them judging by its site.
But an interesting thing happened while I was at Ripple working on "blockchain technology". We kept finding really great ways to solve problems using the 'technology" bits without needing the "blockchain" bits at all. We kept finding really efficient ways to simplify and scale systems, by questioning the key presumptions of "blockchain".
So when I see giant master plans like this, https://cardanoroadmap.com it makes me think of a giant FaceBook walled garden. One where everyone is expected to do everything within one comprehensively managed system.
ILP, Codius and rippling XRP payments are exactly the opposite. They scale because they DON'T require people to operate within a single environment. They work like the internet itself. Many different systems running in parallel, while cooperating using only the most minimal of coordination protocols.
I'm not saying that the Cardano folks aren't doing awesome research and development. I'm just saying that I don't see much of a need for it in my next project. :-)
XRPwinning reacted to BobWay in Chat: General
I think Polysign is really big for the XRP Ledger and ILP RippleNet components as well. I'm not sure what features they've implemented for working with other coins or contract code.
It is important to understand that banks, exchanges and "gateways" (Ripple Fox, Gatehub, Bitstamp, RippleChina, etc) are all trusted with other people's money. Keeping that money safe requires scrupulous security practices related to XRP Ledger secrets and ILP transaction signing keys. Institutions like these need to protect those keys and secrets from both outside attackers and INSIDE threats as well. They also need to provide for system continuity if one of the key human operators dies or becomes malicious.
A key technology for managing these threats is the XRP Ledger's 'multi-sign' feature. However, the same concepts apply to ILP components as well. But 'multi-sign' just means you have even more keys to protect from threats. Just by looking at their naming "poly" = "many", so it seems reasonable to say that PolySign is an institutional solution for managing multi-sign keys, and likely also for authorizing and signing a high volume of XRP Ledger and ILP based transactions.
Once you've convinced banks and other institution that using the XRP Ledger is a good idea, then eventually the technical people from those firms start to ask "how" and for "best practices". It seems to me, PolySign has created a system that implements those best practices.
XRPwinning reacted to BobWay in Chat: General
I don't have any specific new information to add. I've been out of the loop on the most recent developments. But I have worked personally with some of those teams. In general, all of our engagements have been successful. Meaning they met the goals of the original agreements and contracts.
However, how those integrations get deployed to Ripple's customers, customers are generally up to those parties. So A bunch of the services mentioned here and below in this post are services offered by others to their customers. You may or many not hear XRP or Ripple mentioned prominently when those products are rolled out to others.
Every time you can integrate once to someone who already has lots of customers in place, that is a huge win. It can take a load off your sales and integration teams. I can't talk about any specific details though.
I really don't know much about any of this. But keep sending me links. I'll get caught up eventually.
XRPwinning reacted to BobWay in Chat: General
I wanted to respond to this, because I think there is often a misunderstanding about the parties a "smart contract" binds.
A smart contract IS NOT really a typical "contract" between two or more humans enforcing their behavior. Instead, it is a "delegation contract" (like a power-of-attorney) between one human, and an imaginary bookkeeping entity called "the blockchain". The human delegates power to the blockchain to act on his behalf. This delegation often restricts the delegating human's behavior for a period of time.
This is the case with an "escrow" contract. The human gives some funds to the "bookkeeper" and says, "Here are the rules you MUST use in order to spend these funds. You don't need to get any more permission or signatures from me to acted on these rules. But if you can't execute on the rules by Tuesday, they become null and void, and you MUST give me back the money."
So the second human isn't really interacting with the first human at all. Instead, she is interacting directly with the "bookkeeper" (smart contract) that has control of the funds and deal making authority.
The overarching goal of a "smart contract" is that after the second human completes the deal with the bookkeeper, NO long-term contract provisions need apply between the two humans. In effect, the deal is "settled" and both parties can walk away happy.
If one of the parties decides they are unhappy in the future, well by design, there is no contractual recourse. The "bookkeeper" (smart contract) evaporates. And the two humans never had any direct contact or contractual agreements between themselves at all.
If you like this characteristic, you love smart contracts. If you hate that characteristic, well, stay away from smart contracts.
XRPwinning reacted to BobWay in Chat: General
So many good questions. I'm not ignoring them. Just need to put together a few more spare minutes to answer them properly.
I'll try to answer the easy, short answer ones first.
I do know Justin and worked with him at Ripple from the beginning. I like him personally. I was actually surprised by Tron's success. Not because of Justin, but because I didn't know the two were related. Justin told me over drinks in SF that he was going to start a new blockchain and also what the focus was. I didn't think to ask the name at that time. :-)
Justin is Chinese and I'm Texan. So I know I have some cultural bias in regards to "normal" behavior. I see Justin as quite a good self-promoter. He is working mostly in China among Chinese folks to which I'm sure all of his behavior is culturally appropriate. For my personal taste, he often seems a bit "flashy" or ostentatious in his self promotion. But again, I completely realize that is my own personal cultural bias. So in the end, I am happy for Justin's personal success. I hope he follows through in creating a lot of value for everyone over the coming years. I'm not jumping up and down to go work with him, but mostly because I don't think I would be any good at it. I simply have a different set of skills.
This is very much like what Coil wants to monetize. Someone forward this link to them!
I don't know any specific plans. I have written a little about Corda Settler elsewhere in these forums though.
Each company is working to create value in their own way. But "rippling technology" (XRPL & ILP) does tend to tie all of this new value creation together into a single ecosystem. Corda is going to be good at "settling" non-money forms of value, against monetary forms of value. The two are simply inseparable in business. What both ILP, XRPL and Settler have in common is that they assure both parts of a business deal happen in a single "synchronized" (atomic) transaction.
It makes a lot of sense for R3/Corda to work with Ripple's various "rippling technologies" because they are the leader in "synchronized" monetary transactions world-wide. Their doing so would benefit the RippleNet ecosystem immensely (from my personal perspective).
XRPwinning reacted to BobWay in Chat: General
This will figure more prominently in my future discussions. But for now, think of an XRP Ledger "gateway" simply as a "bank".
It is a place where you can deposit your fiat currency. However, instead of reflecting that deposit back to you through "online banking", you would see these fiat deposits directly on the XRP Ledger. That lets you spend or trade your fiat 24/7 to anyone in the world, without needing to interact with your bank or bankers at all.
XRPwinning reacted to JannaOneTrick in The Forex Market could be far bigger than you think
It has been a long time since I wanted to write this post, but there are just so many ideas in my head I always felt overwhelmed with doing it.
So bear with me it is going to be a tad technical and a rather long post.
To those who have studied international trade or logistics it will be piece of cake.
TL;DR: Skip to the back-office section way down this post.
When I discovered Ripple business plan, it did not take me long to think about the amazing opportunities it offers with the Forex market.
We know Ripple wants to tackle the Forex market and is already penetrating it.
The daily FX, despite its recent slowdown, is estimated to have a 5 Trillion daily volume (Source: BIS).
When we think about the FX market, what do we picture ?
A bunch of dudes in suits ? Red and green numbers ? Yeah me too
But who really uses the FX market ?
The greatest volume of currency is traded in the interbank market. This is where banks of all sizes trade currency with each other and through electronic networks.
Central banks, which represent their nation's government, are extremely important players in the forex market. A central bank is responsible for fixing the price of its native currency on forex. This is the exchange rate regime by which its currency will trade in the open market. Exchange rate regimes are divided into floating, fixed and pegged types.
Investment Managers and Hedge Funds
Portfolio managers, pooled funds and hedge funds make up the second-biggest collection of players in the forex market next to banks and central banks. Investment managers trade currencies for large accounts such as pension funds, foundations, and endowments.
The volume of forex trades made by retail investors is extremely low compared to financial institutions and companies. However, it is growing rapidly in popularity.
But there is one actor I would like to give a particular attention in this post:
Firms that are involved in importing and exporting conduct FX transactions to pay for goods or services.
Much freight transport is done by ships. An individual nation's fleet and the people that crew it are referred to as its merchant navy or merchant marine. Merchant shipping is the lifeblood of the world economy, carrying 90% of international trade with over 100,000 commercial ships worldwide. On rivers and canals, barges are often used to carry bulk cargo.
Depending on the stuffing and unloading operations, the container will be:
FCL start - FCL finish: From sender A to recipient A; FCL-LCL : sender A then unbundling on arrival to different recipients; LCL-FCL: grouping initially to a recipient; LCL-LCL: initial grouping and unbundling on arrival. FCL: Full Container Load
LCL: Less Than a Container Load
Many firms send large amounts of products at once, or send multi-million-worth products by ship. The associated risk is huge and therefore that is why the Incoterms exist.
To further enhance the feasibility of such trades, firms which send expensive or massive products from one part of the world to another can decide to use a Letter of Credit (LC).
A letter of credit, also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter, where it assumes the credit risk of the buyer paying the seller for goods.
Here is a very simplified diagram of the LC process:
Now we are getting to the interesting stuff.
What does it mean for us?
The reason why I created this topic is: Forex exchange risk
Companies trade forex to hedge the risk associated with foreign currency translations.
Foreign exchange risk (FX risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. The exchange risk arises when there is a risk of appreciation of the base currency in relation to the denominated currency or depreciation of the denominated currency in relation to the base currency. The risk is that there may be an adverse movement in the exchange rate of the denomination currency in relation to the base currency before the date when the transaction is completed.
Let's take an example:
You are a French wine exporter (yes French, it's me who decide here ) and you concluded a contract with a US customer on March 1st of 2019. The deal is processed for an amount of $ 50,000 with a payment term of 3 months.
As of March 1st, the exchange rate between the dollar and the euro is $ 1 = 1.5 €
On June 1st, the exchange rate has changed; it is now $ 1 = 1.0 €
The claim of the French exporter thus goes from 75.000 € to 50.000 €: the miss to gain is thus of 25.000 €
So how to protect yourself from the FX risk?
Many opportunities are available to protect you against foreign exchange risk. You can indeed:
Bill in your national currency and therefore transfer the risk to the other contracting party. This solution is the simplest for a company. However, firms should be particularly aware of the impact this choice may have on the competitiveness of their products / services: a competitor who agrees to invoice in the buyer's currency may be more attractive to the foreign buyer. Insure against this risk to a greater or lesser degree depending on the arbitration you have to exercise between security (minimum or no risk of exchange that you agree to take) and the profitability of the operation (impacted by the cost the coverage you will have to pay). Take advantage of the various hedging instruments offered by the banks: Advance in export currency: this technique allows you to eliminate the foreign exchange risk (for a transaction actually paid at maturity) while financing the payment period granted to your buyer. The sale of forward currencies: you can establish in advance with your bank the price at which you will sell the currencies you receive in settlement. Currency risk is fully hedged provided that the timing coincides with the settlement. The forward exchange with profit-sharing: allows you to partially benefit at the end of a possible favorable evolution of the currency used, while guaranteeing you a minimum price. oThe exchange option: a hedging method that gives you the greatest flexibility to benefit from the favorable evolution of the currency rate. The last part is the most interesting for us as it is the solution the most widely adopted and it involves a lot of FX transactions.
The forward exchange (futures)
The forward exchange is an exchange of 2 currencies on a date (the value date) and a traded price (futures). This type of contract makes it possible to fix in advance a price between 2 currencies, and thus to hedge against the FX risk.
The characteristics of a forward exchange transaction are defined in relation to a spot price (the price used for the spot exchange) for the day's transactions.
The difference between spot and forward is called "term points". When the futures price is higher than the cash price, it is called "report". When the futures price is lower than the cash price, it is called "offset". But how is the futures price determined?
Calculation of the forward rate
(you can skip this to the Back-Office part if you want)
Futures prices are not quoted as such in the market. For each currency, however, we know the rates of loans / borrowings on different maturities. These are the rates that will be used to calculate futures prices.
From the point of view of the trader who quotes the transaction, the forward exchange amounts to combining 3 transactions:
A "spot" exchange in the same sense as the futures transaction
A loan of the currency purchased over the same term as the futures transaction (the loan repayment flow, a cash flow, coincides with the forward purchase)
A loan of the currency sold (the repayment flow coinciding with the forward sale).
The following graph illustrates the reasoning in the case of a forward purchase of the currency D1 against D2. Beware the dotted flows are fictitious and are only there to support the reasoning, only the flows at Value Date are real.
Let's suppose the trader who is quoting the transaction is working on the following prices:
Spot price D1 / D2: S12 / S21 (which means that the trader buys at S12 and sells at S21)
D1 rate: t1e / t1p (which means that the trader lends the currency D1, over the period considered, to t1p, and borrows from t1e)
D2 rate: t2e / t2p
And that he must quote a forward purchase of an amount M1 of currency D1.
In order for the repayment of the notional loan of the currency D1 to correspond to this amount, he would have to lend today the amount M'1 such that:
M 1 = M'1 + M'1 * t1p * N / 36000 = M'1 (1 + t1p * N / 36000)
Where N is the loan term, in number of days.
Similarly, the amount M2 paid in the future corresponds to an amount borrowed today M'2 such as:
M2 = M'2 + M'2 * t2e * N / 36000 = M'2 (1 + t2e * N / 36000)
and the term course sought is such that:
T12 = M1 / M2 = (M'1 (1 + t1p * N / 36000)) / (M'2 (1 + t2e * N / 36000))
We know that the spot price S12 is such that:
S12 = M'1 / M'2
T12 = S12 (1 + t2e * N / 36000) / (1 + t1p * N / 36000)
S12 is the price of the spot purchase
t2e is the rate of borrowing the currency price
t1p is the loan rate of the negotiated currency
And conversely for a forward sale:
T21 = S21 (1 + t2p * N / 36000) / (1 + t1e * N / 36000)
S21 is the spot sale price
t2p is the loan rate of the currency price
t1e is the borrowing rate of the negotiated currency
It's a bit complicated but once you enter the formula in an Excel sheet you do not think about it anymore!
This means that the futures price, contrary to what one might think, is not an anticipation of what the spot price will be in the future. However, it is based on an evaluation of the value of currencies, via market rates.
And finally we get to the juicy stuff.
What is happening in back office ?
The Back - Office system has the function of materializing the trades negotiated by the trader:
Emissions confirmation: currency exchange transactions are confirmed by SWIFT MT300 messages.
Issuing payments: generation of a payment order (MT202) for the correspondent in the paid currency, a notice of entry of funds (MT210) for the correspondent in the currency received. If the counterparty is internal (customer, deal between 2 desks), the payments are made via accounting (debit / credit account).
The chart below illustrates the flow of information between 2 banks and their correspondents in the event that Bank A sells Currency 1 against Currency 2 to Bank B:
It is literally a maze of flows of information and payments.
Why did I create this topic ?
To enlighten all the flows of information and payments banks have to deal with when the FX is involved, and most particularly in the event a B2B relation (International trades).
Ripple's solutions (messaging + xRapid) hopefully will help circumvent the issues we know.
I am sure I forgot a lot of stuff, I didn't talk about all I had in mind on purpose, it was a lot to write in a single post, so please be kind.
XRPwinning reacted to DGrant in XRP and Bitcoin: Tradeoffs in Blockchain Structure and Implications for Future Market Value
This is a post I wrote last year on another forum before I discovered this community, but recently revisited to see how my thinking has evolved. I think I'm a bit less XRP maximalist now, but my underlying confidence in XRP remains. XRP has become much more decentralized in the last year, and I realize now how loaded that term is.
The debate on the future of XRP is the third rail of crypto politics. Other than Bitcoin vs. Bitcoin Cash, no other topic elicits such polarizing perspectives. From an ideological standpoint true to Bitcoin’s genesis, this is understandable. The community that created Bitcoin values a decentralized, anonymous currency. Between forks and new entrants, there is now significant competition and intense, often personal, debate about the future of crypto assets. This analysis describes Bitcoin’s competitive advantages, and why they are not permanent or insurmountable. More centralized blockchains, such as XRP, are better positioned to create value unencumbered by ideology that hinders mass adoption. This framework also applies to competition between EOS and Ethereum, articulated by Miles Snyder of Multicoin Capital. The future of crypto assets is not winner take all, because of different market niches pursued by various blockchain protocols. However, this framework suggests more growth potential and market capitalization for XRP if Ripple is able to deliver on their value proposition and fend off non-tokenized competitors such as R3.
Blockchain Structural Tradeoffs — Trilemma Decisions
The Monetary Theory Trilemma faced by Central Banks is a useful framework to compare the fundamental structure and tradeoffs crypto assets must choose. In a Trilemma, only two of the three variables can be controlled, forcing an entity to make a choice with tradeoffs.
In fiat monetary policy, governments must decide to choose between free capital flows, controlling exchange rates, and independent monetary policy (interest rates). Wealthy countries have typically opted to allow their exchange rates to the U.S. dollar to adjust, or “float”, in order to have a free flow of capital and the ability to adjust their monetary policy to control inflation. But it’s not one size fits all. Historically, China has controlled capital flows in order to keep its currency relative weak (fixed) to the US dollar to maximize the advantage of its export economy.
Crypto assets face a similar decision and must choose between security, decentralization, and scalability. This was noted in a recent interview with the former lead developer for QTUM, Stephen Ju, who said “The Bitcoin and Ethereum or other blockchain platforms currently, most of them face scalability problems. In the blockchain industry, scalability, decentralization and security — these three cannot work together.”
For the creators and early adopters of Bitcoin, this was a straightforward decision, because they built the bitcoin blockchain specifically for the idea of a nearly anonymous, peer-to-peer transaction network where security and decentralization were paramount. As the network has grown, Bitcoin has had to make difficult choices with the block size debate, competing visions that claim they support the original vision, and resulting hard forks that this analysis argues have been costly. Follow on competitors, including XRP, are not constrained by the same ideology.
If the goal is world-wide mass adoption, scalability is the bedrock that a blockchain asset should start from. Value must be created for consumers and investors who care more about scalability and security and are willing to sacrifice decentralization. Bitcoin has devoted considerable resources to address this issue, and the Lighting Network’s off chain approach may succeed, but it’s a more challenging path to success and is driven by the headwinds of bitcoin’s core value of decentralization.
In the Gallic Wars (58–50 BC), The Romans conquered the Gauls and consolidated Julius Ceasar’s power. Key to this success was Rome’s centralized organization and unit discipline. The Gauls were loosely organized into competing tribes and were known as fierce warriors who fought as individuals on the battlefield. They were ultimately defeated by the more organized, centrally managed Romans, who fielded highly disciplined Legionaries, the premier military units of their era. One formation that demonstrated Roman discipline was Testudo (Latin for ‘Tortoise’) a battlefield tactic in which the Romans closed ranks and covered all sides with shields. This defensive tactic allowed was the antithesis of the Gauls approach to combat, but ultimately won the war. There is a parallel and lesson to be learned in the competing visions playing out in blockchain development today.
Can centralized crypto assets organizations deliver value for consumers as scale better that decentralized networks like Bitcoin? On one hand, there are fundamental advantages that decentralized organizations enjoy. There is no way for any government on Earth to “shut down” Bitcoin. Nor are there key leaders who could be removed that would keep the Bitcoin blockchain from continued development.
Leadership decapitation will never apply to Bitcoin, but there are significant tradeoffs. The hard fork and civil war between Bitcoin and Bitcoin Cash is one of the fundamental side-effects that decentralized blockchains face. This debate has cost time and resources fighting over ideology while not advancing towards the one thing that will lead to mass adoption of cryptocurrency- creating value for the user. As a distributed organization, the Bitcoin community couldn’t agree on the use case and market they were trying to target (peer-to-peer vs store of value) resulting in the hard fork that led 20% of the mining nodes down the Bitcoin Cash fork. Since then, the hard forks continue with Bitcoin Gold, Bitcoin Dark, Bitcoin Prime, etc. These are wasted resources and brand dilution in a competitive market.
Contrast this with the extremely centralized approach of one of the most successful companies of the internet era, Amazon. They have created widespread adoption and value across numerous markets. Jeff Bezos has a very useful framework for strategic decision making, “disagree and commit”. He encourages lively debate within Amazon, but at some point, a decision must be made in order to move forward cohesively and effectively. He might not agree with a course of action, but he can commit if he sees that his key leadership want to go a certain direction. This mindset permeates the rest of the organization. Although everyone might not all agree, they move forward with one common purpose, analogous to a Roman Testudo moving through a battlefield. Bezos credits this philosophy with their ability to move quickly in competitive markets.
Imagine if Amazon lost 20% of its team when they purchased Whole Foods or launched their streaming service? Without leadership, which is by nature centralized, an organization is hindered in how quickly they can respond. Speed and adaptability is a structural competitive advantage Ripple has over the Bitcoin community. Even Bitcoin Cash has an informal leadership structure in Roger Ver that provides a North Star that Bitcoin lacks.
Competitive Advantages of Bitcoin
Despite its lack of central leadership and speed disadvantage, Bitcoin currently enjoys several competitive advantages over XRP and other crypto assets that have allowed it to maintain 35–50% of the total crypto market cap over the last 6 months. While significant, none are permanent, insurmountable barriers for XRP, or other assets, to surpass Bitcoin.
1) First Mover Advantage — Bitcoin was the first cryptocurrency and therefore enjoys a head start on the competition. However, as an open source community, competitors are able to imitate or fork the Bitcoin protocol which would not be possible against an incumbent company with proprietary technology. There are no NDA or non-competes in effect to protects Bitcoin from the competition. The first mover advantage is not a useful a framework for a decentralized, open-source framework.
2) Network Effect — Metcalf law states that the value of a network is the number of participants squared. This suggests that perhaps First Mover Advantage of Bitcoin has led to Network effects creating a defensible competitive advantage. But in the decentralized, fast-moving crypto ecosystem, this network effect is not solid ground. Consider the volatility of the market as a proxy. XRP, ETH and BCH experienced rapid gains in price in 2017 that led to speculation that the “flippening” — replacing BTC as the largest crypto asset by market cap, was imminent. Although this hasn’t yet happened, the lesson learned is that this is a volatile, fluid environment and a large network doesn’t guarantee a sustainable competitive advantage. We are still early in the race and much of the infrastructure to support these currencies is still in its infancy. Partnerships with tech networks for XRP or other crypto assets have the potential to surpass any Network Effect advantage that Bitcoin has enjoyed to date.
3) Brand Recognition — “How to Buy Bitcoin” was #3 on the most Googled “How to” phrases in the world for 2107. This brand recognition and widespread adoption provided the groundwork for futures contracts (see barrier #5). But this brand recognition can’t be easily defended and actually comes with a cost unique to Bitcoin. A private company has legal recourse to defend its brand within the court system. Amazon can sue for infringements on their brand identity. As a decentralized entity, Bitcoin doesn’t have this lever to pull and has spent resources and energy in defending their brand in a very inefficient means. This was highlighted in a recent interview on Peter McCormack’s “What Bitcoin Did” podcast, where James Lopp described the confusion about Bitcoin vs Bitcoin Cash. “At Bitgo we’ve had so much support and engineering resource consumption due to user confusion of sending Bitcoin to Bcash addresses and vice versa”.
4) Gatekeeper Currency — Bitcoin is the default currency that drives the entire crypto economy. It is the entry point from fiat into the crypto asset investing for most investors who want to purchase altcoins. However, many exchanges are offering more altcoin trades for Ethereum. For example, Bittrex offers 192 BTC-Altcoin pairing and 65 ETH- Altcoin exchanges. Developments such as atomic swaps will make it easier to exchange between crypto assets without Bitcoin as an intermediary of the transaction. There is not a compelling reason for the future of all crypto assets to have BTC as the foundation currency.
5) Futures Contracts — The Chicago Board Options Exchange (CBOE) began offering futures for Bitcoin in December of 2017 and the Chicago Mercantile Exchange (CME)followed soon after. This allowed investors to offer futures contracts for Bitcoin, controlling volatility and hedging risk. Although the contracts are settled in fiat, future markets on CBOE and CME provide Bitcoin an investment product that gives it more legitimacy to non-crypto investors and ultimately is intended to reduce volatility. This is a significant competitive advantage to allow institutional money to flow into Bitcoin, elevating the market cap, reinforcing and amplifying Gatekeeper Currency, Brand Recognition, and Network Effect advantages. If Bitcoin is able to maintain this barrier, it’s likely that the flood of institutional money would establish it as a world currency and store of value that would keep it as the dominant crypto asset. However, CBOE has already said they intend to look at other assets to list on their futures markets. “Being in product development our task is to look for new products all the time, so we are constantly evaluating that market, and we are evaluating other cryptocurrencies too”, said Dennis O’Callahan, CBOE’s director for product development in an interview with CoinTelegraph. Although Bitcoin has a temporary, and significant, advantage, this appears to also be a temporary state, not a long-term structural advantage.
Ripple — A Centralized Blockchain Creating Value for its Target Market
Ripple is the antithesis of the Bitcoin approach to building a blockchain network. No mining is required and Ripple is a private company. They depend on a significantly smaller pool of hand-selected nodes, but this is not a deterrent for adoption in their target market. Conversely, this structure is more palatable and adds more value to their target market (banking executives) than a decentralized, anonymous network. There is no compelling evidence that this node centralization results in significantly more risk for a 51% attack for the Ripple blockchain, although potential censorship/central control is a reality.
Early pilots by numerous banks suggest that this approach is working with the adoption of the XCurrent, a first step for XRapid and XRP adoption by banks. A key risk for XRP’s future is that banks will use XCurrent without the follow-on adoption of XRapid and XRP. However, from the perspective of targeting a customer segment and building a product for that market, the effort is more strategic and focused than Bitcoin’s internal debate over a store of value vs. peer-to-peer rapid, cheap transactions. Broadly speaking, if a product is not embraced by the consumer, the company/organization/currency should make it better, or competitors will fill the market demand. If XRP is not adopted by the banking industry, Ripple is better positioned to develop a new strategy, quickly adapt, and respond to the market’s needs better than Bitcoin, to the benefit of XRP.
Centralized vs Decentralized Competition in Smart Contracts Platforms: EOS vs. Ethereum
EOS also has a strategy that decentralization does not add as much value as scalability and speed by adopting a delegated Proof of Stake. This contrasts with the emphasis on decentralization, the value-add for Ethereum. While decentralization and censorship resistance will add value for certain applications of the future, it’s likely that more applications will value speed and scalability for the majority of use cases over censorship concerns or decentralization. An in-depth analysis of EOS is available by Miles Snider of Multicoin Capital. Similar to XRP vs BTC, decentralization will not be as valuable for the mass market as it was to early creators and users.
Conclusion- XRP versus Bitcoin
Maximalists in different crypto tribes tend to view adoption as a zero-sum game that will leave only one winner. A more likely scenario is that many of the crypto assets fail, but several find their respective niche in the market (daily peer-to-peer transactions, store of value (digital gold), international remittance, decentralized smart contracts, etc). However, for each market, once an asset is entrenched the Network effects will eventually become a more formidable competitive advantage.
One of the criticisms of XRP or EOS is that they are more centralized. As argued here, in terms of a scalable, global network this is not a compelling justification against mass adoption. The majority of consumers do not care whether or not a blockchain is centralized. There is more value in reducing the cost and increasing the speed and cost to send money around the world and user experience. These are not tied to an ideology of decentralization or libertarianism. Coupled with the slower decision-making process inherent to a decentralized organization, this shackles how quickly Bitcoin can respond to market forces, and is to the advantage of XRP. For these reasons, the latter will ultimately become a larger, more valuable crypto asset than Bitcoin.
XRPwinning reacted to JannaOneTrick in It’s about the Valuation, stupid!!!
It is sad. I like your way of writing (not in a wall of text mode), and verbiage sometimes, this is what got me to the read the whole thing. But yes it is sad because we disagree on so many fundamentals here...
I will not go on a rant, or criticize you, rather I will try to correct your mistakes, hopefully you will accept it.. I have a little faith in that, knowing people, hence "I will try".