I along with many others have been researching this patent and its potential features for a few days now. Its a mystery to me why they make them so complex, but that’s the way things are done..
Although the detailed operation of how the patent works in practice will never be 100% clear as the document only describes a logical set of variables and operations, and does not explain how the programming will be implemented, there are many clues which which when combined give us a pretty clear idea on how this system could operate.
I’m going to bullet point a few statements all made by Bob throughout the thread(s) ( not in order of appearance).
“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. “
From this we can deduct that Ripple DO have resources they can apply to drive their system forward. We already have a pretty clear idea on what these are.
XRP II sales from escrow.
“War-chest” XRP/Fiat that Ripple hold allocated to boost the ecosystem development.
“It only subsidises risk on the trader supplied funds that actually facilitate bridge payments “
Here we have the word “subsidises”. We know Ripple have a program called “RippleNet Accelerator Program” that consists of a Volume Rebate and an Adoption Marketing Incentive.
Monica Long, VP of Marketing at Ripple, said: “We’re borrowing a page from the likes of PayPal (with their early days adoption and referral bonuses), implementing incentives to accelerate network effects on RippleNet. Since we’re offering the incentives in XRP, we anticipate seeing an added benefit of building an easy on-ramp for institutions to use XRP in their payment flows to lower liquidity cost in the future. Early reception of these XRP incentives in a test phase has been very positive.”
This was announced by ripple in Q2 2017.
It seems logical that in todays highly evolved technical setups, that incentives could be dynamic, with liquidity delivered on demand to areas within the network that need price support.
“So how can you increase the price of XRP? Well, of course, attract more market makers to the corridor and system. They can't trade a corridor until AFTER they purchase their stake of XRP. And once they have purchased that XRP and are profitably making the market, they are in effect long term HODLers.”
Again referring to the statements above, the higher the volume on the network and the more makers, the better the balancing across the network will perform.
We are already hearing about new forms of asset “custodians”, with systems like HQLAx, where pooled assets are available for securities lending. Having a pool of XRP held by custodians, with XRP liquidity being accessible by Ripple partners within the incentive program, seems very feasible. Routing this to corridors that needs support using an algorithm make sense.
Another key point in increasing value that needs lot more attention and understanding is the RCL/XRPLs ability to hold value of other denominations. Simply by being able to hold XRP and recycle its value is not enough for the rise in price. As more and more new assets are added and traded via the ledger, the implicit value of XRP as an intermediary asset increases.
Example - BTC can be held and traded on the XRPL. At times XRP will be used to bridge value in and out. As the capital of more and more assets are traded, the value of the network also rises, and with it XRPs price due to availability and use.
“..Is scrupulously efficient in deploying XRP. This is what prevents it from putting a downward pressure on price.”
Here bob indicates the patent system is very efficient at deploying XRP. As above we can assume the this must come from a source pool of liquidty ( could this be the infamous xpool?)
“Payment volume being equal. High value corridors require more capital. Low value corridors less capital. ROI is a function of (profit / capital). “
This is where the patent becomes more complex, and i hope Bob can one day teach us how that works. As the price finding algorithm is aware of the network state, it knows where liquidity is running low and where it is high, and is always aware of the current demand. The descriptions of bidirectional “Legs” in the patent support this. Using the systems described above liquidity could be provided to the ares where prices need support, effectively make XRP the best choice for each transaction on a dynamic basis.
Hope i'm not to far off the mark here..