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Jedivh

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  1. Jedivh

    Discounting of Ripple (the company)

    Time to apply my finance degree that is otherwise collecting dust! ? I'm sorry to say, with no disprespect meant towards you, that NPV is a flawed valuation model in this case. Like all tools, they have their situation where it makes sense for them to be used. I think you know this, since you said "I know discounting of Ripple is foolish attempt due to ... large amounts of variables that one must address.", so I thought I'd share my insight. The important distinction to be made here is between growth equities and income equities. Income equities are like your standard shares of big companies who have essentially reached their potential, such as grocery chains and retail stores (although Amazon would like to have a word with you on that statement...). These companies have little direction for growth, but rather hold value due to the cash flow they generate through their profits. Traditionally, they aren't very speculative by nature, and people would hold them knowing they would receive a nice dividend. 401K's, retirement funds, and the like are big into these equities because of their relatively low risk and certain cash flow. Due to their low risk, their cost of capital (and thus their discount rate) is relatively easy to estimate. With a good gauge of discount rate and cash flow, NPV is a great model to apply to valuating such equities. Growth equities, on the other hand, are notoriously difficult to valuate. Growth equities are akin to shares in your standard startup or high tech company - you don't buy in to those expecting a cash flow tomorrow, next month or next year. Instead, you buy these equities with the hope that they will disrupt (or create) a market, and somehow transition to being cash flow positive in the mid-late future. Since they have such an uncertain future, their cash flow is unpredictable (which is bad for NPV), and their discount rate will be very hard to predict (since discount rates are linked to the cost of debt, and growth equities are rarely financed through debt). Sure, you can apply NPV in this case, but you have to account for a margin for error that renders your findings meaningless. Now let's talk about Ripple. Ripple shares fit the category of a growth equity better than any other. This is due to their speculative nature. Ripple earns money through selling software solutions to banks currently, but even though they are cash positive (which is huge in and of itself), we all know their end game is an immense valuation due to the currency XRP massively increasing in value. Ripple holds a metric buttload of XRP, and it would be naive to think they're not interested in its long term value. Ripple, as a high tech company, should have a stock price that is through the roof (compared to its earnings) due to its speculative nature. Only when they have achieved their goal of global widespread usage of XRP can they considered to be an income equity. Upon reaching that potential, speculation would be diminished (no more "will banks be using xRapid??" or "are they a security??" or other such... uncertainty (I wanted to use the word nonsense but I'm careful to count my chickens before they hatch). This is assuming Ripple doesn't go full Amazon and start expanding into other verticals once XRP's potential is secured. With Ripple being a high tech company (and like I said, growth equities are difficult to valuate), NPV doesn't really apply here. A popular contender is the option valuation method in which we assume Ripple's stock is worthless if they don't succeed, but the upside is potentially unbound if they do succeed. I would assert that by valuating Ripple, you would need to determine the long term value of XRP which is, as you would understand by reading this forum, virtually impossible. Is XRP going to be worth $5, $50, $589 or higher? The upside is completely unquantifiable. To discount Ripple with NPV would be to estimate what the value of their XRP holdings will be worth in the future, as well as their earnings from products they sell, combined with their discount rate (which I would point out as being much, MUCH higher than 7% due to the huge uncertainty as to what they can possibly achieve). Valuating their xRapid partners as $1M per signup and $0.2M per year makes no sense because of the indirect effect this would have on XRP's value. Each additional xRapid partner makes the XRP ecosystem exponentially more valuable to any additional partner considering xRapid due to network effects. And we all know that a more valuable XRP ecosystem for FIs/banks correlates to volume, which correlates to an increase in price to support said volume. I feel like this is the key takeaway. It is for this reason that I don't see Ripple going public any time soon. When a company is in their early growth stages (such as Ripple), it is detrimental to be focused on quarterly profits and short term goals to appease public shareholders. I would lose a lot of optimism if Ripple were to go public, because it would drive their resources away from the growth of xRapid. Thankfully I don't see this happening due to their "lazer focus" on growth. After all, Brad did write the peanut butter manifesto
  2. Jedivh

    ICE/Baakt and XRP

    I really enjoyed this read - it really got my gears turning. I have a feeling that this is future-FUD. This isn't a jab at you, rather I think that further down the line when "banks aren't going to use XRP" or "XRP is a security" have been buried, we'll be seeing the rise of fractional reserve XRP as a main point of discussion. I love "FUD" because it helps me solidify my own understanding and gets me thinking. Here are my thoughts: XRP's use case is instant, counter party risk free settlement. How is this achieved today? Shipping of physical gold and/or crates of USD for high profile settlement; transfer of ownership of gold with highly trusted underwriters, and low-risk bonds for low-profile settlement. XRP and even Bitcoin trumps this substantially (orders of magnitude better). ICE/NYSE through Bakkt can become a highly trusted underwriter for XRP/Bitcoin. These securities will be highly liquid for the US dollar, capable of handling many trillions of dollars of activity. Let's stop right here and assume that there's a fractional reserve of 10%, and underwritten bitcoin/XRP contracts are being used for low profile settlement in the magnitude of many trillions (before Jevon's paradox; eating a significant portion of bonds, deeds and cash). XRP and Bitcoin would need a collective valuation capable of supporting 10% of this multitrillion dollar volume - indicating they would need to have a mcap in the trillions alone. Let's get back to my thoughts: But this would also create liquidity for the underlying assets. XRP's utility as a standalone settlement tool (not underwritten contracts) would improve as a result. What would have more utility as a settlement asset? The underwritten Bakkt.XRP or the absolutely counterparty risk free XRP (note the lack of namespacing). Just like physical gold has more finality of settlement than COMEX.GLD. Why is COMEX.GLD used over gold? Shipping and storage costs. Hence COMEX.GLD is good enough. XRP is instant with less than a penny to transfer. Therefore XRP's settlement utility isn't cannibalised as much by "equivalent" securities. In fact, XRP is arguably better than Bakkt.XRP in all cases. It's more difficult to transfer Bakkt.XRP than XRP from both a regulatory (security vs commodity) and technological standpoint (proprietary exchange API vs broadcasted crypto-signed transaction in an open network). What conclusions can we draw from this? Banks and large FIs are less likely to use a securitised Bakkt.XRP than actual XRP for settlement in the mid-long term future. Think about this: why isn't COMEX.GLD used for all settlement currently? It's cumbersome (w.r.t regulations and technology) to manage ownership deeds of gold, just like it would be to manage the equivalent in XRP. Will a FI be able to ask another FI to send Bakkt.XRP to an address and call it a day? Fundamentally no, and that is indeed the problem that Bitcoin solves (and XRP solves better, from a tech standpoint). There will always be utility for XRP over a securitised version of it. And all of this isn't even considering the following: Jevon's paradox Bakkt will bring amazing XRP/USD liquidity (exchange XRP <-> XRP.Bakkt <-> USD, driving utility) Maybe there isn't an ulterior motive on behalf of ICE/NYSE Regulation could go in our favor (fractional reserve limits and auditing) Legitimizes XRP and crypto assets Better price discovery through exchange traded funds The surfacing of new exchanges to compete with Bakkt, leading to even more of the above benefits
  3. Jedivh

    (SBI backet) Sentbe considering xCurrent

    Do you have a source on them being SBI backed? I had a good session on google and couldn't find anything.
  4. Concerning to see such a negative article coming from Bloomberg. However, this article felt quite selective in the points it brings up (only negatives), and those negatives I feel can be countered. It's concerning that execs say "scant chance they would ever entrust their corporate clients’ payments to a cryptocurrency". I'd say to that: A few don't represent the whole. It's revolutionary tech, I wouldn't expect incumbents to 'get it' straight away. This is bad for all crypto though. I'm betting with ripple's pro-establishment focus, they will be the most likely to be seen favourably by banks in the future. If banks were raving with compliments for XRP, it would be worth a lot more than it is right now. By investing in XRP, I'm betting that this sentiment will change. No mention of SBI's support for XRP? It's very concerning that SWIFT and Ripple don't appear to be able to come to an amicable partnership. This article highlights that. However this article conflates SWIFT's gpi as a direct competitor for XRP. I'm all about tradeable tokens and free markets solving the nostro problem - I think this is the future (with or without XRP). If SWIFT's gpi implements a native token, I'll invest in it in a snap. Until then, SWIFT's gpi doesn't sway me much. I think XRP is well suited for integrating into gpi, and I can only hope (but I'm becoming less and less optimistic here due to the bad blood). That data about Cuallix (they only sent 12 payments of less than $1k) seems blatantly wrong. Read this and tell me the scale of Cuallix's partnership is less than 10 thousand dollars: https://xrphodor.wordpress.com/2018/01/19/xrapid-cost-savings-confirmed-by-cuallix/ XRP is too volatile for banks? --> Tired argument, could apply to any crypto. It's a nascent industry, and further adoption drives liquidity which will reduce volatility. Cryptocurrencies are going to be much more stable in the future, and people who use this as criticism aren't forward thinking. The quotes from the public is ridiculous. People invest and get burned all the time. "Nobody knows why ripple is worth anything" - some guy. Obviously didn't ask that many people. Not sure how this segment made the cut.
  5. Mutual benefit and aligned incentives are beautiful things.
  6. Yep. If banks are given some XRP, it'll be on their balance sheet. At some point, I can see banks doing Ripple's job for them. Banks that got in early and are holding a large stack of XRP will suddenly have the motivation to try to get other banks on RippleNet too. Not just because of the network effects of xCurrent and xRapid, but because it'll drive XRP's price up and literally make them a lot of money. And honestly I wouldn't be surprised if, in private conversations, Ripple was telling banks this.
  7. Jedivh

    My Idea for Ripple @joelkatz

    The way XRP is currently designed makes it a brilliant store of value anyway. The main incentive for holding XRP is the ability to earn profit by creating markets for other assets. If you own a large amount of XRP, you would put it to work by market making (i.e. getting compensated for the risk of holding it for other parties who are more risk averse, e.g. banks). Since there's already a fixed supply, getting rewarded "drops" for owning XRP would simply be priced into XRP (making the price of an XRP lower to compensate).
  8. As far as I know that's just Alibaba's cloud computing service. That would be like someone claiming that Amazon is running a validator if someone just ran it on an AWS service.
  9. Jedivh

    Spreading the Word

    I'd be scared of getting my car keyed by wild bitcoin maximalists while I'm out buying groceries...
  10. Or like that time Takeru Kobayashi ate 50 hotdogs in 12 minutes, smashing the previous record of 25. "If email captures just 10% of the share of postal mail" ... How dumb does this statement sound now? People anchor on to values thinking that they are hard upper limits. I think we're seeing the same thing now with XRP and the $5 trillion dollars that is sent every day internationally. People talk about the possibility of getting 1% of that, and how it will make the price jump to double digits. What people aren't considering is that the $5 trillion that is handled by SWIFT is limited by a ton of red tape, fees, and 3-5 day long waits. When cryptocurrencies like XRP are underlying the system, numbers like $5 trillion daily will be totally irrelevant. Uber will be able to pay an uber driver $8.50 for that ride they just did. I'll be able to send my mate in the UK 8 bucks on his birthday to buy a beer without a second thought. Things like facebook messenger will have wallets built into them, so when I go out to dinner with my friends, we'll be able to pool the bill through an app. Payments are going to get orders of magnitude easier to make, and the numbers that exist in the current system are going to going to seem tiny in comparison. So it makes no sense to guess what XRP will be worth based on what currently exists.
  11. Hey, overall I liked this article . It's important to bring attention to scaling as its not the first thing on everyone's mind when they invest in projects. But if the goal of a project is to reach mainstream adoption, then it has to be able to scale to handle much, much more than anything we see in the crypto space today. And nothing scales better than XRP, as far as I know, when it comes to speed, fees, throughput and storage requirements. In the discussion of block size you brought up the point "A validator node doesn’t have to have a history of all transactions". I'm disappointed that you left it at that! In my opinion, this is such a huge deal and will be the reason why XRP will succeed over traditional blockchains in the long run. Not only is this the reason why XRP does scale, but its also the reason why Bitcoin, Ethereum, and every other blockchain doesn't scale! Blockchains grow in size quadratically by the number of users (as each user can send transactions to each other user). Bigger blocks accelerate this growth. Small blocks with payment channels and lightning networks ease this growth, but transactions still need to be settled on-chain. And it doesn't change the fact that the growth still worse than linear. Not to mention lightning networks have their own problems (funds locked up, DDOS-able nodes, centralisation of hub nodes). On the other hand, XRP grows linearly, since a ledger contains just a single value and not a history. And once a person opens a ledger, that's it. All that changes is the value of the ledger, nothing more will ever be stored. Other cryptocurrencies, however, will need to then store all of the future transactions done by that person! When we have billions of people using a cryptocurrency, that will be many billions of transactions per day added to the network! With the Kryder rate having maxed out in the early 2000's and getting worse every year, blockchains will be growing faster than hardware can keep up! The only way I can see this not being a problem is if sharding is solved and better off-chain solutions than lightning are invented. But sharding is a complex problem - the smaller the shards the less secure they are; the larger the shards and well, you still have the same problem. The only reason why XRP doesn't have this problem is because it is the only protocol where nodes are trusted to put the right values into the ledger, instead of the network being purely trustless. I guess the saying "a little trust goes a long way" applies here, because it allows you to make something that will actually work at a global scale. If I'm wrong about anything that I've said I would love someone to tell me, because its the main reason why I've invested as much as I have into XRP. It's the main reason why I look at every single other cryptocurrency on coinmarketcap.com and think "meh, it won't scale".
  12. Jedivh

    Ripple Expanding into China!

    I would die
  13. Jedivh

    Get M.E.A.N. with XRP

    Gotta ask the Ripple subreddit mods why your posts keep getting filtered out
  14. Hey Hodor! I enjoy reading your blog a lot. Appreciate all the time you put into making it . The thing that I wish people would talk about more is how well XRP scales compared to traditional blockchains. And I'm not just talking speed, throughput and fees (although those are hugely important and XRP wins here), but the under appreciated metric - blockchain size. This is something that people don't think about enough, and ultimately why I think XRP has the best chance in the long run. As more people use traditional blockchains, the size of the blockchain increases. There is always the transaction where they purchase their initial coins, so the blockchain size increases at least linearly. However as they use the network and send coins to people who are already on the network, the blockchain grows as well. If there are n users on the network who can send money to (n-1) people, then the blockchain growth will be quadratic at the worst rate. Let's compare this to XRP, where every additional user on the system opens an account for 20 XRP. A new account means a new number stored on the XRP ledger for that person (linear growth). The difference to other blockchains is the output of the ripple consensus algorithm is just a new state of the ledger balances - we don't store all of the previous transactions. And the reason why this is possible is because Ripple uses trusted validators, instead of requiring that the entire network be trustless. In short, people have not yet found a way for a network to be trustless without needing to store every transaction that has happened, and ever will happen (which is huge, when you realise people's endgame for cryptocurrencies is overthrowing fiat). And now let's talk about Moore's law. People say that the size of the blockchain increasing doesn't matter because hardware will get better at a faster rate. In the context of storage, we care about the Kryder rate (the rate at which storage improves year by year). We saw a Kryder rate in the early 2000's that was far above what was expected, however in recent years the Kryder rate has been falling short by around 40%. This shows that the age of cheaper and cheaper storage might be over soon as we are reaching a cap. The growth in the early 2000's caused an irrational exuberance in the form of people thinking that storage isn't a problem and never will be a problem for anything like blockchains. But in later years we'll see that the cost to run a full node of bitcoin (or whatever crypto takes off) is huge simply due to the immense storage and bandwidth costs. Trustless systems just won't scale and it will lead to even worse centralisation in the hands of miners who can afford to fork out a lot of money on hard drives (as well as ASICs). Now this just an overview of the problem and a bit of a brain dump. However I believe it's a much bigger problem than people think, and if my thought process is correct then it will be the elephant in the room in coming years. But also, I'm just a guy - I haven't even read the entire white paper. What you've seen here is me synthesizing thoughts based on what people have told me and random things that I've read. So run it by @JoelKatz or someone knowledgeable and do your research. If there's anything wrong with what I've said I'd love to know, because its the main reason why I like XRP as much as I do .
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