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Please take this with a small pinch of salt. It's work in progress so I haven't thought it all the way through 100%. I'd like to call upon some old pals who are smarter than me: @KarmaCoverage @tulo @kanaas @protechtor @cmbartley @baggy23 @yxxyun @Mercury @mars75 @Graine @Global @jn_r @brianwalden @Parabellum etc, to help me thrash this out and debunk/critique as necessary. –––––––––––––––––––––––––––– x-Assets Synthetic, XRP-collateralized, price-pegged digital assets. Collateral could be 1.5:1, 2:1, 3:1 as necessary. Based on the XRP Ledger Stablecoin Proposal by David Schwartz: xUSD xEUR xXAU xXAG xBTC xLTC xMXN xQQQ xAPPL xTSLA xWTI (etc) Assets inside exchange orderbooks are always "synthetic" or IOUs of some sort because on-ledger exchanges (even XRPL's DEX) cannot handle such immense trading volumes. The exchanges hold "real" assets in the back end (either bought "on demand" or most likely in advance bought at bulk or at their own risk), so when you want to cash out you convert the (for example) BTC "IOU" to BTC. Instead of exchanges holding multiple real assets, what if some exchanges only held a quantity of XRP (over-collateralized, say 200%) that's required to buy back those assets upon cashing out? -- @KarmaCoverage rightly mentioned (below) that ILP ledgers can do this; @tulo made a great thread back in 2017 re: ILP & multihop -- The problem is that there are any given number of assets with particular quirks e.g. bitcoin and its slow transaction time. Or some niche digital gold ledger somewhere. So exchanges still have to buy/hold the actual asset "somewhere" to make the withdrawal. But stablecoins prove that synthetics can work. Just look at USDT (aka Tether). What it allows is for better rebalancing and liquidity between exchanges. Users can port USDT to any supporting exchange and hold. Tether acts as a treasury or rebalancing mechanism. But it's still slow and requires trusting the Tether treasurers! Let's assume exchanges support an x-Asset standard instead: xUSD, xMXN to start. Instead of e.g. using ODL for remittance (where we know Ripple have had rebalancing issues) the usual way – deposit to USD exchange (slow), swap to XRP (fee), withdrawal of XRP to MXN exchange (slow, possible fee) and another conversion from XRP to MXN (fee) then withdraw to MXN bank (slow, fee?) – this time a market maker (and/or collateral provider/issuer of some sort) holds only XRP and uses the XRPL's pegged stablecoin feature to create a synthetic 200% backed xUSD / xMXN on the XRP ledger. These synthetics move in 3 sec just like XRP, because they are XRP! But remember, these also behave like "real" USD or MXN for holders thanks to price oracles (perhaps supplied by Flare, Tezos, Chainlink?) so that they always guarantee the same market value upon redemption. That price volatility risk is managed profitably by the issuers (and market makers?). Since the exchanges support x-Assets directly, the market makers (MMs) can quote for a remittance flow from e.g. USD->MXN and since we know the XRP value of both USD and MXN, we can also calculate this in XRP. So all the MM is doing is moving XRP from the xUSD to the xMXN (or vice versa). Or, XRP is just rebalancing instantly from one "pot" to another, so to speak. Going from xUSD to xMXN is really just an XRP tradeoff in a collateral pool. Side note: this might be what parts of Bob Way's patents were alluding to (or not). I believe (but I'm not 100% sure) this gets rid of at least one of the two fees that's been a problem for ODL on traditional exchanges where you have to go e.g. from Kraken (USA, fees) to Bitso (MXN, fees) and cannot also guarantee their withdrawals will be timely. So instead, we're just moving XRP direct and only incurr the XRPL fee plus whatever the MM quotes. Now notice in the bottom graphics that I've put examples of various synthetics trading with one another without XRP, which is a weird notion. E.g. xXAG (silver) & xQQQ (NASDAQ). But remember, these are all just XRP anyway. But I think it's possible. They are really just "pots" being refilled like water flowing from one to another on-demand. The water is XRP. Just for fun really. Also notice one can get a total calculation of volume (in XRP, of course) for the entire orderbook slot. So rebalancing is in theory very easy to calculate here to top-up one-way flows. Remittance/ODL? The main point though, is how a remittance flow would work through this system vs ODL. How the rebalancing gets done. Because now it's just a matter of moving XRP from pot to pot. However, at some point the x-Asset has to hit a real bank account. Unless of course... banks are part of the "pool" in some way. But my brain can't play out all the pieces and I start getting a headache and thinking... maybe this is all total crap?! We know under David's proposal that x-Asset issuers will get rewarded for taking over other positions and providing excess collateral to guarantee redemptions and so on. So the game theory works for this part and provides a sort of long-fabled liquidity incentive (Miguel?!) in the meantime (possibly related to Bob Way's automated, scalable and non-partisan mechanism for allocating XRP on the DEX). Questions/problems Anyway my questions to you guys, are: 1/ How and by whom does this rebalancing take place when new money comes into exchanges e.g. speculators/traders/retail? Who accounts for the extra flows? 2/ What happens at the point of withdrawal to a real bank account? Is that actually faster than just having regular exchanges, or the same? 3/ What if the Banks themselves simply hold and rebalance x-Assets (xPool?) until they need to withdraw in bulk? 4/ What if consumer-end apps and pseudo-banks e.g. Uphold, Gatehub, Coinbase, even Paypal/Revolut, started accepting an x-Asset type standard? 5/ Could x-Asset rebalancing between exchanges/pools be achieved in an automated fashion by an XRPL native AI/monitoring system? 6/ Is this a useful implementation for Offer Auto-Bridging? @nikb 7/ Is this really a legit thought experiment?! Am I wrong or completely bonkers?! PLEASE DON'T ROAST ME ALIVE!!! . . –––––––––––––––––––––––––––––––––––––––––––––––– . . REFERENCE MATERIAL (reading to do if this is all new):