XRP Velocity and Float Value

[zerptilyaderp]

I have seen a few arguments, and would like to discuss, that due to XRPs ability to be used every 4 seconds-10 seconds...however long it takes a tx to close (bankA to bankB? or would it be bankA to MM to bankB?) that this near instant re-availability will prevent XRP from attaining any high dollar value, because there will be so many available at any second...the supply overload due to velocity, will outweigh the transactional volume demand (within these 4-10 second windows)....and that the max value needed for XRPs float (eventually 70-80% of total supply, 70-80B XRP) will be equal to the max money needed to be moved every 4 - 10 seconds...this window may be longer in duration, i dont know...it depends on how the Market Makers are involved in this...id like some help understanding the transaction flow from XRP to USD...between banks

..ironically, this is the polar opposite of bitcoins currency-use-case problem, very low velocity possible due to POW...hence its commodity status at the moment...digital gold

Theres one valuation model that correctly takes this velocity into account...TLDR is $60 plateau in 6-7 years with incredible adoption...realistic

...to be fair that is the same percentage growth to attain a 36k ETH...

https://imgur.com/L7tpMf2

Edited January 10, 2018 by zerptilyaderp

[Guest]

Quote

Theres one valuation model that correctly takes this velocity into account...TLDR is $60 plateau in 6-7 years with incredible adoption.

Can you provide a better format for the valuation model? That imgur image is useless. And we've got time.  Thanks

Edited January 10, 2018 by Guest

[zerptilyaderp]

velocity can be changed..ur not gona like the numbers

https://drive.google.com/drive/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

Edited January 10, 2018 by zerptilyaderp

[XRPbeliever]

Hi zerptilyaderp, I'm sooooooooo impressed with your valuation model regardless of its make-sense. 

An assumption on many inputs and no doubt velocity is the most key one. Any supportive table/arguments for velocity number? As an XRP investor,  higher V is not a good news. agreed. To defence MV = PQ argument, the primary success of XRP in FIs gives your (price) estimates (even lower if higher V). But, I think it's  a very good estimate of the success in cross-border TXs markets. No reason not to think the conquering other markets and/or human greed, etc. It's hard to be measurable but not trivial sources for price appreciation. According to BG, "Where Ripple is today with payments is analogue to where Amazon was with books." and "Progress we made in payments is one piece of the Internet of Value (IoV) puzzle." 

[Mpolnet]

On 1/9/2018 at 11:00 PM, zerptilyaderp said:

velocity can be changed..ur not gona like the numbers

https://drive.google.com/drive/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

When using the model the one I would use is the one dated 2_10_2018 as it is the last model that I uploaded to the XRP community valuation drive. It has four total addressable markets 1) Global Cross Border Payments 2) Store of Value 3) Reallocation of capital freed up from Nostro/Vostro accounts 4) XRP as a settlement layer for derivatives.

How to think about these assumptions can be read here in @Hodor's topic

Edit: The link to the picture in the first post reflects a slightly dated model with older assumptions, less use cases, and no speculative premium that can further drive utility value.

Edited February 28, 2018 by Mpolnet

[KarmaCoverage]

I think the first valuation model is originally from this https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

I tend to agree with this approach to valuation for a number of reasons. So I pulled down the spreadsheet (it is available in the article) one day and started trying to use it for XRP, but as I got into it I realized I was going to have to redo some of the formulas a little bit, because they were not build for exactly how XRP works.

I do think this "Valuation as an Economy" method is the best approach for blockchain project valuations.

[Mpolnet]

32 minutes ago, KarmaCoverage said:

I think the first valuation model is originally from this https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

I tend to agree with this approach to valuation for a number of reasons. So I pulled down the spreadsheet (it is available in the article) one day and started trying to use it for XRP, but as I got into it I realized I was going to have to redo some of the formulas a little bit, because they were not build for exactly how XRP works.

I do think this "Valuation as an Economy" method is the best approach for blockchain project valuations.

https://drive.google.com/drive/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

^ This is the google drive I created where I tried to rework Chris Burniske's original model (which was for cloud storage - essentially modeling the value for filecoin). 

The most recent version of the model is the one dated 2_10_2018 - it has what I personally think are more realistic assumptions around velocity, however that doesn't mean they are right nor that the other assumptions are right. It could also be lacking in potential addressable markets (there are only 4 in that model).

I think if we approach looking at the "Market Cap" as a "Network Value" or "Token Economy" (for each specific protocol/asset) then it eliminates some of the misconceptions over how high the price of XRP can go. Instead it allows us to compare a token economy in terms of a real world economy to get a sense of how much economic activity these protocols could eventually support as they grow and mature. 

Edited March 3, 2018 by Mpolnet

[KarmaCoverage]

@Mpolnet Did you make any changes to the financial model, or just changed the assumptions?

I wanted to run it out at least 30 years (maybe 100), and I was trying to think how to account for some of my personal assumptions...

1. The $27 trillion currently needed in float accounts gets drastically cut down to only needing $2.7 trillion to service those payments, in a post-RippleNet adoption world due to capital efficiency improvements.
2. Machine-to-Machine (IoT) micro payments flows I expect to be 10x whatever human payment flows are, so $27T required in float to service, say 10 years out.
3. I dont know what discount rate makes sense, but this matters quite a bit when bringing each of the 30 years' Future Value of the Utility Value back to present value.
4. other things just were not modeled right, or were irrelevant variables imho, XRP  supply stuff.

At some point I want to take this thing and redo it's modeling specific for XRP.

 

[Guest]

curveball... it's nearly impossible to value a future, entirely new economy, which is the IoT, IoV, basically programmable money world and all that it will unlock as brand new business models we havent even considered -- factoring that in is basically impossible but we do know if ripple succeeds, we 100% WILL have a new economic situation, e.g. nanopayments, microloans, real-time/streaming payments, smart energy grids, smart cars/things/networls all paying eachother, AI businesses/contracts, and on and on and on

just throwing out another big chunk of the cheese

[Mpolnet]

1 hour ago, KarmaCoverage said:

@Mpolnet Did you make any changes to the financial model, or just changed the assumptions?

I wanted to run it out at least 30 years (maybe 100), and I was trying to think how to account for some of my personal assumptions...

1. The $27 trillion currently needed in float accounts gets drastically cut down to only needing $2.7 trillion to service those payments, in a post-RippleNet adoption world due to capital efficiency improvements.
2. Machine-to-Machine (IoT) micro payments flows I expect to be 10x whatever human payment flows are, so $27T required in float to service, say 10 years out.
3. I dont know what discount rate makes sense, but this matters quite a bit when bringing each of the 30 years' Future Value of the Utility Value back to present value.
4. other things just were not modeled right, or were irrelevant variables imho, XRP  supply stuff.

At some point I want to take this thing and redo it's modeling specific for XRP.

 

I did my best to change the model as well as the assumption. I projected it out 20 years (but typically in financial modeling it's capped at a 10 year projection due to the difficulty of accurately projecting further out, since 10 years is hard enough). I made changes to the supply schedule formulas and add more inputs for the supply schedule, mainly around when the founders and how the sell/when they sell.

I added the freed up $27T of nostro/vostro accounts as a new addressable market. That market is treated as a reallocation of capital and projected out the same as cross border payments. Additionally, I added the burning of XRP per every $1 transacted to come up with the new available supply for each addressable market. No XRP is burned for the store of value market since XRP is just being held. 

In terms of discount rate I used a high once since the discount rate can be thought of as what the investor is expecting to get compensated given the amount of risk they are taking on. Definitely give it a look and let me know what you think of the set up/formulas. I would recommend downloading it to your PC to be able to use all of the features built in since google drive doesn't for some reason.

[Mpolnet]

https://static1.squarespace.com/static/5a479ee3b7411c6102f75729/t/5cc4ad03f5a50f00010525e7/1556393220303/Value+Capture+and+Quantification_+Cryptocapital+vs+Cryptocommodities_Final.pdf