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P3T3RIS

XRapid ONLY uses XRP as counter currency

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FYI, if there is no LOLR in xrp, or some contractual agreement between the exchanges on Ripplenet using xRapid that forces lending at some sustainable rate of interest (such as penalizing surplus holders of XRP), then the system will collapse if debt contracts (credit) denominated in XRP are allowed to exist. The only other way to prevent collapse is if debt contracts (credit) in XRP are banned, i.e. no credit creation in terms of xrp is permitted. 

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@Valhalla_Guy

your example is basically it. Nothing to add to that xRapid transaction using on-ledger exchange to exchange XRP payment.

I started this topic about @JoelKatz’s tweet about closed ledger transactions, which in my opinion confirms XRP being the one and only used counter currency in xRapid.

Closed ledger network requires something more than just xRapid, but it was just to prove my point about XRP usage.

 

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57 minutes ago, Wandering_Dog said:

Show me with balance sheets when the net flow is USD -> MXN. This is how I see it (let the FX rate be 1:1:1 for simplicity):

image.thumb.png.d7fc4610e68717684e7eebf0a31909eb.png

 

1) Customer's bank deposits are committed to the xRapid tx:image.thumb.png.81c3c8e13eace731c188942291c49928.png

 

2) The bank's reserves are committed, as are the XRP at the exchange:

image.thumb.png.210c65a30e7c1716fb1e3e2060c31343.png

 

3) The Bank's XRP goes back into the tx (committed now to the exchange in MX) and the MX Exchange commits their peso reserves to the tx:

image.thumb.png.6566932db5f0892133fd562423fa8755.png

 

4) Next the Peso reserves are recommitted to from the US Bank to the MX Bank, and the MX Bank commits to a liability of 10 deposits for the receiving customer:

 

image.thumb.png.8a0be7190195ec4c7eb42439189cbecc.png

 

5) As everything fits, holds are released and the tx settles:  

 

image.thumb.png.84d9f9d0d92fe7285f96282def4cee80.png

What's changed?

> A net flow from the US Bank to the Exchange (USD_Reserves) [LOLR US CB]

>> A net flow from the US Exchange to the MX Exchange (XRP) [no LOLR]

>>> A net flow from the MX Exchange to the MX Bank (MXN_Reserves) [LOLR MX CB]

 

In order for the system to persist through time, each of these parties need to either balance the flow (send an equal amount in the exact opposite direction), or lend the exact same balances back to their holders for the corridor the remain open. 

 

image.thumb.png.688cc89c25b891026dff65c66dd867ba.png

 

 

image.thumb.png.4f3a8ae125d9daef9a194ddfb6a69d11.png

 

Many Edits: apologies, there were some typos/errors [there is an "MXN_Reserves, Bank" missing from MX CB balance sheet in the final two pictures, please just imagine its there :) ]

 

I'm so excited by these graphics!

Not exactly how I visualize it, but same data and story, well done. :paint2: 

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20 minutes ago, Wandering_Dog said:

FYI, if there is no LOLR in xrp, or some contractual agreement between the exchanges on Ripplenet using xRapid that forces lending at some sustainable rate of interest (such as penalizing surplus holders of XRP), then the system will collapse if debt contracts (credit) denominated in XRP are allowed to exist. The only other way to prevent collapse is if debt contracts (credit) in XRP are banned, i.e. no credit creation in terms of xrp is permitted. 

I think you have a very solid point, but the cat is out of the bag, people are already offering fiat loans using XRP as collateral. 

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It looks to me like some of you are thinking of only one corridor.  

There IS demand for XRP in a national fiat if you can then transfer that XRP anywhere in the world and sell it at the front end of some other corridor.

Edited by Tinyaccount
Had receiving end instead of front end. My bad.

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1 hour ago, KarmaCoverage said:

I think you have a very solid point, but the cat is out of the bag, people are already offering fiat loans using XRP as collateral. 

Trying to get my head around this.  Are you saying without a Lender of last resort the XRP ecosystem as set up will eventually collapse?

 

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8 hours ago, Valhalla_Guy said:

So if the banks must hold XRP, how is this different from nosto/vostro?  Still tying up a lot of capital, plus exposure, on all fronts, to slippage; with no way to offset the loss. 

Sorry but a “base currency” requires something real to back it up. Gold, Oil, or old fashioned Govt force. XRP value is backed solely by belief, and only enforced by anonymous validators, whose only weapon is a digital ledger.

You need XRP to be used widely, as local Fiat, for it to hold true value. But (here comes the pretzel) if all govts allowed XRP to be used as a local currency, there would be no need for cross border exchanges, eliminating need for xRapid or any currency exchange markets. Also 1 XRP will always equal 1 XRP, since there will be no local currencies to value it against. 

Doubt the US will allow retail purchases in multiple currencies, heck we do not even take Canadian money, much less Pesos!

The difference is the initial source of the XRPs. For the pioneering institutions, XRP may have been provided to them by Ripple (with stringent conditions on sale, transfer,etc) as a form of incentive to participate in the initiative. This means that effectively the only cost the first wave of institutional customers bear would be the implementation cost. Subsequent waves would have to obtain XRPs from the open market and ideally by then there would have been critical mass achieved in RippleNet i.e. the network effect would have kicked in and network participation value would have exceeded the costs (both tangible and intangible) of joining the global network.

Doing away with the Nostro/Vostro accounts then frees up the huge amount of capital that is presently locked up in the traditional system. And this translates to an immense amount of liquidity (trillions of dollars) that can be injected into the global markets. The downside of this is the potential inflationary pressures that can arise and manifested as price rises in a broad spectrum of asset classes, both traditional and otherwise. 

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3 hours ago, P3T3RIS said:

Buy XRP using USD, (XRPUSD) you buy 1 XRP with 0.333 USD.

buy USD using XRP, (USDXRP) you buy 1 USD with 3 XRP.

 

buy BTC using USD (BTCUSD) you buy 1 BTC with 4000 USD.

buy USD using BTC (USDBTC) you buy 1 USD with 0.00025 BTC

Base currency always 1, counter currency amount changes.

Have you ever used a trading platform?

XRP/USD makes XRP a Base currency. You just disproved your own claim.

Also it's:

Buy XRP using USD (USD/XRP) you buy 1 XRP with 0.333 USD

Buy USD using XRP (XRP/USD) you buy 1 USD with 3 XRP

So with Base always = 1 then any pair that has the currency first is the base pair. So your claim that XRP is ALWAYS a Counter (NOt Base) currency is false by even your own post and can be confirmed here:

https://www.investopedia.com/terms/b/basecurrency.asp

Disprove that site's claims. I dare you.

Edited by BrownBear

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5 hours ago, Wandering_Dog said:

What does this mean, specifically? How can a bank buy something back instantly, always? Are the other exchanges forced to offer XRP for sale? If an exchange wants to sell something, is there a counterparty forced to buy?

The institutions are not forced to buy back XRPs; the buy-back could potentially be an option that is provided as part of the atomic transaction so that an institution which has had a quantum of XRPs sold off by xRapid into the destination end-point of the relevant corridor can choose to have it simultaneously re-purchased in the same corridor or an alternative corridor (so as to maintain the benefits of minimizing costs incurred from the half of the xRapid process in which XRPs need to be acquired). Needless to say, this works only if there is sufficient liquidity in the XRP markets (which can be back-stopped by Ripple given her large XRP holdings).

Edited by Cobalt
grammar

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1 hour ago, Tinyaccount said:

It looks to me like some of you are thinking of only one corridor.  

There IS demand for XRP in a national fiat if you can then transfer that XRP anywhere in the world and sell it at the front end of some other corridor.

But if the purpose of using XRP is to transfer value into a specific destination end-point (which is in a specific corridor) then it would not be possible to sell the XRPs used in the transaction into any other corridors because there would then still be a need to subsequently transfer the value across corridors. Unless, of course, xRapid, as part of its path-finding algorithm, is able to combine several transactions spanning multiple corridors into a single atomic transaction. I believe this would increase the algorithm's tolerance of relatively illiquid XRP markets, at the expense of transactional complexity and speed (since one transaction could constitute many more secondary transactions).

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2 hours ago, Wandering_Dog said:

FYI, if there is no LOLR in xrp, or some contractual agreement between the exchanges on Ripplenet using xRapid that forces lending at some sustainable rate of interest (such as penalizing surplus holders of XRP), then the system will collapse if debt contracts (credit) denominated in XRP are allowed to exist. The only other way to prevent collapse is if debt contracts (credit) in XRP are banned, i.e. no credit creation in terms of xrp is permitted. 

Given that Ripple is still the largest holder of XRPs and has motivation to see the XRP ecosystem succeed, would it not make sense that the company becomes the LOLR? 

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31 minutes ago, BrownBear said:

XRP/USD makes XRP a Base currency. You just disproved your own claim.

https://www.investopedia.com/terms/b/basecurrency.asp

Disprove that site's claims. I dare you.

I do not see how the terminology used by @P3T3RIS contravenes any of the definitions indicated in the link that you have provided. 

Quoting from the linked page:

BREAKING DOWN Base Currency

In forex, the base currency represents how much of the quote currency is needed for you to get one unit of the base currency. For example, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. dollar would be the quote currency.

Parts of a Currency Pair

In forex, currency pairs are written as XXX/YYY or simply XXXYYY. Here, XXX is the base currency and YYY is the quote currency. Samples of these formats are GBP/AUD, EUR/USD, USD/JPY, GBPJPY, EURNZD, and EURCHF.

When provided with an exchange rate, currency pairs indicate how much of the quote currency is needed to buy one unit of the provided base currency. For example, reading EUR/USD = 1.55 means that _1 is equal to $1.55. This directly says that in order to purchase _1, a buyer must pay $1.55. The currency pair quotation is read in the same manner when selling the base currency. If a seller wants to sell _1, he will get $1.55 for it.

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Just now, Cobalt said:

I do not see how the terminology used by @P3T3RIS contravenes any of the definitions indicated in the link that you have provided. 

Quoting from the linked page:

BREAKING DOWN Base Currency

In forex, the base currency represents how much of the quote currency is needed for you to get one unit of the base currency. For example, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. dollar would be the quote currency.

Parts of a Currency Pair

In forex, currency pairs are written as XXX/YYY or simply XXXYYY. Here, XXX is the base currency and YYY is the quote currency. Samples of these formats are GBP/AUD, EUR/USD, USD/JPY, GBPJPY, EURNZD, and EURCHF.

When provided with an exchange rate, currency pairs indicate how much of the quote currency is needed to buy one unit of the provided base currency. For example, reading EUR/USD = 1.55 means that _1 is equal to $1.55. This directly says that in order to purchase _1, a buyer must pay $1.55. The currency pair quotation is read in the same manner when selling the base currency. If a seller wants to sell _1, he will get $1.55 for it.

The title of the thread? The fact he finally admits that XRP/USD makes XRP a base currency is proof that XRP is not always a counter currency.

If you can't see how him saying USD/XRP and XRP/USD is XRP being counter (quote) currencies for BOTH pairings, then you may have missed a step. Like the beginning of the thread and the thread title.

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19 minutes ago, BrownBear said:

The title of the thread? The fact he finally admits that XRP/USD makes XRP a base currency is proof that XRP is not always a counter currency.

If you can't see how him saying USD/XRP and XRP/USD is XRP being counter (quote) currencies for BOTH pairings, then you may have missed a step. Like the beginning of the thread and the thread title.

If you are referring to the thread title "XRapid ONLY uses XRP as counter currency" then perhaps there are a couple of points that are relevant.

a. it should be xRapid and not XRapid (I mean, if you really want to be pedantic about nomenclature as well)

b. the position of "ONLY" in the statement does not convey any significant meaning and could be better worded; note the following variations:

    i. "ONLY xRapid uses XRP as counter currency" - this means no other systems use XRP as counter currency

   ii. "xRapid uses only XRP as counter currency" - this means that xRapid does not have any other counter currency except XRP"

   iii. "xRapid uses XRP only as counter currency" - this means that xRapid does not use XRP as anything else besides the role of counter currency"

   iv. "xRapid uses XRP as counter currency only" - same meaning as point iii

Or are you referring to his references to XRP as the base for xRapid transactions while simultaneously citing it as the counter currency? Specifically he used the term "the base" and not "the base currency". I believe the point that he was trying to convey is that XRP serves as the basis for all transactions in xRapid. That might be the bone of contention that you have with his statements. 

Regardless of whichever you are perturbed by, the issue seems more related to grammar than it is to semantics.

I think we are all here to focus on XRP and not on English grammar. While the latter is important since improper use of grammar can create misunderstandings, we are neither linguistic experts nor English Language professors so our discussions serve to convey and subsequently refine the semantics of our individual stance on various XRP-related topics and we need not be too worked up over syntax.

As many of the (somewhat heated) conversations you have had with other members have clearly demonstrated, the focus on syntax can be backfire by distracting from the essence of the original threads. 

Let's learn to forgive and be more tolerant of one another's shortcomings while celebrating our collective strengths!

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1 hour ago, Cobalt said:

But if the purpose of using XRP is to transfer value into a specific destination end-point (which is in a specific corridor) then it would not be possible to sell the XRPs used in the transaction into any other corridors because there would then still be a need to subsequently transfer the value across corridors. Unless, of course, xRapid, as part of its path-finding algorithm, is able to combine several transactions spanning multiple corridors into a single atomic transaction. I believe this would increase the algorithm's tolerance of relatively illiquid XRP markets, at the expense of transactional complexity and speed (since one transaction could constitute many more secondary transactions).

I’m afraid I don’t follow you...   can’t the market maker or individual who bought those XRP with fiat simply withdraw them to another exchange across the world or into their own wallet?   So arbitrage across the planet.  

Thats what I meant by saying folk are only considering one corridor.  It’s actually a web.  

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