Chat: divisible units and pricing

[jag216]

Are they important? I necrod a thread (sorry) but then found a link to one video that caused a mild ruckus.

This was inspired by a brief segment in the CKJ presentation where Bob did a brief segwe and broke down the relationship between satoshis and drops.

Will this become more relevant as micropayments make up a larger part of the volume if the price of a whole XRP increases? Are XRP undervalued when compared to BTC given the location of the decimal place? Or is the reach and network of BTC such that it outpaces XRP and the value factor is justified as is?

I'll step away from the hornets nest now - but I'd ask Bob how he thinks about the impact divisibility has on overall whole price - and if the dominance of public perception of owning a "whole amount" of something holds back pricing - because there's just "so many" xrp.

[BobWay]

The above math is correct. This is the way I wrote about it.

NOTE: Originally I said BTC was nine decimal places. The web claims bitcoin is divisible to 8 decimal places so I had faulty memory. I fixed my original post.

I don't think the divisibility matters at all. When BTC price started getting high people started to talk about everyday goods prices being too small for humans to work with. So everyone (for a while) started pricing things in millibitcoin. People tend to adjust, but it can get complicated.

In reality, nothing in either system's calculations use the decimal points at all. Those are added by the user interface on display.

Edited April 17, 2019 by BobWay

[Jayed]

So wait.. if the decimal is aesthetic, I'm going to start pretending there's a 100 million drops per XRP, like the 100 million Sats per BTC. Why would I convince myself of such a lie? For the memes dear Watson, for the memes..

But I've also thought a lot on this topic. @BobWay would you agree that a value greater than $10,000 per XRP would actually rapidly become detrimental to the network as a liquidity source? Assuming the price could even reach that kind of figure, the reason I see such a price as detrimental is due to the fact at $10,000.00 per XRP, 0.000001 XRP would be worth $0.01. So my logic follows as such, $0.01 is ~ $1.00 Serbian Denar. Meaning at $10,000 XRP is no longer divisible enough to provide the transfer of less than $1.00 Serbian Denar. So what if a product costs $1.58 Serbian Denar and someone wants to pay in XRP, but XRP isn't divisible enough to pay that $0.58 denar? Wouldn't I then as the XRP user, or the store that accepts XRP have to front the half denar difference?

[BobWay]

3 hours ago, Jayed said:

Meaning at $10,000 XRP is no longer divisible enough to provide the transfer of less than $1.00 Serbian Denar.

I hope we have that problem! 

Your math seems correct for XRP.

Fortunately the other currencies on the XRP ledger are actually much more granular because they use floating point numbers.

If things got that extreme, you might have to manufacture a type of floating point based XRP using the XRPL trust lines feature. In fact one already exists called PRX. It always trades 1:1 with XRP.

You’d have to avoid converting PRX to XRP when amounts are smaller than a drop though. There would be roundoff error.

[Jayed]

@BobWay Bwahaha right? If XRP reached $10,000 I wouldn't know what to do with myself! Honestly I didn't even consider such a price possible, but now your insight's got me questioning if it would be as detrimental as I first thought. Though I still don't think any of us need to worry about such figures, at least not for a another decade or so?! lol

[Arsaww]

First of all, sorry for my poor english.

@jag216 thank you for this topic, because i ask myself the same kind of question. but in my opinion, XRP does not need to be at $10,000 to encounter this problem because of Coil and streaming payment.

Let's imagine, 1 XRP has the value of $100 so it means  1 cents = 1000 drops

Now, lets consider a media company would like to make a streaming payment with Coil on a 100 minutes video (so a total of 6000 seconds).

The company would like to sell the full content of the video for a total amount of $0.01 (reasonable price for the internet era)

It means we will have a streaming payment ratio of 0.17 drops per sconds

@BobWay i did not really understood the following sentence

Quote

If things got that extreme, you might have to manufacture a type of floating point based XRP using the XRPL trust lines feature. In fact one already exists called PRX. It always trades 1:1 with XRP.

But please could you explain me :

1. If this kind of situation already have a technical solution or if we just cannot do it because the price is too low.

2. What about the drops burned for each transactions ? If i understand correctly, the lowest value we can burn for each transaction is 1 drop. what happen with this kind of streaming payment ?

 

Thank you so much for everything you do for the community Bob.

[BobWay]

On 4/17/2019 at 9:59 PM, Jayed said:

@BobWay Bwahaha right? If XRP reached $10,000 I wouldn't know what to do with myself! Honestly I didn't even consider such a price possible, but now your insight's got me questioning if it would be as detrimental as I first thought. Though I still don't think any of us need to worry about such figures, at least not for a another decade or so?! lol

I think it will all work out. :-)

[BobWay]

21 hours ago, Arsaww said:

@BobWay i did not really understood the following sentence

You can define new assets other than XRP on the XRP Ledger. One of the things you could define if you wanted to, is a substitute version of XRP.  PRX is that asset. If you know how, you can buy it for XRP. The XRP remains locked up on the ledger in a type of smart contract implemented on the XRPL itself. It was a pretty cool hack. Because of that lockup, you can always sell your PRX back for XRP whenever you want.

21 hours ago, Arsaww said:

1. If this kind of situation already have a technical solution or if we just cannot do it because the price is too low.

2. What about the drops burned for each transactions ? If i understand correctly, the lowest value we can burn for each transaction is 1 drop. what happen with this kind of streaming payment ?

ILP uses XRP, but because of the high volumes of really small payments, not all of those payments go through the XRPL itself.  For this use case, the streaming payments protocol uses XRP payment channels. That allows the to parties to "clear" a lot of small payments very fast. These could include sub-drop payments if they wish to implement that. The sub-drop payments would then accumulate into full drops that could be "settled' on the XRPL at any time.

[jag216]

Sorry I didn't get notifications on the thread but really appreciate the inventive nature of the technology and your thoughts on how the tech can be reshaped to address exceptional circumstances.

[joe91]

On 4/17/2019 at 5:27 PM, BobWay said:

In fact one already exists called PRX. It always trades 1:1 with XRP

 

20 hours ago, BobWay said:

It was a pretty cool hack. Because of that lockup, you can always sell your PRX back for XRP whenever you want

So if J. Holmquist created 1,000,000,000 PRX (minus whatever he gave away/sold out) - He can at any time trade those 1:1 for XRP?!?

[ADingoAteMyXRP]

1 hour ago, joe91 said:

 

So if J. Holmquist created 1,000,000,000 PRX (minus whatever he gave away/sold out) - He can at any time trade those 1:1 for XRP?!?

If he wanted 1B PRX he would have to first acquire 1B XRP somehow, and use those to buy the 1B PRX. The XRP he spends get escrowed on the XRPL, so they can't be used until he exchanges out of PRX trust line and back into XRP. (The XRP has effectively been converted to PRX). Make sense?

[joe91]

20 minutes ago, ADingoAteMyXRP said:

If he wanted 1B PRX he would have to first acquire 1B XRP somehow, and use those to buy the 1B PRX. The XRP he spends get escrowed on the XRPL, so they can't be used until he exchanges out of PRX trust line and back into XRP. (The XRP has effectively been converted to PRX). Make sense?

You sound like you know what you are talking about! So i guess; it should make sense! But, I know nothing, so it is a different story in my brain! The only thing i can fathom is that J. Holmquist was the one who created 1,000,000,000 PRX // why He would need to first acquire 1B XRP somehow?!?

[BobWay]

Wow, I missed some of this while I wasn't looking. @joe91 you are absolutely right to be confused!  I actually know Jon Holmquist but I had to Google to see what he had been up to.

It turns out, this is NOT the PRX that I was referring to. The one I was talking about was created by @jatchili long, long ago. It works exactly like @ADingoAteMyXRP explained.

2 hours ago, ADingoAteMyXRP said:

If he wanted 1B PRX he would have to first acquire 1B XRP somehow, and use those to buy the 1B PRX. The XRP he spends get escrowed on the XRPL, so they can't be used until he exchanges out of PRX trust line and back into XRP. (The XRP has effectively been converted to PRX). Make sense?

 

A lot of this is what I'm planning to explain in the study group. So consider this a bit of a preview.

On the XRP Ledger, each newly "issued" currency is associated with a particular issuing party. That party is represented by their particular ledger address so it is always easy to tell the issuances apart if you understand what is going on. But if you are new to the system it can be pretty confusing.

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By metaphor, if you deposit your paycheck in your bank account at Bank of America. They credit your account in USD. You think of that balance as fundamentally equivalent to the paper notes you might carry around in your wallet. The goal of the banking system is for you to be able to do so. You should be able to trade one form of USD (bank) for another form of USD (paper) at your convenience.

That is precisely what the ledger address @jatchili created does. Let's call that address "autoteller". It takes in XRP (paper) and credits your account in PRX@autoteller. It can also reverse this process. The autoteller runs as a smart contract and no human has the ability to change its rules. @jatchili disabled the master secret for the autoteller and set the regular secret to a blackhole address.

However, there is one thing that everyone knows but is so obvious that it rarely comes up in conversation. If you deposit you money at Bank of America, you CAN'T just show up to withdraw your money from CitiBank. What you own is (USD@BofA).  You do not own any (USD@Citi) to be withdrawn.

You could have BofA "wire" or "ACH" funds to another account you have opened with Citi. Then you might own both (USD@BofA) and (USD@Citi) at the same time. But you can still only withdraw the related amount from each particular location in paper (USD@FedReserve).

So now we've defined three different types of USD: (USD@FedReserve), (USD@BofA), (USD@Citi). And in fact, in the real world there is no limit to how many different types of USD can be defined. It is only a matter of getting other people to "trust" your particular USD as being fungible with (USD@FedReserve).

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It turns out the XRP Ledger lets you do exactly the same thing. You can create as many types of (currency@location) as you want, and so can everyone else.

Moving back to the original example... 

What made the original discussion confusing was conflating (PRX@autoteller) with (PRX@JHolmquist). Those are two distinct "issuances" that share the same denomination. However, the same denomination does NOT necessarily make the two interchangeable. It is up to each person to decide which PRX they wish to own/hold based on which "issuing" address operator they "trust". Most of the time this is fundamentally equivalent to deciding between BofA vs Citi. You weigh how safe your money is vs. the benefits your deposit enables.

In this case, the two PRX issuances were fundamentally different concepts. (PRX@autoteller) is always equal and tradable 1:1 for XRP because the autoteller will always buy it back. (PRX@JHolmquist) is not equivalent to XRP. It's value is determined by the market of humans willing to buy it in exchange for XRP.

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The important lesson to learn from this is that counter parties (issuers) are important and not interchangeable. We understand this about the real world. Your friend owing you $100 is not the same as your bank owing you $100. However, most people don't immediately associate this concept with the XRP Ledger. 

 

 

Edited April 20, 2019 by BobWay
typos

[The-Fake-Andre-Kuipers]

Do you think banks will design there own PRX like currency for internal use and make there own decisions on how to store them for there customers and that the equivalent amount of XRP gets locked up on the ledger? Or do you think one day i can store my XRP at my own bank. I hope one day the value increases i can earn interest on my XRP by my own bank. 

Thank you for al the information you provide to us @BobWay. 

(Not a native speaker)

[Guest]

2 hours ago, BobWay said:

In this case, the two PRX issuances were fundamentally different concepts. (PRX@autoteller) is always equal and tradable 1:1

Are trust lines the XRP Ledger's version of (USD@Citibank) but in the form of (XRP@Gatehub) or (USD@Bitstamp) and it costs 5XRP to open a trustline to your XRP address similar to opening a bank account in the real world?

I haven't Googled this jholmqist but am I right in assuming PRX@Jholmqist makes him a "bank" for this trustline meaning we're just trusting him with our XRP like we trust a bank with our FIAT.