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peanut56

David Schwartz twitter comment clarification.

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"When xRapid is used, the XRP is bought on an exchange. It's then immediately sold on another exchange. So there's no net increase in demand but there's no net increase in supply either."

Joel Katz. (as copied from twitter).

As the conversation is taking place on twitter I thought I'd ask for clarification on my own thoughts regarding the explanation as it may or may not affect price. wil

It is to my understanding that Xrapid inherently will not cause an increase in price due to the fact that the buy order will equal the sell order, however the use of Xrapid will increase price due to the fact that the usage of Xrapid by corporations will cause the scarcity in xrp.

In another way.

Xrapids function= zero increase in xrp demand as it is a zero sum process.

Usage of Xrapid Increases demand on xrp therefore that creates the scarcity and possible/probable increase in xrp price

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Whether rapid itself drives demand and XRP price is unclear but seems neutral by common sense and as explained by Schwartz’s comments.

Bob Way explained succinctly that the upside for XRP from xrapid is the institutional demand from the participants in the Xrapid pipelines: exchanges, market makers, corporations which want to send XRP directly and so forth. The assets don’t self balance, and market makers need to replenish XRP from ripple or from the open market in order to maintain liquidity.

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4 minutes ago, rootvegetable said:

 and the demand curve is just an aggregate of all the individual demands. 

A market demand curve is not a sum of individual curves so long as the incomes of each individual are affected by the sales or purchases themselves. There is no useful "demand curve", because the non-linearities produce something which cannot be meaningfully measured.

 

4 minutes ago, rootvegetable said:

It's easier to understand it if you don't think of it as an quantity, but rather an amount that it is wanted- basically just an intangible subjective feeling. For example, if I want a slice of pizza, I demand a slice of pizza, and my willingness to pay for it shows the amount that I want it. I may want a slice of pizza up to $2, or I may demand it more and be willing to spend $5. I may not know exactly how much I want the pizza, only that I want it at least enough to buy it for the price the shop is selling it for. Some people may demand XRP up to 10c, some people may demand it up to $1, some people may demand it at $0. If I demand it up to 10c, I would be offering my XRP for sale right now, if I demand it up to $1 I would be offering my dollars for sale to buy XRP.

Similarly, an individual demand curve is not an amount that is wanted (according to a given utility function), and cannot be meaningfully measured according to some potential basket of goods, because the total quantity of combinations available at any time is so large that no human being is capable of making the necessary calculations to optimize their utility function.

 

Take your Neoclassical drivel somewhere else. :big_boss:

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Posted (edited)
3 hours ago, peanut56 said:

 

Xrapids function= zero increase in xrp demand as it is a zero sum process.

Usage of Xrapid Increases demand on xrp therefore that creates the scarcity and possible/probable increase in xrp price

A "near zero sum process " is probably more accurate, but the first part you have essentially correct. 

Demand is only tangentially related to the actual use case. It comes from the necessity, as others have already stated, for liquidity providers to have a stash of XRP.  It's pretty much that simple.

None of that has much to do with the price of XRP today or even (probably) for the next two years. You can monitor utilization by following Galgitron or learning how to interpret the stats on the Ripple website.

Over time, increased utilization should make the 3rd number below  get larger than the first number. I track it as a number, which is currently .57, up quite a bit from the .3 level when I started to track it. It will (or should) become a whole number and just keep getting bigger for quite a while.

 

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Edited by dr_ed

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@KarmaCoverage is correct, although I wouldn't choose that wording. This question has been answered before. The flow of XRP, in a system where there is a surplus destination and a corresponding deficit source of bank deposits flowing between two fiat currencies, requires borrowing of XRP from the surplus destination to continue funding the deficit source over time. The alternative is that the surplus destination purchases goods and services from the deficit source, using XRP accumulated in the destination exchanges accounts on ledger, balancing the flow and eliminating the surplus. If nothing is done, XRP will accumulate in the surplus destination accounts of the exchanges who "convert" XRP to bank deposits for receiving customers.

Hence there are two ways to balance the flow--you borrow it back, at some rate of interest, or you convince the surplus destination to make purchases. This is how XRP, as a fixed quantity settlement asset, puts pressure on interest rates (for fiat and XRP) to balance payments between two currencies (deficits cannot persist forever in a fixed supply settlement system). 

xRapid exacerbates the recycling of the settlement asset. If the system is begun without a way to recycle surpluses, the system will "hang" immediately, that is, the source of the flow will run out of XRP and stop making purchases. 

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18 minutes ago, mrhat75 said:

At least we found something that we think may increase price.  Clearly, "more amazing news" doesn't seem to be a part of the price function.

Well then you haven't paid much attention. I've seen dozens of ways that may increase the price in the past year.

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6 minutes ago, Wandering_Dog said:

xRapid exacerbates the recycling of the settlement asset. If the system is begun without a way to recycle surpluses, the system will "hang" immediately, that is, the source of the flow will run out of XRP and stop making purchases. 

This is another reason I think Ripple could act as a lender via "market maker incentives" in the form of loans, with the incentive being tied to cheaper interest rates.

The only way I see to accomplish any elasticity in XRP supply, is via Ripple Inc or some other major whale holder offering loans via methods which enable interest rates on XRP to fluctuate with value flow rates, in various corridors & directions.

Really Market Makers should play the pricing role, but in terms of supply elasticity, Ripple is most well positioned with their escrow holdings.

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