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JoelKatz

Suggestion: XRP-collateralized Stablecoins

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it's fascinating stuff. But...

What happen if I lock 1000 xrp at 3.8$ price (3800$ as total)?

I mean, I'm going to emit 1900 USDX. And then I buy 500 xrp. Currently I will have 1000xrp locked plus 500xrp.

  1. What happen if we will going to test 0.2 current real price? I should lock other xrp to grant the gap value? Real example: 1900 USDX are based on 1000xrp at 3.8$ (1900$ as real value). With 0.2 price per xrp we get: per 500xrp = 100$ (not anymore 1900$). How we have to fill this gap?
  2. In which way I may unlock 1000xrp used to issue USDX?

 

Thanks for readme.. :-)

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Thank you @jbjnr and @Sukrim for your answers.  Most helpful.  I must admit though that I’m a bit thick and am struggling to understand this properly.  Don’t read this unless you have enormous patience with thick heads.

TLDR:   I don’t get as yet how the bank that takes a position in usd/foo at 150% is protected against XRP price slump.  
 

Walking myself through it...  I can see they can use settler to transact with usd/foo but what happens when XRP slumps?  

Someone called Foo operates a stable coin pegged to USD.  BankA has bought 150 XRP for $150.  They take a position in usd/foo and issue $100 usd/foo.  For simplicity they never get around to using it.  XRP slumps to 80 cents.  They redeem their 100 usd/foo for 125 XRP which comes from their collateral?  Foo’s?  Or some other unfortunate third party who was less well capitalised?

So how many XRP do they now have?   275?  125?  or maybe 150?   Anyone sure of the answer?  (Sorry to be so thick...)

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Oh...   I think I got it...   BankA don’t buy XRP in the first place...  they buy $100 usd/foo and it’s always worth $100 USD.  (Assuming price feed is valid and that original collateral was set sufficiently).  Mrs Foo is the one wearing the volatility risk.  Now I’ve got to try and understand what’s in it for her...

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On 10/4/2019 at 3:18 PM, quan said:

But it’s just the ledger with capability of making Dex. 

There is no wallet for xrp that functions like Dex, is there? 

I've made a desktop wallet that is an xrp wallet, dex and automated trading bot all in one. 

When one of my trades fill I get desktop notifications with sound and I can either deal with it manually or let the built in bot trade for me. No browser is needed although I recommend using a browser for charts, tx history ect. When you are using the dex you want to use the right tool for the job. My app ihilda is for key management; which includes trading because signing a tx requires a key.



What I would like to see for the dex is not stable coins. That doesn't make any sense at all. IOU's ARE stable coins. They are stable to the asset they represent. A usd stable coin and a USD IOU are fundamentally the same thing. 

Collateralized lending lending of IOU's is much simpler to understand. 

user 1 : lends out 1btc with a %fee that he/she specifies. 

user 2 : accepts the loan and borrows the 1btc. Using any iou or xrp of their choice as collateral. 
user 2: sells the 1 btc for any asset of their choice. 

user 2 is now in a leveraged position. 

user 2 would then need to settle the 1BTC as a payment to the lender in order to close the position. He/she could acquire this btc by refunding his account or by trading. 
 

There would need to be strong insensitive to settle the loan so maybe extra xrp locked away in reserve to cover potential losses and to keep spam down. 

The issue would be what happens when the loan is nearing it's margin. Also how to stop bots from causing flash crashes that trigger chains of margin calls for profit. 

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So what is the status on coding this up and testing? Is this simply a proposal, or is it something we can expect to go live in 6 months?

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47 minutes ago, mrak said:

So what is the status on coding this up and testing? Is this simply a proposal, or is it something we can expect to go live in 6 months?

Just a proposal at this point. The design is more or less complete and it's definitely complete enough that people can decide whether it's something they'd be interested in participating in. As I said in the response above, if nobody is willing to provide price feeds and operate a stablecoin, there's probably not much point in continuing to implement it. I'm trying to make sure that there's enough information about the implementation out there that people can make an informed decision of whether they'd use this functionality.

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I really don't like the fact that the operator has to provide the price feed. And that if the price feed is not provided the redeem process stops.

Imagine a bad gateway that closes the business (it already happened multiple times). If the coins were really pegged the users could always redeem the IOU for XRP. In this way the gateway can run away and don't pay it's debt. In every moment the operator can make the currency not "pegged" so it loses the only utility.

Definitely not interested in this feature.

Edited by tulo

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51 minutes ago, tulo said:

Imagine a bad gateway that closes the business (it already happened multiple times)

We need someone who we can trust to issue a stablecoin... Someone like the federal reserve bank :wizard:

Edited by baggy23

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1 hour ago, JoelKatz said:

Just a proposal at this point. The design is more or less complete and it's definitely complete enough that people can decide whether it's something they'd be interested in participating in. As I said in the response above, if nobody is willing to provide price feeds and operate a stablecoin, there's probably not much point in continuing to implement it. I'm trying to make sure that there's enough information about the implementation out there that people can make an informed decision of whether they'd use this functionality.

It is a very innovative concept and as you say "beautiful" in its completeness and simplicity.  I think if you provide this facility people will find a way of using it.  It is quite easy to think of use cases.

My personal view is that the difficulty comes in how to regulate the space because it is a Pandora's box. 

Edited by Julian_Williams

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1 hour ago, tulo said:

I really don't like the fact that the operator has to provide the price feed. And that if the price feed is not provided the redeem process stops.

Could the price feed somehow be decentralized? A consensus process, or some multi-signing so one doesn't have to trust a single entity?

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Thanks David for the excellent replies.  Another thing that I’m wondering about is does anyone know if this is similar to any other stablecoin issuance on any of the thousands of crypto’s out there?  Can we learn any lessons from pre-existing?

(Probably not because it sounds like it’s a novel idea...)
 

Is there reputation risk for the XRPLedger if any stablecoin is adopted by significant numbers and then fails?  Or do we think the separation of the two would be clear?

Regarding the price feed...   for those assets with a number of existing price API’s couldn’t a list similar to the UNL be made available by the operator?  Take a median (discarding any more than two standard deviations off)?

This doesn’t seem to present any additional spam options beyond existing, so presumably the fee acts in the same way to escalate spam costs of issue/redemption etc?

I’m not really qualified to speak to this topic so I appreciate the ongoing discussion and forebearance of silly questions...  thanks guys.

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3 hours ago, JoelKatz said:

A great next step would be for a few entities to step forward and express interest in operating stablecoins on the ledger.

It would definitely be interesting to automate some price feeds to the point that it doesn't need a centralized operator (e.g. via Codius or similar mechanisms). Operating stablecoin price feeds has 2 concerns for me left: Update rate (I assume there will be a "PublishPrice" transaction that could/should(?) be submitted for each ledger in the extreme case) which could end up being more spam than utility and configurability (if all my price feeds are tied to my AccountRoot settings directly, I can't set these values for different asset classes - e.g. something risky/volatile like BTC or ETH should probably be collateralized higher than something XRP is relatively stable against, e.g. XLM or currently USD).

27 minutes ago, Tinyaccount said:

(Probably not because it sounds like it’s a novel idea...)

It doesn't sound very novel to me, but I'm not up-to-date on current "automated derivates on cryptocurrency" aka. "stablecoins". A lot of the ones I looked at in the past tried to get away from the centralized price feed model more towards open markets, but that contains also some risks. The proposal here definitely sounds more like "Ripple" (in the original sense) than some other ideas that are more towards "one central asset on many markets" (vs. the "many assets on one market" approach).

Edited by Sukrim

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5 minutes ago, Sukrim said:

It doesn't sound very novel to me, but I#m not up-to-date on current "automated derivates on cryptocurrency" aka. "stablecoins".

I bow to your greater knowledge (sincerely) but I thought it was perhaps novel because of the automated collateral control aspect.  A nearly trustless stablecoin.

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