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Suggestion: XRP-collateralized Stablecoins


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3 hours 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.

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.

Ideally, the operator would lock the price at some final value so that redemption could continue, though the asset would no longer be pegged to anything but the price of XRP itself. But there is always the possibility that the operator would stop providing a price feed.

Note that while issuing and redemption would cease, the stablecoin could still be transferred and could be traded on the on-ledger decentralized exchange. People who had XRP locked up would still want the stablecoin and could place offers to buy it. So it's possible for the system to engage in an orderly wind down even if the price feed stops.

A malicious price feed, however, would be a different story.

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One of the original use cases for the XRP Ledger (since 2012) was using the built-in decentralized exchange to exchange between stablecoins and to exchange stablecoins for XRP. Currently, only stablec

I made a video giving more details on the proposed design.  

The advantage is that if you hold XRP directly, the value of what you hold changes over time. Some people want that, some people don't. This scheme lets those that want that hold XRP and those that do

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3 hours ago, tulo said:

then the latest closed order on the DEX is used to determine the price?

That’s sounds like a good idea.  One issue might be a stable IOU created for something that doesn’t trade as yet or much on the DEX.  It’s probably an unlikely and self correcting situation though.

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As the price would be updated with timely XRPL transactions, it seems to me that this process could be decentralised on a Codius contract, based on a consensus agreement between few parties, or even getting the data automatically from some oracle and triggering the correspondent XRPL transacción.

If that is possible the only risk left is the collateral level, which I think the proposed implementation takes care of very well

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1 hour ago, Odiseo said:

If that is possible the only risk left is the collateral level, which I think the proposed implementation takes care of very well

There is also the risk of collusion between the parties operating the Codius contracts or them getting hacked. "Triggering a XRPL transaction" means signing it with one or several private keys. Where should these keys be generated and stored?

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On 10/9/2019 at 10:11 AM, Sukrim said:

Since there can be multiple operators for the same asset, there also can be a dozen or so "USD" stablecoins, right?

Will rippling be enabled for Stablecoin trustlines in the same denomination? So if I own 100 stableUSD/foo and 100 stableUSD/bar, I can enable rippling and end up with e.g. 50 stableUSD/foo and 150 stableUSD/bar without any further action on my end. What about over-/undercollateralization in that case?

I think turning on rippling would not be smart.

Imagine I create a USD stable-coin and set as operator the price at 1/10th of the normal price. I will then also issue/collaterize  on my self operated stable-coin and receive 10x as many USD as I should have received. I will then 'ripple' to other - more fair priced USD and then exchange these USD back for XRP. I will receive ten times the amount I collaterated. (And just leave the collaterated XRP)

 

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2 minutes ago, zerpdigger said:

could XRPL itself somehow be harnessed to get consensus on (price) data-sets similar to the way it processes/validates transactions ? 

Well, yes, but it depends on which value you want the consensus to converge. And that is based on the consensus process and the input data. What do you suggest as input data for the price?

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1 hour ago, tulo said:

Well, yes, but it depends on which value you want the consensus to converge. And that is based on the consensus process and the input data. What do you suggest as input data for the price?

a collection of price inputs, i.e. collating a bunch of people/nodes (dis)agreeing on a price, or, the average of multiple sources e.g. daily close(s) from a reputable external source(s), or those disagreeing with price (outside a threshold) are treated like 'bad actors' like validators work for transactions on the XRPL 

See: 'Trust-Based Validation' section https://xrpl.org/intro-to-consensus.htm

me right now trying to sound smart but being way over my head:

13-celebrities-who-are-outspoken-about-their-love-of-weed.jpg.786a514717bd130e83ac16819dae2a5e.jpg

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2 hours ago, zerpdigger said:

could XRPL itself somehow be harnessed to get consensus on (price) data-sets similar to the way it processes/validates transactions ? 

Yes, at least for prices of major currencies. The downside of this is that it would require validators to get a price feed from somewhere. We could use a system similar to what we use for fees where validators advertise in their validations what prices they want and then validators can combine information from other validators they trust to propose setting particular prices. The problem with this is that it will then be very hard to know where the prices are really coming from and validators might not use very high quality price sources because it takes effort on their part to do so.

But we could add support to determine some prices by consensus and a stablecoin could be configured to use the consensus price. Then validator operators would have to choose to obtain prices from some source and vote them into the ledger.

I'm not convinced this is worth doing, but others might disagree.

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On 10/9/2019 at 11:29 AM, Tinyaccount said:

Is there a risk here that in order to salve the fears of those not wanting to transact in XRP,  this new facility is created...  and takes volume, activity and hence price action away from XRP?

So although going long or short in XRP for no cost seems cool I’m not sure this facility is something I’d welcome as a XRP holder.  Futures are available already.

I realise this means there might be a tension between those who want the price to appreciate and those who want additional facilities on an already incredible ledger.

I assume the response is twofold: don’t be greedy and that the over collaterisation puts XRP out of circulation.  Against that I argue that unless the amounts collateralised are ginormous they are unlikely to offset the lost price action because of ‘displacement’ of activity.  To which someone will no doubt reply that the pie is grown which helps us all...  

 

Anyway...   just raising my concerns about this.  (No doubt another instance of my short sightedness)  :) 

Great point and I have exactly the same concerns. The route to a healthy XRP ecosystem is NOT stablecoins imho. As soon as they are made you need an extensive governing and control system to make sure that a stablecoin is correctly valued/backed and 100 % redeemable. And that is where greed comes in and the 'printing press' will make more stablecoin than is fully backed...... And THAT is what we see in our society happening again and again. It's called quantitative easing (printing money).

For me stablecoins backed by XRP are in fact destructive to the XRP ecosystem. Also any XRP hodler can issue a stable coin... yeah let's all go and play for bank and create 'walled gardens'. Brings us back to square one.

XRP must and will fulfill its global liquidity bridge function as planned. No side steps and remain 'laser focussed'. Let's first make XRP the strongest digital asset on earth and then see if people still want SOLO, LIBRA or any other coin for that matter...

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13 hours ago, jn_r said:

I think turning on rippling would not be smart.

Imagine I create a USD stable-coin and set as operator the price at 1/10th of the normal price. I will then also issue/collaterize  on my self operated stable-coin and receive 10x as many USD as I should have received. I will then 'ripple' to other - more fair priced USD and then exchange these USD back for XRP. I will receive ten times the amount I collaterated. (And just leave the collaterated XRP)

You don't need rippling for stablecoins enabled as a malicious operator to profit from the proposed scheme, but yes: malicious price feed operators are at least as bad as malicious gateways, rippling or not. Without rippling, you could probably just do a 1 ledger "flash crash" to tiny prices, create tons of stablecoins for yourself and then dump them on the market for example. The whole system here rests on the premise that some more or less centralized entities stay honest.

About validators providing price feeds: I'd rather see XRPL-internal price feeds first before external data feeds get considered. E.g. a trustless (at lesat trustless for the pricing data part) stablecoin based on the on-ledger USD/Bitstamp market.

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