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JoelKatz

Suggestion: XRP-collateralized Stablecoins

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On 10/2/2019 at 7:05 AM, JoelKatz said:

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 stablecoins that have a backer/issuer are supported.

We propose adding a collateralized stablecoin feature to the XRP Ledger. The key distinguishing property of this proposal is that the stablecoin is always redeemable for XRP on the ledger from the collateral pool. So, for example, if you hold one unit of a USD stablecoin, you can make on-ledger payments at any time just as if you held $1 worth of XRP.

We propose a scheme as follows:

  • Anyone may place XRP into a position that they own.
  • If the position is sufficiently collateralized, it may issue a stablecoin.
  • Position owners may adjust the XRP in their positions so long as it maintains sufficient collateral.
  • Position owners may issue and redeem stablecoins in their positions so long as it maintains sufficient collateral.
  • Severely undercollateralized positions may be taken over by re-collateralizing them -- whoever does so keeps the remaining excess collateral.
  • An order book mechanism will be used to permit the stablecoin to be automatically exchanged for XRP by redeeming against the least collateralized positions first.
  • This encourages over-collateralization and cleans up positions that are in danger of becoming under-collateralized

Pathfinding will be augmented to use redemption against the collateral so payments with a stablecoin work the same as if you held the corresponding amount of XRP.

The scheme is not perfectly decentralized because some organization or federation still must supply the price the asset is pegged to on a continuous basis or the stablecoin will freeze. That organization can set a reserve ratio that they can use to tax the stablecoin system or to provide a reserve to buy out under-collateralized positions.

The most obvious application is a stablecoin pegged to a fiat asset such as the dollar. However, stablecoins can also be pegged to the value of precious metals, stocks, indexes, and so on. 

This post is one suggestion for an enhancement to the XRP Ledger. See this post for context:
https://www.xrpchat.com/topic/33070-suggestions-for-xrp-ledger-enhancements/

You can find all the suggestions in one place here: https://coil.com/p/xpring/Ideas-for-the-Future-of-XRP-Ledger/-OZP0FlZQ 

Hi David,

Wouldn’t it be a great idea to issue XRP backed stablecoin especially for funding.

Ripple/Xspring can fund startups by issuing the XRP collateralized Stablecoin VS giving them XRP.

Do the startups get XRP from Ripple which they then sell on the market for USD? 

Or do they just get USD?

Non techie here, sorry if it’s a stupid question.

 

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On 10/10/2019 at 6:36 PM, tulo said:

What if only the first price feed is provided by the creator of the IOU, then the latest closed order on the DEX is used to determine the price?

I'm not sure this can't be gamed, but using open market seems better than a private feed.

The best would be a decentralized oracle, but it's not so easy for now.

 

On 10/16/2019 at 3:30 AM, Sukrim said:

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.

Each time I've read through and tried to get my head around what Microtick is doing on Cosmos/Tendermint, it left me wondering if something similar couldn't be employed to achieve what you've been talking about here - or if it's altogether inapplicable/incompatible/impractical in this instance.

1*jh0i_e-AqL6_2oa07Qruyg.jpeg

http://microtick.com/

https://blog.cosmos.network/microtick-on-cosmos-tendermint-8fc2065ec3e6

https://chorusone.libsyn.com/23-microtick-price-oracles-and-short-term-options-with-mark-jackson-and-kent-barton

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6 hours ago, yxxyun said:

Can you tell us a bit more about this? Does this mean that the Schwartz' stablecoin idea is already implemented in this fork of the code? Any ideas about the timeline and requirements to start using it?

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More progress: https://github.com/seelabs/rippled/commits/sc-proto

So it looks like this will go from an idea to an initial prototype. This will make it easier to have a detailed discussion about the specifics, but regarding timeline I don't think anyone should expect this to be finished, merged and activated with an amendment anytime soon(e.g. this year).

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Is is really a stable coin if the only collateral is XRP, even if over collateralised. Even if over collateralised, say $2 of xrp for each $1 face value of stable coin, what happens if XRP drops 51% in value? Breaking the buck. Who pays the difference if the holder of the stable coin falls in value?

wouldn’t a mixed XRP and USD collateral be more stable?

He have seen multiple sudden falls in value for XRP as well as sudden rises. Which raises the question of what if the price suddenly rises and I want to get my XRP back to sell it?

 

 

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Posted (edited)

@JoelKatz

Looking back at recent events (DeFi services (on Ethereum network) and pricing oracles) is there anything that worries you about this proposal now?

Based on what you know today would you still keep the original wording of this proposal? Did "team Ripple" start to implement this proposal or a variant of it? If yes, is there anything more that you can share with us at the present time? If no, any other words of wisdom regarding this proposal?

 

 

Edited by crypto_deus

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On 3/8/2020 at 9:45 AM, xerxesramesepolybius said:

Is is really a stable coin if the only collateral is XRP, even if over collateralised. Even if over collateralised, say $2 of xrp for each $1 face value of stable coin, what happens if XRP drops 51% in value? Breaking the buck. Who pays the difference if the holder of the stable coin falls in value?

wouldn’t a mixed XRP and USD collateral be more stable?

He have seen multiple sudden falls in value for XRP as well as sudden rises. Which raises the question of what if the price suddenly rises and I want to get my XRP back to sell it?

 

 

That's a great question. Tx fees could be routed to a reserve fund which would be used to artifically "pin"/dynamically adjust the price of the frozen XRP at certain intervals. Even if the XRP dropped in value collateralization Delta (so to speak) would be kept in check thus preventing unwanted liquidations and many sleepless nights. Also, just as you incur a cost for holding options (Theta decay) you should incur a "cost" for freezing the XRP (?).

The more you overcollateralize, the larger your reserve fund.

DeFi: you could choose to do a number of things with your extra-collateral such as lending to people who are in danger of being undercollateralized.

Loving this conversation.

Edited by EnforSys

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Some links...

E-book:

https://assets.coingecko.com/books/how-to-defi/How+to+DeFi.pdf

Very good podcast...

https://www.coindesk.com/how-makerdaos-stablecoin-survived-the-crash-smart-contract-bugs-and-full-decentralization

 

 

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