Locking up Ripple's XRP with Crypto Conditions

[Apollo]

12 hours ago, JoelKatz said:

Now I think we probably should lock up as much as we think we can for as long as we think we can. If we don't, people will fear that if things aren't going so well, we'll be tempted to sell lots of XRP, precisely the fear we want to eliminate. In exchange, if we're doing well and need more XRP for some reason, we should just be able to buy it if we have to.

The only real downside to locking up too much XRP is if the price is getting too high and we want to use the opportunity to increase the supply but can't. First, that's a good problem to have. Second, in that case, we can still increase the supply at a predictable rate, and I don't see it being a problem if the price gets "too high". We're not looking to make money by selling XRP at temporary peaks -- that's never been our strategy.

 

 

 

 

lol... I think you just talked me into wanting a more restrictive lockup.

Creating a perception of scarcity might be something worth taking into account. BTC accomplished this through decreasing block reward and a hard cap of 21 Mill. This system sparks speculation because of the fear of missing out on the larger early supply. However, one problem with this model is that it may continue to lead to greater volatility after the network has sufficient early speculation/adoption that utility and therefore low volatility starts to become a more important feature.

So, I see the most important goals for a lockup plan as; (1) to provide as much market certainty as possible, and (2) to leave Ripple adequate XRP to run incentive programs/fund their operations, and (3) to spark early speculative investment by creating a perception of impending scarcity, and (4) to leave adequate future distribution to lower volatility and improve XRP's utility  once speculative investment becomes a comparatively less useful way to grow the network, and (5) to keep the plan simple and easy to explain/market. It might be too difficult to predict when lower volatility becomes a controlling consideration to take it into account. Goal four is also clearly intention with 1, 3. and 5... On the other hand, having a distribution goal of lowering long-term volatility may help with marketing XRP to FI's.

As always, your's and Ripple's clear willingness to consider new information and alternative perspective gives people a lot of confidence in the viability of this project. 

 

Edited March 26, 2017 by Apollo

[Guest]

11 hours ago, JoelKatz said:

My position on this has evolved lately, largely due to conversations with Miguel. My position used to be that it didn't really matter but that locking up some XRP wouldn't hurt us and might help, so there was no reason not to do it. I was concerned that we might limit our future flexibility and so didn't advocate locking up on a tight schedule.

However, if we're going to lock up XRP on the ledger, we're doing it to provide more predictability. Locking up too little or for too short means we get less predictability. Too little gives effectively no predictability at all. Essentially, I was super-concerned about us needing XRP for something and not having it and ignoring the harm from overhang that we could have mitigated by locking up.

Now I think we probably should lock up as much as we think we can for as long as we think we can. If we don't, people will fear that if things aren't going so well, we'll be tempted to sell lots of XRP, precisely the fear we want to eliminate. In exchange, if we're doing well and need more XRP for some reason, we should just be able to buy it if we have to.

The only real downside to locking up too much XRP is if the price is getting too high and we want to use the opportunity to increase the supply but can't. First, that's a good problem to have. Second, in that case, we can still increase the supply at a predictable rate, and I don't see it being a problem if the price gets "too high". We're not looking to make money by selling XRP at temporary peaks -- that's never been our strategy.

I guess there are also ways to lock it up... I'm thinking time periods. You could put some chunks locked up for ages, some subject to periodic review, with an official announcement at each stage, like a central bank does in terms of adjusting inflation rates or what have you

[MundoXRP]

24 minutes ago, Apollo said:

 

So, I see the most important goals for a lockup plan as;

1. to provide as much market certainty as possible, and
2. to leave Ripple adequate XRP to run incentive programs/fund their operations, and
3. to spark early speculative investment by creating a perception of impending scarcity, and
4. to leave adequate future distribution to lower volatility and improve XRP's utility  once speculative investment becomes a comparatively less useful way to grow the network, and
5. to keep the plan simple and easy to explain/market.

It might be too difficult to predict when lower volatility becomes a controlling consideration to take it into account. Goal four is also clearly intention with the 1, 3. and 5... On the other hand, having a distribution goal of lowering long-term volatility may help with marketing XRP to FI's.

 

Clear and concise.. This is by far the best I've seen for a lockup plan set of goals.

Edited March 26, 2017 by MundoXRP

[Jcapathy]

I read the original post and thought what a great idea. Im an altcoin investor and entrepenuer and love the idea of locking up the Ripple held (50% of holdings) 30bn coins. In fact, I think locking up 30 Bn Ripple is an amazing idea. If that was coupled with an incentivization plan to hold XRP in an account whereby the minimum amount of XRP is 1mm. The account holder receives a "dividend" from the locked account at a regular interval, say 6 months or 1 year. It has to be a length of time that is beneficial to the account holder so they can see their investment grow thereby creating two things;

1. Stability for the value and what most would expect as "slow growth" yet somewhat safe because it isnt subject to the volatily in the market. Good for a majority portfolio position of 60%+ soit can attract a lot of old money 

2. Show investors that they can expect some liquidity for their investment but also prevents people from hoarding all of a limited amount of coins. I know 100bn coins sounds like a lot but after mass  bank adoption the entire amount of the available Ripple can be bought up quite rapidly when the concept is proved  out that they can  cut their basis points by 75% for cross border transactions. Now the good part - Lets say if I held say 1mm XRP and I was able to get 10k Ripple just for holding it in an account but here is the kicker- that "dividend" had to be sold to the market within 1 year but not  before 1 month after the reward is awarded. There would ba an open markt for the coins, there would be a limited supply and thecoins wouldnt get dumped on market after they are awarded. 

This  is  an idea in the making, obviously it needs some work so I thought Id put it out there and see who can take it  from here. My idea is OPENSOURCE just let the  higher ups at Ripple I would like to join their board if they have an open seat. 

[miguel]

@papa I don't think we would need to lock it up cryptographically for that to happen.  Putting it into a trust and issuing shares would be legally sufficient I think. That's a lot of work though and not our core competency.  We're better served by continuing to focus on developing tools, partnerships, and markets that help XRP's usage grow.  That said, if someone wanted to create such an investment vehicle we could fund it with our holdings. 

[Xi195]

Welcome @Jcapathy  thank you for sharing your thoughts. Ripple is rare in that they value the input of this community and frequently stop by to share their thoughts. 

39 minutes ago, Apollo said:

So, I see the most important goals for a lockup plan as; (1) to provide as much market certainty as possible, and (2) to leave Ripple adequate XRP to run incentive programs/fund their operations, and (3) to spark early speculative investment by creating a perception of impending scarcity, and (4) to leave adequate future distribution to lower volatility and improve XRP's utility  once speculative investment becomes a comparatively less useful way to grow the network, and (5) to keep the plan simple and easy to explain/market. It might be too difficult to predict when lower volatility becomes a controlling consideration to take it into account. Goal four is also clearly intention with 1, 3. and 5... On the other hand, having a distribution goal of lowering long-term volatility may help with marketing XRP to FI's.

Great summary/post as usual @Apollo. 

Put me in the more restrictive and simple the better camp. 

Higher prices means Ripple has to sell fewer XRP to supplement funding. 

[Chan_Maddanna]

@JoelKatz in classic economics when we want to incentivize  users to save, we provide various interest returns for various locking periods. when we want to incentivize spending, we reduce interest rates and hence make fixing deposits non-profitable. 

Ripple in its current phase needs savings and not spending ( as largely spending=speculation at this point). Hence some form of incentive ( perhaps as percent of XRP deposit held) for holders, would cut down on rampant spikes and provides for stability while accomplishing other things mentioned in many posts above.  

and if these interest payments are delivery by dedicated escrow hold-accounts, whose sole purpose is interest payouts of term deposit XRP holders, then it accomplishes many things at once. 

>> Display a real life use-case of the new escrow facility 
>> locks excessive flow of XRP (which is detrimental at this stage of evolution)
>> Stabilizes prices without hindering appreciation purely by reducing over-speculation (abrupt pump/dump schemes will take a hit) 
>> Provides confidence to the organizations partnering with ripple about price stability( most organizations don't worry about appreciation, but what they truly fear is speculative and unreasonable change in either direction) 
>> Incentivizes true investors ( who behold Ripples future ) while repelling gamblers
>> finally, provides 'one' of the ways to meaningfully lock funds future future conditional disbursement.

@miguel Almost every major financial landscape has utilized these fundamental techniques (A very visible example is the FOMC overnight lending rate management), I hope you guys benefit form it too. to your point below :

"Putting it into a trust and issuing shares would be legally sufficient I think. That's a lot of work though and not our core competency. We're better served by continuing to focus on developing tools, partnerships, and markets that help XRP's usage grow."

Yes indeed - I agree on your clear focus, and keeping this in mind, I have provided this alternative which is really less work. no need to issue shares, no need to file new SEC's, nothing. Just term deposits, implemented as product, using the escrow function ripple has already implemented,  which also acts as a showcase of escrow functionality (albeit partially) -- for Ripple's partners to see it live and take confidence from.

and one of the partner exchanges ( who already have licenses ) shoudl be able to release this as a simple 'savings/fixed-deposit' product (non-derivative). At most the work involved will be  - how Ripple incentivizes an exchange for doing this and perhaps an agreement between the exchange that offers this product and Ripple on various terms & conditions ( perhaps, just a basic MOU will do as no regulators or other third parties are involved, and your legal counsel shoudl be able to get it up in a few days).

My 2 cents. 
~~~~~~~~~~~~~~~~~

@enej / Gatehub : You might be in a very efficient place to offer this exclusive "Fixed XRP deposits with mind-blowing interest rates , like say 11%" for holding at specific terms. XRP equates to real fiat, and no-body in today's market is able to provide interest rates on safe term deposits. I am very sure the 'appreciation' caused due to increased 'certainty of currency disbursement'  will raise XRP's value to cover much more then 11% interest ( just as an example)

Not everyone can do such things, and not always. Ripple is in a unique evolution phase, where excess liquidity and flow velocity needs 'checking' and this can be a unique opportunity. The exact same thing that Mr. Volcker did in the 90's and saved the dollar (co-incidentally from a similar problem XRP is facing :-) - people are worried about its uncertain disbursement).
~~~~~~~~~~~~~~~~~

either way, good luck. Hope all the informative and thought provoking posts in here by such a thoughtful community will help you find the right balance and instrument to aid & nurture the ecosystem.

Kindly,

R8

 

Edited March 26, 2017 by R8102V1D2D

[jp2017]

2 hours ago, Apollo said:

LOL, I think lots of people at Ripple felt the same way before he dumped. The problem is, Jed's actions were never motivated by money. If money was a driving factor in his calculus,  he would have caused much less harm.

Agree.. Thr current lock-up agreement already in place is sufficient to minimize the damage Jed can do.  I think he already have been paid enough from Ripple already. 

Strategy to incentivize FIs, Strategic Partnets, Central Banks are more important.  Jed is already out of the picture, no reason to bring him back into the picture.

Edited March 26, 2017 by jpchang888

[OlivierA]

13 hours ago, JoelKatz said:

(...)The only real downside to locking up too much XRP is if the price is getting too high and we want to use the opportunity to increase the supply but can't. First, that's a good problem to have. Second, in that case, we can still increase the supply at a predictable rate, and I don't see it being a problem if the price gets "too high". (...)

Lock with a strategy.

- release X% of the market cap every X period, make sure it stays fluid if demand grows too fast

- X pool for institutional OTC buys max out per year at market price with a X period strategy to release the new XRPs to the market

- X% of the released XRPs amount available per year for each new Gateways/Exchange/MarketMaker joining

..and be open/clear about it!

Edited March 26, 2017 by OlivierA

[TplusZero]

@OlivierA I like your suggestions.. in particular the fact that this lock up strategy would enable some sort of 'competition' between stakeholders (banks, gateways, exchanges and most important OTC institutional investors...that gives a valid excuse to point them to the open market). Copying @miguel so that sees this. 

[jp2017]

2 hours ago, R8102V1D2D said:

@JoelKatz in classic economics when we want to incentivize  users to save, we provide various interest returns for various locking periods. when we want to incentivize spending, we reduce interest rates and hence make fixing deposits non-profitable. 

Ripple in its current phase needs savings and not spending ( as largely spending=speculation at this point). Hence some form of incentive ( perhaps as percent of XRP deposit held) for holders, would cut down on rampant spikes and provides for stability while accomplishing other things mentioned in many posts above.  

and if these interest payments are delivery by dedicated escrow hold-accounts, whose sole purpose is interest payouts of term deposit XRP holders, then it accomplishes many things at once. 

>> Display a real life use-case of the new escrow facility 
>> locks excessive flow of XRP (which is detrimental at this stage of evolution)
>> Stabilizes prices without hindering appreciation purely by reducing over-speculation (abrupt pump/dump schemes will take a hit) 
>> Provides confidence to the organizations partnering with ripple about price stability( most organizations don't worry about appreciation, but what they truly fear is speculative and unreasonable change in either direction) 
>> Incentivizes true investors ( who behold Ripples future ) while repelling gamblers
>> finally, provides 'one' of the ways to meaningfully lock funds future future conditional disbursement.

@miguel Almost every major financial landscape has utilized these fundamental techniques (A very visible example is the FOMC overnight lending rate management), I hope you guys benefit form it too. to your point below :

"Putting it into a trust and issuing shares would be legally sufficient I think. That's a lot of work though and not our core competency. We're better served by continuing to focus on developing tools, partnerships, and markets that help XRP's usage grow."

Yes indeed - I agree on your clear focus, and keeping this in mind, I have provided this alternative which is really less work. no need to issue shares, no need to file new SEC's, nothing. Just term deposits, implemented as product, using the escrow function ripple has already implemented,  which also acts as a showcase of escrow functionality (albeit partially) -- for Ripple's partners to see it live and take confidence from.

and one of the partner exchanges ( who already have licenses ) shoudl be able to release this as a simple 'savings/fixed-deposit' product (non-derivative). At most the work involved will be  - how Ripple incentivizes an exchange for doing this and perhaps an agreement between the exchange that offers this product and Ripple on various terms & conditions ( perhaps, just a basic MOU will do as no regulators or other third parties are involved, and your legal counsel shoudl be able to get it up in a few days).

My 2 cents. 
~~~~~~~~~~~~~~~~~

@enej / Gatehub : You might be in a very efficient place to offer this exclusive "Fixed XRP deposits with mind-blowing interest rates , like say 11%" for holding at specific terms. XRP equates to real fiat, and no-body in today's market is able to provide interest rates on safe term deposits. I am very sure the 'appreciation' caused due to increased 'certainty of currency disbursement'  will raise XRP's value to cover much more then 11% interest ( just as an example)

Not everyone can do such things, and not always. Ripple is in a unique evolution phase, where excess liquidity and flow velocity needs 'checking' and this can be a unique opportunity. The exact same thing that Mr. Volcker did in the 90's and saved the dollar (co-incidentally from a similar problem XRP is facing :-) - people are worried about its uncertain disbursement).
~~~~~~~~~~~~~~~~~

either way, good luck. Hope all the informative and thought provoking posts in here by such a thoughtful community will help you find the right balance and instrument to aid & nurture the ecosystem.

Kindly,

R8

 

@R8102V1D2D I think the 11% interest is a brilliant idea.  I remember a couple years ago quite a few people on here also park a portion of our xrp in FMM for the dividends. It wasn't much maybe around 10% per year but was paid out daily. The biggest risk we saw at that time was that FMM was a fund out of China so there was a level of skepticism since they could have closed up shop any day.

If Ripple can allocate maybe 10 Billion to a Trust that pays out an 10-12% interest to xrp holders the benefit would be two folds.  One, it would offset any downward pressure on the price of xrp as many of those here that are trading in order to accumulate more xrp may simply decide its better to just buy and hold instead of trading.  Also with such attractive yields at 10-12% there will be new money coming into the market to take advantage of this..this would make xrp a store of wealth and also this would create scarcity with more and more people holding on to their xrp. The price would automatically appreciate as well.. this would also lock up a good portion of xrp..

SBI or BNY Mellon would be Perfect to serve as Custodial Account for this set up as they are respectable Financial Institutions. Actually thinking about it, SBI would be ideal as they are "located in Japan", they are a "respectable FI" and also a "bank" and also a "strategic partner"...

this doesn't have to go on indefinitely.. perhaps for the next 2-3 years..

Edited March 26, 2017 by jpchang888

[Xi195]

2 hours ago, R8102V1D2D said:

when we want to incentivize  users to save,

While incentivizing savings would help with price stability, a savings incentive is contrary to Ripple's primary goal which is liquidity. Ripple needs lots of XRP moving around (use) not sitting still (savings). XRP is unique in that it has a very clear and meaningful use case (low cost value transfers). Any incentive should be geared at increasing adoption and use of XRP for its intended purpose. We know Ripple plans to directly incentivize liquidity to this end. Perhaps incentivizing development would be helpful as well. 

[Chan_Maddanna]

23 minutes ago, Xi195 said:

While incentivizing savings would help with price stability, a savings incentive is contrary to Ripple's primary goal which is liquidity. Ripple needs lots of XRP moving around (use) not sitting still (savings). XRP is unique in that it has a very clear and meaningful use case (low cost value transfers). Any incentive should be geared at increasing adoption and use of XRP for its intended purpose. We know Ripple plans to directly incentivize liquidity to this end. Perhaps incentivizing development would be helpful as well. 

I agree with you one hundred percent, but i don't think now is the time. liquidity shoudl be 'freed up' as projects go live and need for them manifest. liquidity before the hours of glory leads to extreme undervaluation, which in turn can lead to even severe problem of 'trust erosion'. 

it is for this reason, as important liquidity is, yet every provider of currency make sure to place adequate locks. locks that does not prevent liquidity when needed, but avoids excess flow.

 

[Guest]

5 minutes ago, R8102V1D2D said:

I agree with you one hundred percent, but i don't think now is the time. liquidity shoudl be 'freed up' as projects go live and need for them manifest. liquidity before the hours of glory leads to extreme undervaluation, which in turn can lead to even severe problem of 'trust erosion'. 

it is for this reason, as important liquidity is, yet every provider of currency make sure to place adequate locks. locks that does not prevent liquidity when needed, but avoids excess flow.

 

To increase trade, XRP has to become more desirable. XRP will become more desirable when the value of XRP continously increases.

[MundoXRP]

I would like to see a fund/lending instrument similar to what Ripple has been thinking about, but for the average holder. Just thinking out loud after reading @jpchang888 FMM example..

1. Imagine ripple locking a large portion of Ripple's xrp funds with a strategic number of xrp's distributed yearly for predictability.
2. Along with a fund being created by SBI or someone else that allows holders of xrp to contribute their holdings so the fund can loan them out to entities that need them to increase liquidity (9-10 billion just from CL and AB alone) allowing xrp in the wild to be locked and useful
3. This would allow XRP holdings that are currently idle to have some sort of return. For the last four years the idle xrp have not benefited anyone as the only way to realize any sort of benefit meant you would have to sell them creating downward pressure.
4. Ripple could subsidise the fund making the xrp being held desireable to MM's/exchanges/etc for the first few years while the market understands all the benefits of using xrp. Everyone wins in this scenario.

Very crude idea.. would love to see others contribute to refine or expand it