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Montoya

Do State Backed Cryptos Mean the Window is Closing For Ripple?

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From the sounds of it, China will be releasing a crypto-yuan in less than a year. The US Fed has announced that they, too, are working on a crypto-dollar. My question is this: with the impending availability of state backed cryptocurrencies, is there any role for XRP? From an ideological perspective I can see the value of wanting to hold a non-state-controlled asset, but most people don't care about ideology and have no problem with state monetary control. From a purely business perspective, how can Ripple be expected to compete with the liquidity that governments can bring to bear in their respective cryptocurrencies? Governments can literally force liquidity on the market. If china or/and the  U.S. introduce a crypto, it will have immediate market depth that dwarfs anything else. Why would remittance operators not utilize them instead of XRP? And if XRP is not getting used to facilitate cross border liquidity, why would anyone speculate in it? If no one is speculating in it, the liquidity would drop further. It would be a vicious feedback loop. 

The only possible reason that I could see that people may still prefer to speculate in a non-state crypto over a state crypto is the prospect of deflationary value gain, but that is a stretch IMO. I guess we will have to wait and see how profligate government spending continues to get. 

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I've considered the issue of government backed electronic money. Essentially money today is digital. Xrp doesn't create liability of holding another nations currency. If I trade for example if I send goods to china and I'm paid in the E-Yuan then I'm forced to trade that Yuan for USD or hold the Yuan to then turn around and pay China for the goods in their native currency. If there is a nation neutral digital asset then I can turn around and utilize the digital asset to other nations that may not accept the E-Yuan. I think it is an issue of creating and international ustilized non-nation dependent digital asset for trade in order to promote global trade without nation specific liability.

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In terms of Ripple's use case for XRP - it will be used as a liquidity solution in emerging markets, to improve high-friction payment rails, and to facilitate growth in otherwise traditionally illiquid markets depending on the reach of RippleNet. It'll open up opportunities that weren't previously viable - rather than replace the majority of current payment rails (at least initially). So I think you're comparing apples to oranges.  

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3 hours ago, Montoya said:

From the sounds of it, China will be releasing a crypto-yuan in less than a year. The US Fed has announced that they, too, are working on a crypto-dollar. My question is this: with the impending availability of state backed cryptocurrencies, is there any role for XRP? From an ideological perspective I can see the value of wanting to hold a non-state-controlled asset, but most people don't care about ideology and have no problem with state monetary control. From a purely business perspective, how can Ripple be expected to compete with the liquidity that governments can bring to bear in their respective cryptocurrencies? Governments can literally force liquidity on the market. If china or/and the  U.S. introduce a crypto, it will have immediate market depth that dwarfs anything else. Why would remittance operators not utilize them instead of XRP? And if XRP is not getting used to facilitate cross border liquidity, why would anyone speculate in it? If no one is speculating in it, the liquidity would drop further. It would be a vicious feedback loop. 

The only possible reason that I could see that people may still prefer to speculate in a non-state crypto over a state crypto is the prospect of deflationary value gain, but that is a stretch IMO. I guess we will have to wait and see how profligate government spending continues to get. 

Everything Ripple has been doing with XRP positions it not as a primary currency, but a bridge currency.  Let's just get way ahead of ourselves and say that all of the nations of the world converted to digital currency.  There's still a need to conduct FOREX, to send money overseas, etc... in fact, it's arguable that there's a greater need to do so.  Never has There has to be a pool of liquidity, technologically aligned to properly transfer and settle between various digital currencies.  I don't see any digital currency better positioned to do this.

 

 

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28 minutes ago, lysistrada said:

Everything Ripple has been doing with XRP positions it not as a primary currency, but a bridge currency.  Let's just get way ahead of ourselves and say that all of the nations of the world converted to digital currency.  There's still a need to conduct FOREX, to send money overseas, etc... in fact, it's arguable that there's a greater need to do so.  Never has There has to be a pool of liquidity, technologically aligned to properly transfer and settle between various digital currencies.  I don't see any digital currency better positioned to do this.

 

 

But why would anyone conduct forex with XRP as a go-between instead of say, a crypto dollar? Especially when a crypto dollar would instantly have magnitudes more liquidity and be accepted pretty much in every country on earth. It would simply swamp any XRP corridors.

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3 hours ago, itcdominic said:

This is the big plan in my opinion.  Transfer money... Digital Yen...to Digital USD......XRP is the transfer middle man

But why would any liquidity provider want to use XRP? Rather than US$ crypto? If the dollar is a cryptocurrency, then it is as good as a green back. It is a bearer instrument, which means the only counter-party risk is the U.S. government. Most people seem to treat that risk as non-existent. For practical purposes, a U.S.$ crypto would essentially be counter-party risk free.

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3 hours ago, peanut56 said:

I've considered the issue of government backed electronic money. Essentially money today is digital. Xrp doesn't create liability of holding another nations currency. If I trade for example if I send goods to china and I'm paid in the E-Yuan then I'm forced to trade that Yuan for USD or hold the Yuan to then turn around and pay China for the goods in their native currency. If there is a nation neutral digital asset then I can turn around and utilize the digital asset to other nations that may not accept the E-Yuan. I think it is an issue of creating and international ustilized non-nation dependent digital asset for trade in order to promote global trade without nation specific liability.

The physical U.S. $ (not the current digital representations in bank accounts) is, for all intents and purposes a "nation neutral digital asset". A crypto dollar would be analogous to that. You seem to be positing that there would be more people, in more countries, willing to accept XRP than would accept crypto $. Do you think that is realistic? In your example, how would trading your E-Yuan for XRP be any better than trading it for US$ crypto? Wouldn't the US$ crypto be likely to be accepted in more places and by more people than XRP? Wouldn't it therefore be a more useful and sensible go-between?

From an ideological standpoint, I agree with you, and would like to see a non-state backed currency. But most people would rather just use the dollar out of convenience. 

Edited by Montoya

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54 minutes ago, Montoya said:

Do you think that is realistic? In your example, how would trading your E-Yuan for XRP be any better than trading it for US$ crypto? Wouldn't the US$ crypto be likely to be accepted in more places and by more people than XRP? Wouldn't it therefore be a more useful and sensible go-between?

These comments lead me to believe you don't understand the use case of XRP as a bridge as opposed to thinking it is some currency everyone will accept.  Today dollars, yuan, euro are mostly just 1's and 0's on a screen.  Countries hold onto these in bank accounts in order to "move" money across borders, XRP removes the holding portion of the moving magic.  XRP acts as JIT system for monetary movement.  A fiat coin is no different than the system we have today and probably has neutral to positive effects on whether XRP becomes adopted as opposed to negative potential.

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52 minutes ago, Bettergoham said:

These comments lead me to believe you don't understand the use case of XRP as a bridge as opposed to thinking it is some currency everyone will accept.  Today dollars, yuan, euro are mostly just 1's and 0's on a screen.  Countries hold onto these in bank accounts in order to "move" money across borders, XRP removes the holding portion of the moving magic.  XRP acts as JIT system for monetary movement.  A fiat coin is no different than the system we have today and probably has neutral to positive effects on whether XRP becomes adopted as opposed to negative potential.

What do you think a bridge currency is if not a currency (most) everyone will accept? I think you are confusing a debt instrument and an asset here. Money in a bank account (our current system) is a debt based system, and likely a completely different animal from what a crypto $ would be. A crypto $ would be analogous to a physical greenback, meaning it would be a bearer instrument. While technically greenbacks do have counterparty risk, ie: the US gov, in practice they are treated by users as if they have no counterparty risk, so functionally they perform as if they were an asset. This is completely different from US $ represented in bank accounts. This is a debt based system, meaning you sell your physical cash (an asset) to the bank in exchange for their IOU. Thus a bank balance US $ bears not only the counterparty risk of the US gov, as mentioned above, but also of the institution whom the depositor has trusted. A bank balance then is simply an IOU of an IOU. 

This is not what I'm talking about. I'm talking about a crypto that is an analog of the physical US greenback. Perhaps, you say,  I am wrong and it wouldn't be this way. But then why create one at all? As you say, we already have a digital debt based accounting system. What would be the point of putting it on a blockchain? 

The only conclusion I can come to is that the crypto $ will only bear the counterparty risk of the US gov, which, as we can see from current global economic behavior, people treat as essentially no counterparty risk at all. If that is indeed the case, settlement in value would be instant (the same as XRP) and only bear the counterparty risk of the US gov. There would be no holding portion. The on demand liquidity would be provided in exactly the same fashion as it is with XRP, by a market determined group of forex traders. Only now they could trade in US$ instantly instead of a niche crypto asset such as XRP.

The only caveats I can think of that would lead people to possibly want to use XRP over the dollar would be to avoid US gov interference or political control. I just cannot see that being a very deep market. And besides, Ripple, controlling 50 billion XRP and being based in the US would likely be subject to the exact same political control anyway.

Perhaps you are right and I simply "don't understand the use case of XRP", but so far you have failed to enlighten me. I would like nothing more than to be proven incorrect here.

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The U.S. dollar became the currency for international trade at the end of world war 2. It basically led to the cold war. I can assure you that Europe would like to bypass U.S. currency control and buy oil from IRAN. China would love to avoid U.S. dollar as international currency since currently they are the largest manufacturing nation in the world. Maybe the foreigners I've met that don't like U.S. economic policy are the few and the sample size too small to represent the majority, but from what I've encountered in my life U.S. foreign economic control pisses a lot of nations off, but right now they have no other choice. If you consider the U.S. dollar right now is a digital dollar then why even try insert a nation neutral floating asset. Fair enough, but if or when the U.S. financial model goes to hell so does the rest of the world. I think the part, at least in my mind, is that xrp if accepted would essentially allow for the greater independence of nations. If this was to occur then less leverage could be placed on a single nation and possibility that inclusion would allow each nation more agility within their own specific needs.

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1 hour ago, peanut56 said:

The U.S. dollar became the currency for international trade at the end of world war 2. It basically led to the cold war. I can assure you that Europe would like to bypass U.S. currency control and buy oil from IRAN. China would love to avoid U.S. dollar as international currency since currently they are the largest manufacturing nation in the world. Maybe the foreigners I've met that don't like U.S. economic policy are the few and the sample size too small to represent the majority, but from what I've encountered in my life U.S. foreign economic control pisses a lot of nations off, but right now they have no other choice. If you consider the U.S. dollar right now is a digital dollar then why even try insert a nation neutral floating asset. Fair enough, but if or when the U.S. financial model goes to hell so does the rest of the world. I think the part, at least in my mind, is that xrp if accepted would essentially allow for the greater independence of nations. If this was to occur then less leverage could be placed on a single nation and possibility that inclusion would allow each nation more agility within their own specific needs.

And why would the US (aka the ones we are primarily waiting on for regulation) allow their hold on international trade to be weakened by a company out of San Francisco?

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1 hour ago, Zerpple said:

And why would the US (aka the ones we are primarily waiting on for regulation) allow their hold on international trade to be weakened by a company out of San Francisco?

What makes you think the US still rule the world?

Triffin Paradox is already crippling the US economy.  London, the ECB, Tokyo, Canada, Australia, The Arabs and Middle East, India and Singapore are already steaming ahead without New York.  China is licking its lips and making blockchain a target industry to outflank US financial dominance.   The US can either participate in the future and be at the centre of the new financial order or  be bypassed.

 

 

Edited by Julian_Williams

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8 hours ago, Montoya said:

From the sounds of it, China will be releasing a crypto-yuan in less than a year. The US Fed has announced that they, too, are working on a crypto-dollar. My question is this: with the impending availability of state backed cryptocurrencies, is there any role for XRP? From an ideological perspective I can see the value of wanting to hold a non-state-controlled asset, but most people don't care about ideology and have no problem with state monetary control. From a purely business perspective, how can Ripple be expected to compete with the liquidity that governments can bring to bear in their respective cryptocurrencies? Governments can literally force liquidity on the market. If china or/and the  U.S. introduce a crypto, it will have immediate market depth that dwarfs anything else. Why would remittance operators not utilize them instead of XRP? And if XRP is not getting used to facilitate cross border liquidity, why would anyone speculate in it? If no one is speculating in it, the liquidity would drop further. It would be a vicious feedback loop. 

The only possible reason that I could see that people may still prefer to speculate in a non-state crypto over a state crypto is the prospect of deflationary value gain, but that is a stretch IMO. I guess we will have to wait and see how profligate government spending continues to get. 

The link below from this year's SWELL conference does a great job at addressing all of these questions. Long story short - XRP's cross border value transfer use case won't be affected by state backed stablecoins.

https://www.youtube.com/watch?v=ad_A5v0d9hc&t=6s

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