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The Case For XRP by Galgitron

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Thanks for sharing this.  I enjoy his blogs but I haven’t read all that many.  This one is now bookmarked for the next time I need to explain XRP.  It touches every point I can think of that needs explaining.  And it has hyperlinks to jump off into various areas as needed.  Excellent work @galgitron.  

I don’t fully agree with absolutely every statement he makes,  but the I do with the vast bulk,  and the general point is spot on in my opinion.  Thanks again for sharing @JASCoder

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It still leaves me with the same questions.

We know that XRP is one of the stand out coins in that it has clear case for utility. 

Will it be used on a significantly large scale. Let's see, but the general feeling and evidence points to, yes it will. 

Does the utility model directly dictate for a increasing value of XRP - I believe the consensus is no, ODL does not directly impact price as XRP is bought and sold near simultaneously. 

So indirectly XRP will rely on market makers to increase the price of XRP. These market makers are only as good as the supply and demand for XRP which, as said earlier is not impacted all too much by ODL. 

Which leaves speculation induced price. Speculators seem to hate it. It is hardly moves on price, and has been performing consistently badly for over 2 years now).

Sorry to sound like a moaning fudster, but this argument of utility will change things, just does not hold water in my mind. 

 

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8 minutes ago, XRP_to_20dollars said:

El modelo de utilidad dicta directamente un valor creciente de XRP? Creo que el consenso es no, ODL no afecta directamente el precio ya que XRP se compra y vende casi simultáneamente. 

De manera indirecta, XRP dependerá de los creadores de mercado para aumentar el precio de XRP. Estos creadores de mercado son tan buenos como la oferta y la demanda de XRP que, como se dijo anteriormente, no se ve muy afectado por ODL. 

I think you have something wrong here ... the consensus says yes ... and I don't understand why you say that the use will not affect the price? ??? On what scale are you seeing this? Anyway I love and respect your opinions. big hug and hodl

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7 minutes ago, Cesar1810 said:

I think you have something wrong here ... the consensus says yes ... and I don't understand why you say that the use will not affect the price? ??? On what scale are you seeing this? Anyway I love and respect your opinions. big hug and hodl

How? What is the mechanism by which ODL will increase price? I get the market makers argument and I would say yes that has potential to increase or decrease the price - they just react to the natural supply and demand of the market. 

What specifically is the mechanism by which ODL increases the price of XRP?

And yes, nothing but love here. 

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With respect I think you are looking at it too mechanically.  
The reason for price movement in a market is a subtle combination of a number of effects including the elusive sentiment of the participants.  The simplistic ‘supply and demand’ is only a large scale explanation for the result of an amalgamation of multiple emergent behaviours.

I think it’s analogous to vehicle traffic.  The actual reason traffic slows down,  or why it is nearly stopped on a freeway for no apparent reason and then a few metres further on magically clears and speeds up...   those are emergent behaviours caused by an amalgamation of micro causes.  The study of traffic has discovered paradoxical implications for minor changes...  it is not straight forward and easily explained or even easily predicted.

53 minutes ago, XRP_to_20dollars said:

I believe the consensus is no, ODL does not directly impact price as XRP is bought and sold near simultaneously. 

That may be the consensus out there in crypto-crazy land,  but I think it’s wrong for a number of reasons.  Or it might be right for the wrong reasons...  time will tell.  But since the buy and the sell are in totally different exchanges (admittedly indirectly connected by complicated arbitrage) then it’s clearly incorrect to make that statement.  Arbitrage and other third order effects may mean it’s got the correct outcome,  but the argument is specious.  The transaction in total is symmetrical but the components are asymmetric and the buy happens first...  which may be the significant factor.

I am still looking for an example of a similar situation to the one we hope XRP will find itself in.  I haven’t found one yet.  So I don’t think it’s possible to be certain what effects we will see if there is large scale ODL usage.

There is a consensus, I think, that a network itself acquires some portion of the value that flows thorough it.  Similarly there is a consensus that if a coin holds value,  and is universally useful,  then it becomes desirable and is held for that value.  That reduces the circulating supply and increases the demand.

So I think it’s incorrect to look mechanically at what will be a convoluted and complex system and try and ascertain the mechanical reason for a movement.  These will be emergent behaviours and they are as yet not understood.

I do think you can say however that in general volume begets volume,  and volume begets value.  How this plays out is yet to be determined.

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Many of the points are valid. A few are out of touch of reality.  Noting ripple had "zero" impact on XRP price falling, is nonsense. Such a large stakeholder group (including their employees) selling billions of XRP and having control over developmental aspects will have some type of impact.

Then shifting all the blame on whales, is ridiculous. Yes, we all know there are whale groups intentionally organizing pump and dump initiatives. Whales have little impact on the majority of the XRP holders becoming more frustrated and untrusting of Ripple. When people pull their money out of XRP because they are frustrated with Ripple's actions, this proves the Ripple had "zero" impact theory to be false.

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I don't have the great understanding of the market that you have but let's put it like this: they believe that ripple would try so hard to implement xrp if ODL would never increase the price of xrp (even on the highest scale of use) I doubt it VERY MUCH on the other hand ... in all markets I understand that there is a purchase on one side and a sale on the other and vice versa, even so the price goes up and down, what is the mechanism? Not applicable to ODL? I'm really crazy?

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2 hours ago, Tinyaccount said:

The reason for price movement in a market is a subtle combination of a number of effects including the elusive sentiment of the participants.  The simplistic ‘supply and demand’ is only a large scale explanation for the result of an amalgamation of multiple emergent behaviours.

I think that is precisely what makes me uneasy. It is one of the misconceptions I had when I invested over 2 years ago. I thought at the time, Xrapid was going to be a mechanism that inherently increased the price of XRP. Utility and price increase are not synonymous and I think the blog post does well to separate value from price. 

The "subtle combination of a number of effects" is what I am trying to get at. Traffic on a freeway may seem to be random but there is always some physical or psychological reasoning that can be applied. Parameters such as the number of vehicles, number of lanes, speed limits and pedestrian volume are all things that can indicate a given amount of traffic. Looking at ODL, the infamous quote form the big man himself, "When xRapid is used, the XRP is bought on an exchange. It's then immediately sold on another exchange. So there's no net increase in demand but there's no net increase in supply either." So when you mention the "combination of number of events." I am lost as to what these events are. What are those parameters of Ripple's solution can even theoretically show to impact price, in the same way the aforementioned parameters would effect highway traffic? 

The buying and selling does not have an effect, market makers and takers will behave as dictated by the buy and sell orders, and these if not effected by ODL are at the mercy of......the speculators. 

SO, for all the VALUE that XRP would give to a system such as ODL, I cannot identify the parameters that would effect the price beyond speculation. As of recently, the speculators don't seem to be our friends. 

Peace

 

Edited by XRP_to_20dollars

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2 hours ago, Tinyaccount said:

That may be the consensus out there in crypto-crazy land

I really find this hard to understand. So you say there is a method for how ODL will directly impact the price of XRP? What is this method or mechanism? If you say one does not exist and instead it is a combination of sentiment and "a number of other things," - then my statement stands that there is a consensus that ODL does not directly impact price. 

I want Ripple to succeed, I want my 50k XRP to pump to the moon and beyond, but I feel like 2+ years has taught me to be honest with myself. Can we admit that ODL does not directly effect price. 

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12 minutes ago, XRP_to_20dollars said:

So when you mention the "combination of number of events." I am lost as to what these events are.

As are we all.  It is not trivial despite what cocksure young traders would have you believe.

13 minutes ago, XRP_to_20dollars said:

Traffic on a freeway may seem to be random but there is always some physical or psychological reasoning that can be applied.

I believe it’s more subtle than you probably think...  there are paradoxes in traffic where something that should in theory improve a situation actually makes it worse.  But belabouring the traffic analogy is probably counter productive.  I simply wanted to make the point that no one knows, and that simplistic mechanistic views of the ODL transactions will probably mislead us.

17 minutes ago, XRP_to_20dollars said:

What are those parameters of Ripple's solution can even theoretically show to impact price, in the same way the aforementioned parameters would effect highway traffic? 

As I say...  I and everyone else do not know for sure.  I tried to give some of my reasons for optimism with the following:

Quote

I do think you can say however that in general volume begets volume,  and volume begets value.  How this plays out is yet to be determined.

 

19 minutes ago, XRP_to_20dollars said:

SO, for all the VALUE that XRP would give to a system such as ODL, I cannot identify the parameters that would effect the price beyond speculation. As of recently, the speculators don't seem to be our friends. 

 You are not alone in being unsure of the exact parameters.  But speculators in crypto?  I believe they can only help long term.  I believe the utility value will eventually be apparent,  and that will be a floor price.  I also think it’s likely to trend upwards longer term.  The network will gain value in the same way that the internet has.  Speculation will only add on top.  Even if they leave,  the utility value will remain.
 

12 minutes ago, XRP_to_20dollars said:

So you say there is a method for how ODL will directly impact the price of XRP?

No I have been trying to say, perhaps badly, that no one knows as yet.

13 minutes ago, XRP_to_20dollars said:

then my statement stands that there is a consensus that ODL does not directly impact price. 

Yes it does stand...  I already agreed.  But the fact that there is a consensus in crypto crazy land means exactly as much as it sounds like it does.  :) 

Just because the crowd agrees on something does not make it correct.

ODL is only symmetrical at a high level.  At the component level there are forced market buys prior to forced market sells in an entirely different country.  How that plays out when it’s large scale is yet to be seen.

But as I indicated above...  my believe is the value will ultimately come from the volume moving through the system...  not the actual mechanics of each transaction.  More volume attracts more players which increases the demand.

I believe this is unknown territory.  The people creating container shipping did not know it would affect what varieties of vegetables would be grown in far different countries than they were initially operating in.  The world is far more complex than politicians and talking heads on tv would have us believe.  
Ultimately XRP could turn out to be extremely useful.  If that doesn’t mean that it also valued, and held for use, then it would be somewhat surprising.

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47 minutes ago, XRP_to_20dollars said:

I really find this hard to understand. So you say there is a method for how ODL will directly impact the price of XRP? What is this method or mechanism? If you say one does not exist and instead it is a combination of sentiment and "a number of other things," - then my statement stands that there is a consensus that ODL does not directly impact price. 

I want Ripple to succeed, I want my 50k XRP to pump to the moon and beyond, but I feel like 2+ years has taught me to be honest with myself. Can we admit that ODL does not directly effect price. 

ODL drives demand. More demand gets more market makers. More liquidity/deeper orderbooks makes XRP more interesting (read: cheaper) to use. Which drives demand.

A market being supply and demand it's easy to see that increased ODL volume increases supply and demand. Even if it's a buy and immediately sell. Just keep in mind that "it's an immediate buy and sell" is way to simplistic. This is still XRP changing hands. So if the sender wants to do a similar transaction the sender "needs" XRP again. Either through his own XRP stash, through a Marketmaker, or other XRP-supplier (e.g. retail). I know the term "network-effect" is spread here like a pesticide over crop, but it'll certainly be a factor.

Also feel free to remove the 2 in your nickname if you don't believe in it ;) Honestly, 2 years for an investment that you expect to make you rich is nothing. 50k, so you perhaps want to have 1 mill. That's 20$ per XRP. That's 100x from now. If you have only patience for 2 years I doubt your expectations are in check.

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Just now, SquaryBone said:

Also feel free to remove the 2 in your nickname if you don't believe in it ;) Honestly, 2 years for an investment that you expect to make you rich is nothing. 50k, so you perhaps want to have 1 mill. That's 20$ per XRP. That's 100x from now. If you have only patience for 2 years I doubt your expectations are in check.

ad hominem

 

1 minute ago, SquaryBone said:

ODL drives demand.

"When xRapid is used, the XRP is bought on an exchange. It's then immediately sold on another exchange. So there's no net increase in demand but there's no net increase in supply either."   - David Schwartz

I think the best we can say is it seems a possibility that XRP could rise in price but we do not understand or foresee the mechanisms by which this will happen.

Chucking around words like demand, market makers and deep order books in no context does not bring clarity to anything unfortunately. 

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45 minutes ago, XRP_to_20dollars said:

ad hominem

 

"When xRapid is used, the XRP is bought on an exchange. It's then immediately sold on another exchange. So there's no net increase in demand but there's no net increase in supply either."   - David Schwartz

I think the best we can say is it seems a possibility that XRP could rise in price but we do not understand or foresee the mechanisms by which this will happen.

Chucking around words like demand, market makers and deep order books in no context does not bring clarity to anything unfortunately. 

An individual transaction does not have a net increase in supply and demand. But an increasing number of transactions does. The number of transactions/volume done through ODL will increase when it's being cheaper than the traditional rails. And the more liquidity and deeper the orderbooks the more competitive it will be and so demand for ODL will increase, resulting in increased transactions and increased demand for XRP. More XRP is tied up in transactions and changes hands and stashes need to be replenished. ODL is a bootstrap (what I call phase-2 in total of 3 phases).

At the current scale this effect is not there. But I do believe it will be when we're at scale.

Only the future will tell. I too try to understand all the mechanics but there's still areas that nobody knows. These are just (educated) guesses. I have some and I'll see how it unfolds. I could be wrong in what I believe, but XRP might still increase 10x in price, which would still be great returns. Or I could be right and it fails and goes to zero. In that case I loose some money. No biggy. Honestly if I had to choose between XRP and Ripple I'd choose Ripple. Crypto is still very risky.

Feel free to read all the threads in the forum to bring the context you need.

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2 hours ago, SquaryBone said:

ODL drives demand. More demand gets more market makers. More liquidity/deeper orderbooks makes XRP more interesting (read: cheaper) to use. Which drives demand.

A market being supply and demand it's easy to see that increased ODL volume increases supply and demand. Even if it's a buy and immediately sell. Just keep in mind that "it's an immediate buy and sell" is way to simplistic. This is still XRP changing hands. So if the sender wants to do a similar transaction the sender "needs" XRP again. Either through his own XRP stash, through a Marketmaker, or other XRP-supplier (e.g. retail). I know the term "network-effect" is spread here like a pesticide over crop, but it'll certainly be a factor.

 

Totally agreed. 

I believe the statement that ODL does not impact the price is only valid in the end game when the whole ecosystem is fully loaded and balanced. Until then, however, increased utility must lead to increased demand.

But for now, we have to wait for the moment that the increase in demand > 1bnXRP/month, because then the ecosystem has to go to the market.

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