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AMA with Nicolas Steiger, founder of FlashFX, Australian user of ODL

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Hi, 

Nicolas Steiger ( @Nicolas  ) is the co-founder of FlashFX the FI that was “Born to make money transfers simple, fast, and fair.”  FlashFX use ODL.    https://www.flash-fx.com/

He gave an interview to @CryptoEri and has generously volunteered to continue to answer questions here. 

I will endeavour to keep this post edited with the questions so that Nicolas can easily see what we are asking.

Please just ask questions in this thread and Nicolas may answer directly...    I will also try to maintain the list of outstanding questions here.


Nicolas we really appreciate this and realise that you may not be able to go into every aspect for business reasons.

Oustanding Questions:

  • What is company’s future?

 

The questions and answers are continued over next posts:

  • Is the limiting of ODL capacity automatically handled by software or is it a manual control?  Eg if liquidity on target exchange was drained by a third party transaction would ODL see the cost was too high and pause?

A: ODL flow will automatically exchange currency/xrp on either exchange once the initiating entity agreed the pre-quoted price. There is always back up liquidity from market makers, so if an order book is hit by a bigger market order, liquidity is immediately replenished by those market makers. 

 

  • What kind of growth are you expecting over next 1-2-5 years?

A: We're expecting great growth expansion from RippleNet and will drive ODL two-way flows to all available end-points. On a B2B side and our ability to process payments from RippleNet into Australia via NPP in real-time, we're expecting to pinch a few high-profile contracts from bigger players who can only process same day AUD settlement. FlashFX has and will continue to evolve around Ripple capabilities

 

  • How many corridors do you see yourself active in next year?

A: So on ODL I thought it was possible to have 20 different send / receive end-points by end of the year in general. For us, we are connecting to any available ODL destination and in the meantime will partner with any available RippleNet participant, for end of Q1we will have 3-5 additional ones and the pipeline for Q2 is filling up fast with interested parties wanting to connect to FlashFX.

 

  • Can you comment on the growth of current corridors you are doing business in?

A: For us PHP was completely a new corridor so it will take time to develop. Having said that we will later in Q1 enable a new partner that will drive some tremendous growth and flow in AUDPHP. USDbitstamp is something we have been doing using IOU for the past 2 years, we'll continue to push this corridor and we have a number of clients that seek to increase and re-activate their USDbitstamp activity. Its also dependent on overall crypto flows and demand.

 

  • How much cheaper is ODL compared to the other services?

A: I dont have hard an fast fact and numbers on this yet, we are still evaluating this and in the meantime please rely on official Ripple numbers. For us with expansion on RippleNet flow whereby we can save on Bank swift fees is already a big win. Transaction fee compression will continue in all markets. We've started FlashFX by not charging the end-user any transaction fee, so while the user might not see a difference per se, our operational cost structure will improve.

 

  • Would it be possible for us to watch the volume growing as the service matures?

A: I believe I found a link on this forum that tracks the flows on these exchanges however I am not yet sure that this is accurate ODL flow. Would need to investigate further and match up. For now, we're just focused on generating flows in any market where we can.

 

  • Is the present price, .22, restricting your ability to grow your volume of ODL transactions?

A: The utility of XRP as a digital assets works with any price point, the liquidity matters most to facilitate payments from A to B.

 

  • Will you provide public facing APIs for data hounds to poll ?

A:  We have API for our clients to transact payments and integrate into FlashFX however I believe the exchanges will provide sufficient access to data for data hounds.

 

  • What are the constraints and costs for replenishing fiat capital reserves consumed by trades at the endpoint of a one-way corridor ?

A: That question relates more to issues we previously had when we only had our own liquidity dealing with IOU. That was our initial AUDUSDbitstamp flow. We had to manage the FX and send the fiat back to Bitstamp. Not effective way in the long run. Now with ODL at lot better and theoretically we have unlimited liquidity pool through external market makers.

 

  • I know your main ODL corridor is AUD/US.  Since Bitstamp is not located in the US, how does the money get to a US bank account?  Does it need to be wire transferred to a US bank, or does Bitstamp connect to US banks?

Our AUDUSDbitstamp is for user who wish to have USD liquidity on Bitstamp only. We can't yet facilitate payments into the US and we hope this can be resolved soon. So depending on the destination of the users transfer, we use traditional FX and swift for US payments but if someone wants USD on Bitstamp or on their Ripple wallet it will go via ODL. Eventually USD ODL will be used for local US distribution. The issue is largely a licence issue. A Financial institution would need to have 50 licences for every state to make local payments. Having only a BitLience for NY does not help for NJ, or other states (basic example).

 

  • Does FlashFX have any plans to operate a Ripple node?  Is that something you had to consider or discuss?

A: We have been running a Ripple gateway for years and are also running a validator for our on-ledger transfers.

 

  • Do you handle KYC/AML with in-house programs, or have you used/integrated another service?

A: We have both but in large part we do KYC/AML, PEP sanctions and transaction monitoring at onboarding and transaction level for sender and recipient. It a must have and largely automated, with manual review where needed.  https://www.prnewswire.com/news-releases/international-payment-transfer-provider-flashfx-enhances-additional-customer-on-boarding-security-through-4stops-kyc-and-anti-fraud-solution-300781882.html

 

  • How will pull payments work?  Is it a FlashFx implementation or a function of Ripple or XRPL?

A: I know on NPP there will be a pull function soon however the sender still needs to confirm obviously. I am not across this function on Ripple yet. Need to investigate. Thanks.

 

  • Are there new uses you imagine FlashFx filling in the future?

A: More and more what we do is B2B, where 3rd parties use our infrastructure to make international payments. Think credit unions, digital banks etc. They like the mix of traditional and innovative ways to make international payments. The other new one for us having overseas banks using us for local distribution in Australia, where we seek to take away this service from traditional banks who are not efficient, tech-savvy and are not on Ripple.

 

  • Was that really you in the chatbox on the site?  :) 

A: I really like to engage with all customers on the chat box. We want to help everyone and I am happy to engage as much as I can.

 

Edited by Guest

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Questions and Answers continued:

 

  • Do I understand correctly that there is still something similar like you have on the correspondent banking network that you need to have an agreement/established relationship between 2 parties for these ODL transactions to take place? My idea was that ODL removed this requirement and that you just connect to the network and have an orderbook or something similar and you don't know with whom you'll be doing business on the RippleNet/ODL.

A: Yes correct. There are still bilateral agreement needed with each party that will be mainly commercial terms. Ripple / ODL etc is only the technical solution but it does not regulate FX rates or transaction fees etc.

 

  • Are you also involved in the USDEUR corridor that will be going live and does this corridor use IOUs or XRP (The answer on USDBitstamp makes me wonder)?

A: I am not in a position to announce new corridors, thats solely the responsibility of Ripple. I know EUR is coming but am not sure who the EUR distribution partner is for sure. The EUR exchange is likely Bitstamp.

 

  • So with XRP being 1 cent it would be as useful as it being 1 dollar? The same size, volume and costs would be possible?

A: For us price is irrelevant as part of ODL. We look for the use case to transfer value from A to B and thats the important factor here. That was always important for us by choosing Ripple. We believe in use case, we believe in the technology, we believe in Ripple and the team behind, we believe in ODL and how XRP works as a digital asset, with increasing utility the price will eventually increase.

 

  • So the rate is first determined through messaging and based on that rate XRP is bought and sold, without doing something like a market order? It's just entity X sending an agreed-upon amount of XRP to entity Y. It's more like a direct move of XRP between known and agreed-upon wallets than an exchange transaction? Do I get this right? Or is this completely abstracted away for FlashFX and you're basically only looking at the fiat currencies?

A: Sort of. We request a live quote where we get price and fees for exchange into XRP on exchange 1 and then XRP back into fiat on exchange 2. Before we lock-in the actual fiat-fiat exchange we know all the associated costs, to/from XRP. So the XRP exchange is done off-ledger on either side, whereas the XRP movements from A to B is done on-ledger.

 

  • Frequently XRP-enthusiasts are talking about flipping the switch: all transactions are switched over from the old system to the new one. The way I see it you have both systems available and check/guesstimate what the total cost will be on both systems and based on that you route through the cheapest method. Do you have such a system in place? And if yes, is this on a per transaction basis? Or the new system is always used for this corridor (as you said there's enough liquidity in the market to do all your transactions) and a fallback is in place if liquidity would dry up?

A: Yes we a payment logic in our payments platform. Subject to destination currency and location (country, bank or wallet), it will switch from traditional FX pathway to Ripple. That service is constantly being updated when new corridors are being made available. We can apply rules and have payment limits, so flexible but increasingly complicated because of so many use cases (ie. traditional, via ODL using off-ledger, via our on-ledger solution etc)
 

  • What do you think is the amount of XRP that is needed (mainly by MM's and traders) to source for a certain value of liquidity expressed as a multiplying factor? I mean like "to move on average or on peak a certain value per hour Xborder over ODL the markets need about X times that value in XRP to support exchanging fiat>XRP>fiat on a corridor"  Estimations of ODL amounts, together with estimations of the # of "XRP floating or available for FX" those would be a good metrics tho calculate a fair valuation for XRP.   Such honest numbers of course would be of great help for possible investors (and to open the eyes of some dreamers).

A: Theoretically speaking anyone can be a market maker on an exchange where you can place your orders. I dont have any hard and fast figures on the amount of fiat / xrp needed to support  the growing need of ODL and XRP being used as intended ie a digital asset. Every new corridor or end-point will only be opened once there is enough MM liquidity and support. Its a bit like chicken and egg and thats why its taking time to build out this network as there is technology integration, commercial agreement between pay-out partners, availability of MM liquidity etc.

 

  • Do you expect competing MM's within the same corridor to drive up XRP demand (and price) ?

A: Yes thats possible but think its only short-term in nature. XRP demand, trade volume etc should be looked holistically across all exchanges. For example a MM or exchange does not know where the 2nd leg of ODL transfer will end up at the time of the trade, only the originator of the payment has this insight. 

 

  • If Bitstamp is the ODL exchange for US and EUR, would that mean that you can do ODL transactions with just one exchange rather than two?

A: Yes with Bitstamp offering XRP/USD and XRP/EUR, you can synthetically trade EUR/USD for ODL. Though am not sure how far that is and how on either end of fiat will the payment distribution.

 

  • If there was a hypothetical financial institution with a license in NJ, would that then connect you with the US RTGS system?  Why do you need to be connected to all states separately if you can just use their last mile system?

A: The issue is that even if NJ payments company is connected to local ACH, they would not be legally allowed to pay someone in CA, unless they are licenced by the state of California. Thats why the US is such a basket case. At the moment is far easier to receive USD and pay to MXN, then to offer the reverse into the US. Again chicken and egg, a small FI might have technology capability and is using Ripple but does not have the licences in enough states to be considered. A larger FI might have licences to distribute payments but then again they might not capable of running on RippleNet. I am certain this will be resolved in 2020.

 

  • Given that it takes some time to get a go ahead from the customer after the initial quote/estimate has happened,  is that order locked in the order books of the sending and receiving exchanges?   Or does your system just show the costs at that time..  and it could change a tad.  Once the order is started I assume both exchanges have those offers and bids locked to this transaction waiting for the ledger close to finalise and perform the move.  Is that a correct understanding?

A:  The prices are only locked in when the customer confirms the fiat fiat conversion and transfer. Remember that the customer does not know or necessarily care that XRP is being used. We request an initial live quote as part of the process but only once the user confirms the transfer we can lock-in the fiat fiat transfer via XRP

 

  • What timescale do you give for XRP/ODL mass adoption by banks/liquidity providers?

A: We should see an increase adoption this year and in part relies on Ripple to open  new ODL sending / recipient countries. This requires a suitable exchange to handle flow, a payment partner that can onboard and distribute fiat, being licensed in this destination and a supportive regulatory environment. You can see its not like just switching on these destinations. Banks are not necessarily stepping into this equation for the time being until they have increase regulatory certainty, improved internal risk appetite. This is different for liquidity providers who may be interested to step in much earlier. Anyone can be a market maker on exchanges and for ODL, a bank's trading desk might become interested in handling this flow with potentially their XRP holding well before they touch the fiat collection / distribution more broadly. 

 

  • Will XRPs price be set before mass adoption, or will its price slowly increase as adoption grows?

I dont see that price can be set in a free market and dont think Ripple can influence the price as widely expected they would. Hence I would opt for a slow price increase as adoption of use cases grows. XRP is still linked to an overall market environment, rightly or wrongly with other coins. All the good news over the past year highlighted that the market still does not yet understand the value of XRP and what its trying to do and achieve. I am more pragmatic and can't be bothered to argue if XRP is now a centralised and decentralised coins, if it really is a crypto or not, or any other reason why people talk down XRP. I am only interested in the use case, the technology underlying and the efficiency gains etc. 

 

Edited by Guest

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Guys if you had a question in any other thread that you’d like to ask here just go to you earlier post and use the quite post plus icon button then come here and post it.  

Thanks. 

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I know your main ODL corridor is AUD/US.  Since Bitstamp is not located in the US, how does the money get to a US bank account?  Does it need to be wire transferred to a US bank, or does Bitstamp connect to US banks?

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First of all, my compliments to FlashFX for being straightforward.  It inspires confidence for the service.

  • Does FlashFX have any plans to operate a Ripple node?  Is that something you had to consider or discuss?
  • Do you handle KYC/AML with in-house programs, or have you used/integrated another service?
  • How will pull payments work?  Is it a FlashFx implementation or a function of Ripple or XRPL?
  • Are there new uses you imagine FlashFx filling in the future?
  • Was that really you in the chatbox on the site? :D

Thanks for considering!

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Nicolas has answered the remainder of the questions...  I’ve updated the initial post.

Wow.   This is great stuff coming from the bleeding edge of the new financial players.  We are very lucky to have such a generous and open participant here with us.  Thanks Nicolas.

Anyone want to ask anything else?

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Do I understand correctly that there is still something similar like you have on the correspondent banking network that you need to have an agreement/established relationship between 2 parties for these ODL transactions to take place? My idea was that ODL removed this requirement and that you just connect to the network and have an orderbook or something similar and you don't know with whom you'll be doing business on the RippleNet/ODL.

Maybe I'm mixing things up.

EDIT: are you also involved in the USDEUR corridor that will be going live and does this corridor use IOUs or XRP (The answer on USDBitstamp makes me wonder)?

Quote

The utility of XRP as a digital assets works with any price point, the liquidity matters most to facilitate payments from A to B.

So with XRP being 1 cent it would be as useful as it being 1 dollar? The same size, volume and costs would be possible?

Thanks FlashFX for pioneering this RippleNet and ODL tech for 3 years now! Must have been a great experience.

Edited by SquaryBone

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Just a note to all...  it’s far better that you add a new post than edit an existing.  Best to only edit if you need to fix something.  New information can be missed if you edit it into a post since people have already read that post.

 

Edit:   See the irony here as I merrily edit the OP (and this one) willy nilly with all sorts of new info...     :) 

Edited by Guest

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Thank you Nicolas, this thread is a real FUD smasher.  This is first hand account from a Ripplenet user who has moved up to ODL; he is telling us ODL is providing liquidity and Ripplenet with ODL is cheaper than SWIFT.

We have 300 XCurrent users and a handful of corridors.  As more corridors open, and users become more confident, ODL usage will expand at an exponential rate

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Quote

Are there new uses you imagine FlashFx filling in the future?

A: More and more what we do is B2B, where 3rd parties use our infrastructure to make international payments. Think credit unions, digital banks etc. They like the mix of traditional and innovative ways to make international payments. The other new one for us having overseas banks using us for local distribution in Australia, where we seek to take away this service from traditional banks who are not efficient, tech-savvy and are not on Ripple

This is a very interesting reply.   You are becoming a hub!  Can we elaborate here?  Digital transfers with SWIFT carry very little information about the money.  Digital money could for instance arrive with an invoice or remittance attachment, or the release could be tied to a provision in a smart contract .  Do you see FlashFX providing extra services alongside their traditional payment services?

Are there times you would still use SWIFT on the Ripplenet corridors?

About what proportion of your business is using SWIFT and what proportion Ripplenet?

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13 hours ago, Tinyaccount said:

A: ODL flow will automatically exchange currency/xrp on either exchange once the initiating entity agreed the pre-quoted price. There is always back up liquidity from market makers, so if an order book is hit by a bigger market order, liquidity is immediately replenished by those market makers. 

Meaning what?
The MMs sit on billions of XRPs waiting to be used?

  • A: For us price is irrelevant as part of ODL. We look for the use case to transfer value from A to B and thats the important factor here. That was always important for us by choosing Ripple. We believe in use case, we believe in the technology, we believe in Ripple and the team behind, we believe in ODL and how XRP works as a digital asset, with increasing utility the price will eventually increase.

 

He says they have no interest in holding XRP. Okay, fair enough atm.

He says the price will eventually rise with increasing utility.

Considering the fact that about 50 billion XRP are still not in the market at all and that ODL will only be relevant for those corridors that are exotic and not liquid, where less money is flowing anyway than e.g. USD-EUR, I think we can wait a very long time until the utility will raise the price.

except
More usecases are being developed and the limited number of XRP will have an impact. With ODL alone it will take a very very long time, in my eyes.

 

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A: ODL flow will automatically exchange currency/xrp on either exchange once the initiating entity agreed the pre-quoted price. There is always back up liquidity from market makers, so if an order book is hit by a bigger market order, liquidity is immediately replenished by those market makers. 

Meaning what?
The MMs sit on billions of XRPs waiting to be used?

I think MMs source more from the markets.  Holding huge amounts of XRP over long periods of time would be very risky  for MMs

A: For us price is irrelevant as part of ODL. We look for the use case to transfer value from A to B and thats the important factor here. That was always important for us by choosing Ripple. We believe in use case, we believe in the technology, we believe in Ripple and the team behind, we believe in ODL and how XRP works as a digital asset, with increasing utility the price will eventually increase.

 

He says they have no interest in holding XRP. Okay, fair enough atm.

He says the price will eventually rise with increasing utility.

Considering the fact that about 50 billion XRP are still not in the market at all and that ODL will only be relevant for those corridors that are exotic and not liquid, where less money is flowing anyway than e.g. USD-EUR, I think we can wait a very long time until the utility will raise the price.

except
More usecases are being developed and the limited number of XRP will have an impact. With ODL alone it will take a very very long time, in my eyes.

Crypto Eri has said the talk is that we need about 30 corridors before the utility begins to hit price, but this is a guess.  The cross border remittance market is something in the order of 800 billion, and the banking cross border is many times bigger again - in the multi trillions per day.  ODL at present is hitting a few tens of millions a day.  The 50 billion XRP will be needed, but they are mostly locked up and only released on escrow at a rate of up to a billion a month.  Last month the release was only 100 million.

I think you should watch Crypto Eri on You Tube. 

You are likening you crypto investment to investments in other markets.  The Crypto Market is flooded with bad players with huge wealth and not as well regulated as traditional stocks.  This will change.  This is an embryonic market and does not behave with much rationality.  If you choose a winner at a low price you will make huge gains, if you choose randomly you will lose your shirt.

Edited by Julian_Williams

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