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

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Hi Nicolas, first thanks for the wealth of interesting information in this thread. Very much appreciated to get some insights regarding FlashFX and the inner workings of RippleNet/ ODL.

How robust is ODL in times of high volatility? I would assume that volatility is not a problem as the high volume that typically creates the volatility should favor ODL transactions (less "slippage", order books full) and Ripple are removing all volatility risks for ODL users with the user-specific XRP pool.

Nevertheless the ODL volume seems to have a  slump today after some hours with high price volatility. Thanks in advance!

Edited by karstnDE

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10 hours ago, karstnDE said:

Hi Nicolas, first thanks for the wealth of interesting information in this thread. Very much appreciated to get some insights regarding FlashFX and the inner workings of RippleNet/ ODL.

How robust is ODL in times of high volatility? I would assume that volatility is not a problem as the high volume that typically creates the volatility should favor ODL transactions (less "slippage", order books full) and Ripple are removing all volatility risks for ODL users with the user-specific XRP pool.

Nevertheless the ODL volume seems to have a  slump today after some hours with high price volatility. Thanks in advance!

Sure no problem. So far volatility per se has not been an issue for us. 

With regards to ODL flows, please keep in mind that real money flows for these corridors are not linked to high price volatility or crypto sentiment. These customers are not focused on that. 

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Just popping in here to say thanks @Nicolas for taking the time out of your day / days to respond to all these questions. Fascinating to see a view on XRP/ODL/Ripple that is firmly grounded in reality and hands on experience..

Out of interest, as an early adopter - what is ODL (and Ripple.net) missing or what could it do better? (I suspect your answer would be "more customers, more flows" but I figured I'd ask anyway!)

PS. I'm based in Barangaroo, if I turn my head to the right I'm looking straight at the CBA head offices. You guys and gals are based on Pitt St right?

 

Edited by Lawsuit

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3 hours ago, Lawsuit said:

Just popping in here to say thanks @Nicolas for taking the time out of your day / days to respond to all these questions. Fascinating to see a view on XRP/ODL/Ripple that is firmly grounded in reality and hands on experience..

Out of interest, as an early adopter - what is ODL (and Ripple.net) missing or what could it do better? (I suspect your answer would be "more customers, more flows" but I figured I'd ask anyway!)

PS. I'm based in Barangaroo, if I turn my head to the right I'm looking straight at the CBA head offices. You guys and gals are based on Pitt St right?

 

Yes you are right and there are many other developments in the pipeline but more later...sorry.

CBA, you mean those that have NPP real-time payment integration but slow down the process to 24 hours for their clients? So innovative. 

Close to Machiavelli yes.

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I imagine the total ODL process end-to-end as follows, not considering stuff under the hood like re-balancing and the XRP pools provided by Ripple:

---What the FlashFX client sees
A: Your client enters a request to send money from AUD to, e.g. PHP, on your website
B: That request is automatically forwarded to trigger a RippleNet request (like "get quote") for a certain amount of AUD, choosing the respective target, e.g. PHP
C: Your client gets the response from RippleNet with FX rate and TX fees forwarded in real-time (he might just see the amount of the target ccy)
D: Your client decides whether the target amount is good and executes the trade through your frontend
---Not visible, orchestrated by RippleNet & Exchange/ Market Maker
E: AUD is sold from FlashFX's ODL-related wallet/ destination tag on BTCmarkets for XRP and deducted from your clients balance
F: XRP is sent to FlashFX's ODL-related wallet/ destination tag on coins.ph 
G: XRP is sold on coins.ph for PHP
H: coins.ph "credits" the FlashFX customer in PHP via local rails (e.g. national wire transfer/ IBAN)
---What the FlashFX client sees
I: Client destination (e.g. IBAN) gets credited PHP from coins.ph knowing that it came from FlashFX

Is that more or less correct?

And regarding step D: For how long is the RippleNet response valid/ "locked in"? Volatility might render the reponse not viable after some seconds/ minutes, I guess. Who takes the price risk?

Edited by karstnDE

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1 hour ago, karstnDE said:

I imagine the total ODL process end-to-end as follows, not considering stuff under the hood like re-balancing and the XRP pools provided by Ripple:

---What the FlashFX client sees
A: Your client enters a request to send money from AUD to, e.g. PHP, on your website
B: That request is automatically forwarded to trigger a RippleNet request (like "get quote") for a certain amount of AUD, choosing the respective target, e.g. PHP
C: Your client gets the response from RippleNet with FX rate and TX fees forwarded in real-time (he might just see the amount of the target ccy)
D: Your client decides whether the target amount is good and executes the trade through your frontend
---Not visible, orchestrated by RippleNet & Exchange/ Market Maker
E: AUD is sold from FlashFX's ODL-related wallet/ destination tag on BTCmarkets for XRP and deducted from your clients balance
F: XRP is sent to FlashFX's ODL-related wallet/ destination tag on coins.ph 
G: XRP is sold on coins.ph for PHP
H: coins.ph "credits" the FlashFX customer in PHP via local rails (e.g. national wire transfer/ IBAN)
---What the FlashFX client sees
I: Client destination (e.g. IBAN) gets credited PHP from coins.ph knowing that it came from FlashFX

Is that more or less correct?

And regarding step D: For how long is the RippleNet response valid/ "locked in"? Volatility might render the reponse not viable after some seconds/ minutes, I guess. Who takes the price risk?

Thanks for outlining this, pretty much correct. 

The price is live gets automatically updated until it is accepted. 

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Hi @Nicolas,

I still have some lack of understanding regarding market makers.

 

Quote

For the time being there is enough liquidity to absorb ODL trades among other XRP trades, these market makers are stepping to absorb trades and there are backups in place with additional liquidity in need, so dont think you can assume there are limits right now. 

I understand that the market makers "keep the order book filled" to provide enough liquidity. You also state that there are backups in place in case the market makers activities isn't enough. 
--> What are these "backups" exactly? 
--> Do you know what kind of entities those market makers are and how closely Ripple engages/ "instructs" them (in opposition to "the market handles it via arbitrage opportunities")? The term "market makers" is still a bit dubious for me.

I guess you know the market makers though as you stated to help them with re-balancing activities, which brings me to my next question:

Quote

We're helping some market makers to move excess funds to some destinations, so payments can be made in the local MXN or PHP currency. 

--> How can we imagine this rebalancing process in detail?

My line of thought was like this: In case of activities on bitso or coins.php they have too much XRP and want their local fiat back. There's not enough organic demand to buy back the fiat with their XRP on the same exchange as it would move the price and they get less fiat back. So they send you their XRP and you send them back their MXN/ PHP via traditional rails/ SWIFT.

Thanks for clarifying!

Edited by karstnDE

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6 hours ago, karstnDE said:

Hi @Nicolas,

I still have some lack of understanding regarding market makers.

 

I understand that the market makers "keep the order book filled" to provide enough liquidity. You also state that there are backups in place in case the market makers activities isn't enough. 
--> What are these "backups" exactly? 
--> Do you know what kind of entities those market makers are and how closely Ripple engages/ "instructs" them (in opposition to "the market handles it via arbitrage opportunities")? The term "market makers" is still a bit dubious for me.

I guess you know the market makers though as you stated to help them with re-balancing activities, which brings me to my next question:

--> How can we imagine this rebalancing process in detail?

My line of thought was like this: In case of activities on bitso or coins.php they have too much XRP and want their local fiat back. There's not enough organic demand to buy back the fiat with their XRP on the same exchange as it would move the price and they get less fiat back. So they send you their XRP and you send them back their MXN/ PHP via traditional rails/ SWIFT.

Thanks for clarifying!

Hi, let me try to shed some light on this as much as I can. Any person theoretically can be a market maker and establish a book with different buy / sell orders. More professional MM have automated process to build an order book. Thats how much liquidity is being offered at what price spread. That is whats a visible order book, you always see that and as orders are hit, the book is re-established. Imagine that there are multiple of MM doing this at the same time. There are mechanism in place that in case a bigger market order is placed that invisible liquidity is made available to clear this market order however I am unsure exactly how this works on technical level.

Ripple is organising a number of market makers to be available on these exchanges to manage and make liquidity available however I am unable to clarify what arrangement they have. Note here this is not about arbitrage. A MM can be a professional trading firm, hedge fund, bank, asset manager or private person have the technical capabilities and financial position to be active in this.

With regards to re-balance, this is not about XRP. XRP can be sent and rebalanced easily. I think I explained previously that a MM has a XRP balance and over the course of the day accumulates an excess in AUD. (more people buying XRP). They convert those AUD to USD in fiat outside of Ripple and send those USD back to where they can collect their XRP. The XRP are being used to make a XRPAUD market again. While they collect AUD (by selling XRP), they will at some point or frequency buy back XRP/USD somewhere else. All thats left to do is use a FX service for selling AUDUSD to buy settle the USD. In this case they can also sell AUDPHP or AUDMXN and place the PHP with coins to make a XRPPHP market or similar with MXN. 

Does this help? 

 

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3 minutes ago, Nicolas said:

Does this help? 

Having you here is a wonderful help Nicolas.  Thanks very much.

 

Can I ask your opinion on the ODL monitoring site?  ( If this is too close to proprietary info then please just ignore me. )

Have you seen https://utility-scan.com/#/dashboard and do you think it is accurate in terms of the amount it’s recording?

You would probably have a good idea of the AUD pairs...  do the numbers match your reality?

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18 hours ago, Nicolas said:

Does this help?

It helps, but there's one thing I don't yet understand. For BTCmarkets I understand that the market makers would accumulate AUD as XRP is asked a lot due to ODL. For Bitso and coins though, I imagine that the MMs need more fiat holdings to ensure enough XRP can be exchanged to MXN/ PHP. Or otherwise said, you would need MMs to offer fiat for XRP in exotic destinations. So on those exchanges they would accumulate XRP over the day, or am I missing something?


For the other readers - regarding market making activities I found some interesting articles from GSR which I suspect to act as XRP market maker on some ODL-enabled exchanges based on their history. See e.g. https://medium.com/gsr-trading/a-guide-to-market-making-for-crypto-startups-7179eb3e2889

Edited by karstnDE

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9 hours ago, karstnDE said:

It helps, but there's one thing I don't yet understand. For BTCmarkets I understand that the market makers would accumulate AUD as XRP is asked a lot due to ODL. For Bitso and coins though, I imagine that the MMs need more fiat holdings to ensure enough XRP can be exchanged to MXN/ PHP. Or otherwise said, you would need MMs to offer fiat for XRP in exotic destinations. So on those exchanges they would accumulate XRP over the day, or am I missing something?


For the other readers - regarding market making activities I found some interesting articles from GSR which I suspect to act as XRP market maker on some ODL-enabled exchanges based on their history. See e.g. https://medium.com/gsr-trading/a-guide-to-market-making-for-crypto-startups-7179eb3e2889

Yes, in Australia they will accumulate an excess of AUD until we can open up in-bound AUD for ODL. For the other two exchanges, they will accumulate XRP but the challenge is to bring-in fiat MXN and PHP. You got it correct. 

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Hi Nicolas, thanks for being here and answering questions. I was hoping to get your opinion.

You mentioned that xrp price is irrelevant to ODL and that liquidity is the key. Surely though, if xrp price was zero ODL wouldnt work. So there must be some threshold where xrp price does come into play?

Also is there any advantage that you know of for ODL if xrp is a higher price?  

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3 hours ago, Addictedxrp said:

Hi Nicolas, thanks for being here and answering questions. I was hoping to get your opinion.

You mentioned that xrp price is irrelevant to ODL and that liquidity is the key. Surely though, if xrp price was zero ODL wouldnt work. So there must be some threshold where xrp price does come into play?

Also is there any advantage that you know of for ODL if xrp is a higher price?  

sorry I am not able to answer this, I am unable to make any price comments I am afraid

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