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Chris_Reeves

ODL Question Regarding the Slippage

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Below is the step by step guide provided by Ripple for ODL Transactions. Take a look at number 7.

1. The sender requests a quote on pricing and FX.

2. Ripple’s technology calculates the pricing and FX across all parties, and returns a quote to the sender.

3. The sender accepts the quote and submits payment instructions, initiating the payment.

4. The send-side exchange debits the sender’s account, and converts that amount (less fees) into XRP.

5. XRP is sent across the XRP Ledger (settles in 3 seconds) from the send-side exchange to the receive-side exchange.

6. The receive-side exchange converts XRP into local currency, and credits the sender’s account (less fees).

7. Ripple’s technology confirms the amount received is accurate, and will top up the sender’s account if needed.

8. The receive-side exchange forwards the payment to the receiver.

9. The receiver forwards the payment if necessary.

10. The sender and receiver confirm the transaction is complete

 

How do you think this is accomplished? Does Ripple hold an account on each ODL partner exchange and they literally transfer the currency into the receiver's bank account along with the sold amount from the transaction? Since this is done following conversion of XRP into the local currency, I can't imagine another way for them to accomplish this goal. I wonder how much this costs. Using the utility-scan.com data set, I bet we could round to the nearest $1,000 USD to get the intended amount to be sent and determine the difference. Ripple may just be using their war chest to compensate other companies for using a product that's not nearly ready for production use.

 

Long XRP.

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45 minutes ago, karstnDE said:

Nicolas Steiger provided some insights in the AMA in that regard. Ripple deploys customer specific XRP pools. I summarized it here —> https://coil.com/p/karstnDE/Ripple-s-ODL-in-action-Insights-from-FlashFX-regarding-growth-end-consumer-integration-and-the-inner/Xc-tV61B

This contradicts what Ripple says as step 6 already has the conversion from XRP to the local currency. I agree that this method makes the most sense though.

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Howdy @Chris_Reeves - I've been researching ODL's mysteries as well, mainly by studying the data exposed to the public via various APIs provided by Bitstamp, Bitso, and CryptoCompare - you've maybe seen some of my generated charts. Also @Tinyaccount and a few other helpful posters have helped me understand better what to look for in the process' mechanics. IIRC, Nicolas of FlashFX calls us, "data scanners." 

IMHO that process flow description from Ripple you quoted above is a bit abstracted - which is reasonable for them to do, but it cannot possibly be literal.

What we DO know from monitoring the XRPL transactions to Bitso and their trade history, is that the "value flow" from BS to Bitso is generally metered - with occasional opportunistic spikes of conversion (sometimes even at a negative slippage!). I've charted Bitso hourly trades of consistent volumes for like 48 hours straight.

The reason for these constrained and consistent transaction rates, is of course, is that it allows for the books to be re-balanced by the arbitrage network and local market maker/takers to re-up their bids and asks. Otherwise the slippage costs would be non-optimal (of late, the baseline costs have been running under 1%).

I have also tried to drill down to measure the latency of the elasticity of the paired books, and seen its recovery rates range from about two minutes to ten; but I have more research to conduct in that area yet !

Think of the ODL process this way (greatly simplified) ... 

  • Ripple has fiat capital reserves on account at their banks in both US and Mexico.
  • Ripple can transfer fiat to their customers' bank account as needed, programmatically.
  • Ripple has a known capacity rate of restoring fiat balances between THEIR OWN two bank accounts (FX).
  • Ripple's ODL strives to maintain a value flow rate from initiate exchange to end-point exchange (price of XRP is irrelevant).
  • Ripple commits to an ODL transaction with a customer - asynchronous to the backend's on-going value flow process.

By insulating the two processes - 1) the customer facing operation, and 2) the back-end FX transfer process - it greatly reduces their coordination requirements, and its attendant complexities.

They are, however, left having to tie-up fiat capital, and be exposed to FX rate variances...

Our research continues :) but feel free to add any corrections, comments, or questions !

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41 minutes ago, Chris_Reeves said:

This contradicts what Ripple says as step 6 already has the conversion from XRP to the local currency. I agree that this method makes the most sense though.

I don’t think it’s necessarily contradictory. RippleNet could after step 6 detect that a fraction of fiat is missing due to volatility and adjust the amount based on an additional “micro”-trade. 

Edited by karstnDE

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16 hours ago, Chris_Reeves said:

This contradicts what Ripple says as step 6 already has the conversion from XRP to the local currency. I agree that this method makes the most sense though.

Not really..

 

"These XRP pools are basically "insurance policies" to ensure that the required amount of the target currency can be bought.

Steiger assumes it could work like this: If the price of XRP goes down and the receiving exchange can buy less of the target currency than anticipated seconds earlier, Ripple "tops up" the missing XRP from the XRP pool. If the price of XRP goes up and the receiving exchange could buy more of the target currency, the excess XRP are added to the XRP pool. With that mechanism, ODL customers have zero volatility risk."

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2 hours ago, ed1 said:

Not really..

 

"These XRP pools are basically "insurance policies" to ensure that the required amount of the target currency can be bought.

Steiger assumes it could work like this: If the price of XRP goes down and the receiving exchange can buy less of the target currency than anticipated seconds earlier, Ripple "tops up" the missing XRP from the XRP pool. If the price of XRP goes up and the receiving exchange could buy more of the target currency, the excess XRP are added to the XRP pool. With that mechanism, ODL customers have zero volatility risk."

Again, this is something that would have to be done before conversion to local currency. 

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4 minutes ago, Chris_Reeves said:

Again, this is something that would have to be done before conversion to local currency. 

Not necessarily, it can happen immediately following the conversion. The receive side exchange has a pool of XRP that belongs to Ripple. The software automatically triggers conversion from XRP to local currency to top it up if the price has gone down in between and vice versa. The XRP pool stays on the exchange, I bet there's not much happening with that XRP pool to be honest. 

This may end up being an issue if the amount being transferred in a single batch is so large that even a slight fluctuation in price creates a big enough pressure to exhaust the XRP in the pool. Although, I don't really see that hypothetical scenario occurring.

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17 minutes ago, ed1 said:

Not necessarily, it can happen immediately following the conversion. The receive side exchange has a pool of XRP that belongs to Ripple. The software automatically triggers conversion from XRP to local currency to top it up if the price has gone down in between and vice versa. The XRP pool stays on the exchange, I bet there's not much happening with that XRP pool to be honest. 

This may end up being an issue if the amount being transferred in a single batch is so large that even a slight fluctuation in price creates a big enough pressure to exhaust the XRP in the pool. Although, I don't really see that hypothetical scenario occurring.

If this is true, can you please explain the term decentralized? It used to be the battle cry of RL and all the fan boys that XRP is “NOT centralized”, yet the mechanics now show that ODL is a more centralized system than Swift.

Amazing how quick some can ignore yesterday’s “Truths”, because today it is no longer convenient.

Fact is only 1 company profits from running validators and nodes. Happens to be the same company that has profited the most from the sale of XRP. Any guesses??

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2 minutes ago, Valhalla_Guy said:

If this is true, can you please explain the term decentralized? It used to be the battle cry of RL and all the fan boys that XRP is “NOT centralized”, yet the mechanics now show that ODL is a more centralized system than Swift.

Amazing how quick some can ignore yesterday’s “Truths”, because today it is no longer convenient.

Fact is only 1 company profits from running validators and nodes. Happens to be the same company that has profited the most from the sale of XRP. Any guesses??

Centralization is about where the decision making power lies in a given organization or network. An XRP pool that acts as a buffer against slippage in ODL is orthogonal to any arguments regarding centralization.

XRPL is not ODL, it's good to remember this. L in XRPL stands for Ledger, L in ODL stands for Liquidity.

XRPL is a decentralized ledger, ODL is a software/tool giving access to a proprietary network for liquidity.

 

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33 minutes ago, Valhalla_Guy said:

yet the mechanics now show that ODL is a more centralized system than Swift.

ODL is the Ripple corporations software process. Of course it is centralized. Why would anyone think its not? 

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2 hours ago, Valhalla_Guy said:

If this is true, can you please explain the term decentralized? It used to be the battle cry of RL and all the fan boys that XRP is “NOT centralized”, yet the mechanics now show that ODL is a more centralized system than Swift.

ODL is a software allowing instant payments with low fees :) 

As this software is integrated/sold by Ripple, it should be centralized :D But anyone is free to buy and use it

Do not confuse XRP Ledger and products based on its ecosystem

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7 hours ago, Valhalla_Guy said:

that XRP is “NOT centralized”, yet the mechanics now show that ODL is a more centralized system than Swift.

How can you have been here for so long (during which time you’ve made a gazillion harping posts about how bad everything is) and yet still confuse the XRPLedger with Ripple propriety software?

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21 minutes ago, Tinyaccount said:

How can you have been here for so long (during which time you’ve made a gazillion harping posts about how bad everything is) and yet still confuse the XRPLedger with Ripple propriety software?

Quoted you Mr Tiny, but the same answer goes to all. 
My definition of centralized is very fundamental. If it doesn’t work without a key player involvement, then it is centralized. I doubt you would defend Swift as decentralized, simply because they use email or other 3rd party software, on top of their services.


When RL shuts down it’s validators, and stops insuring the Forex transfers with their war chest,  and better yet, separate themselves from control of the war chest, then you can educate me on the products and process. In the meantime, the fundamentals are clearly centralized so it really does not matter what SW or service you put on top of it, it still falls apart without the key player.

BOOKMARK THIS:

When the SEC and courts rules favorably for RL and XRP you may see a FOMO price spike  (actual price depends on RL) but you will then see that retail investors are still not interested in XRP because RL still holds all the cards, and can legally hold them out of our sight. (by remaining a private company)


My experience tells me that when it’s WIN-WIN for one player, it has to be LOSE-LOSE for everyone else.

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38 minutes ago, Valhalla_Guy said:

My definition of centralized is very fundamental.

Oh god.   Are you just this moment discovering that Ripple is the 800lb gorilla in the XRP space?

If you want something that has large real usage by many players maybe invest in some other coin (if you can find one).

Or just wait until the nascent small entities using XRPL for micropayments and game item tokenisation etc grow larger.  

Meanwhile beating some trigger-word drum about “centralisation” is a waste of everyone’s time.  

Ripple are the biggest player,  and always have been.  Perhaps take your crusade to somewhere where everyone doesn’t already know that?

Or if you really want to debate centralisation in terms of ledger maybe start a thread on that?  ( You will find XRPL is already decentralised and getting more so every quarter)

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