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x-Assets: Idea based on XRP Ledger Stablecoin Proposal


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Please take this with a small pinch of salt. It's work in progress so I haven't thought it all the way through 100%. I'd like to call upon some old pals who are smarter than me: @KarmaCoverage @t

Just FYI to you all, "xAssets" is a registered trademark to xAssets.com Limited and xAssets LLC. You need to find another name for whatever it is you are discussing, otherwise we will go legal.

My first thought is, the xAssets should just be XRPL IOUs. However that would be unacceptable because as you said... The total global volume will be processed by a tier of market participants, 

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Careful guys...I once got into a legal tango with a very naive and stupid chap... thought I dotted all the I's and crossed all the T's... even added the squiggly at the bottom right corner of the Q... but I got bit in the azz (am no longer aloud to cuss) hard!  Apparently, when I thought I heard that this person was going to "sue my butt", my response was "Bring it on, bud!" (yeah, he was a kiwi)... long story short, the accent got in the way and I ended up with sewed together asscheeks!

 

DYOR

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8 hours ago, xAssets said:

Just FYI to you all, "xAssets" is a registered trademark to xAssets.com Limited and xAssets LLC. You need to find another name for whatever it is you are discussing, otherwise we will go legal.

LOL, ok. Pretty sure a forum post discussion doesn't infringe. But I put a hyphen in it: x-Assets. Happy now?! 

@karlos if you're worried though I'll find/replace it all... ?

Edited by thinlyspread
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13 hours ago, KarmaCoverage said:

Computationally, speaking to the bold part of your quoted text, this is the reason XRP became a "Bridge Asset" within XRPL. 

It was too computationally expensive (slowing ledger close time) to have the Pathfinding/Routing function preform across an unlimited number of IOUs.

Never thought about it that way (computationally), but yes agree. Most efficient place in on DEX – x-Assets/synthetics fit so well in place of IOUs. 

13 hours ago, KarmaCoverage said:

Bitcoin would have no other option but to compete Ripple laid that gauntlet down with ILP years ago. I think this BTC vs XRP is damn near a game-set-match situation, and we are just watching the last 1/3 of the volleys in which the change in tide/momentum becomes observed by the crowd/market.

It would be beeeeaaauuutiful to see synthetic xBTC gain traction on the XRP ledger. 

Edited by thinlyspread
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  • thinlyspread changed the title to x-Assets: Idea based on XRP Ledger Stablecoin Proposal
22 hours ago, KarmaCoverage said:

This can happen at two tiers, both on the internal ledger of the Exchange/Narrow Bank between the Exchange and their Clients.. and also between an Exchange and some "Liquidity Provider" which I hypnotized could be Ripple in my "How xPool" write up, but now that I'm seeing some of these FXRP & Distributed Liquidity Pools , I'm realizing that the Exchanges could/should end up having choices for their source of Collateral that they loan to their Clients (like Margin traders). I want to do a video on this, it is fascinating.

Would love to see a video on this and exploring synthetic assets as we've discussed (feel free to copy/use anything however you want, it's just putting together other people's ideas in a slightly new way really). I have read and enjoyed your xPool writeup many times. Took me about three reads to get my head around it properly though! 

Ultimately there have to be a few major exchanges/pools providing "true" fiat liquidity to XRP, true meaning backed by "the system" i.e. banks, CBs, etc. I think CBs could play a role here as a sort of liquidity guarantor (but I feel like we're still a way off that, and my hunch for a while is that they want to explore digital bearer instruments, i.e. true crypto e-cash, not only account based DLT systems).

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2 minutes ago, thinlyspread said:

Never thoguht about it that way, but yes agree. Most efficient place in on DEX – so xAssets/synthetics fit so well in place of IOUs. 

Yeah, I havent settled on my understanding of weighing out the pros and cons of the options for Value to be represented on a ledger than it's provenance ledger.

  1. Hosted Wallet - on an Exchange's ledger/platform, with DA collateral held in the Exchange's wallet
  2. IOUs on XRPL - A representation of a DA on XRPL, that is held in a Hosted Wallet like BTC.bitstamp. This is a type of Custodial service.
  3. Ripple lending XRP - which would put the value of XRP onto the Narrow Bank/Exchange.
  4. FXRP - a smart contract on a distributed ledger/network that represents the value of XRP on that network.
  5. Distributed Ledger Pools - similar to an FXRP, but well... I'm fuzzy about what the difference to a FXRP would be. I guess some of these DLPs are single purpose networks, and may not be full smart contract platforms. In that case the Stable Coin is the networks service/product, and not serving as collateral for Smart Contracts. So less utility.

I guess what we are really talking about is a way to have Value represented on 2+ ledgers, that are not the Asset's native ledger/network. Then multiple networks can exist with various functionalities and capabilities and the value can flow through to use each ledger/network for what it's useful for (utility value) and then move on to the next ledger and use it for what it is useful for, and so on.

This creates a "Leveling of the Playing Field" situation just like ILP was intended to do, and as for the market dynamics there will be various "Service Types" of networks/ledgers (settlement, smart contracts, loans, retail, etc) one winner will emerge at first, then several competitors within that Service Type will immerge, then ultimately each Service Type will settle down with 3-5 major providers.

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6 minutes ago, KarmaCoverage said:
  • FXRP - a smart contract on a distributed ledger/network that represents the value of XRP on that network.

I'm not sold on the potential utility of Flare yet and the extra layers of complexity it adds. I am also concerned they won't be able to generate enough liquidity for (yet another token) Spark. Let's see. But if you can do a stablecoin implementaiton on XRPL, for me that beats doing it on Flare (at least for the base use case, not including Flare specific contracts, oracles, etc). The main advantage for Flare I see is in providing oracles to XRPL, but why not have that done by Chainlink or Tezos? Still need to read up on exactly why Flare is so advantageous.  

 

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23 minutes ago, KarmaCoverage said:
  • Ripple lending XRP - which would put the value of XRP onto the Narrow Bank/Exchange.

Going point by point, hope that's OK. Makes it easier to follow for me. 

I still love the idea of Ripple simply using a third party crypto-loan specialist (e.g. Nexo) to interface with the potential customers, with Ripple just provide the capital via XRP. Easy – just keeps it simple. Downside is Ripple are seen to be partisan, but so what? That's a good thing for strategy.

XRP gets a competetive advantange in yet another area (i.e. is a crypto of choice for collateral) because Ripple can undercut other cryptos/originators using its stash of XRP and with the speed at which it deploys. Ofc if the deal is also done in 100% XRP, then as the client goes to pay back the loan, they add (excess) demand pressure to buy XRP going the other direction. KYC/AML/etc all done by the intermediary, who also benefits. It's a profit deal all round. 

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23 minutes ago, KarmaCoverage said:

Then multiple networks can exist with various functionalities and capabilities and the value can flow through to use each ledger/network for what it's useful for (utility value) and then move on to the next ledger and use it for what it is useful for, and so on.

This creates a "Leveling of the Playing Field" situation just like ILP was intended to do

Nailed it. :ok:

Quote

and as for the market dynamics there will be various "Service Types" of networks/ledgers (settlement, smart contracts, loans, retail, etc) one winner will emerge at first, then several competitors within that Service Type will immerge, then ultimately each Service Type will settle down with 3-5 major providers.

The DEX is such an enoromous advantage if Ripple/whoever can make it work as a hub in the IoV. Any other DEX is sort of "tacked on", illiquid or over-bloated. E.g. Binance DEX, it's a total nightmare and has none of the capabilities of the Fugger system of credit lines. Let alone the settlement time. When we get credit lines working with on-demand loans across XRPL things get interesting and the old DEX comes back to life; add in x-assets etc and we have a clear winner. 

Edited by thinlyspread
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5 hours ago, thinlyspread said:

It would be beeeeaaauuutiful to see synthetic xBTC gain traction on the XRP ledger.

What would make me smile would be to see Distributed Liquidity Pools of BTC, end up interim settling on XRPL during the 15+ minutes it takes Bitcoind to process the sum of all the transactions that have been settling every 3 seconds for the last segment of 15+ minutes.

---

Was just watching a Dalio thing with him going on about Monetary Policy 3, and the transitioning from MP-2 back in '08. It made me think of this thread because if you have these Stable Coins (I will just lump them in with Fiat at this point) being created then this is an Expansion of Fiat Money Supply. However this time it is not the CB's balance sheet/Ledger that is backing the Expansion. It is Digital Assets, and the Expansion is effectuated via the Issuing of these Stable Fiat Coins.

Asking myself, "What could be MP-4? How would that unfold?" I began thinking about ^ paragraph and the fact that with these Stable Coins being backed by Digital Assets essentially like an over collateralized Margin Loan.. there are two ways to expand Fiat Stable Coin money supply.

  1. An increase in the value of the Underlying DA Collateral
  2. A decrease in the Reserve Ratio. (2.5 for FXRP)

Now, thinking forward to the environment that the next Monetary Policy efforts may be required by the global economy, some of the market dynamics that I would anticipate are

  1. A financial system which is comfortable and has already undergone a few generations or cycles of improvement using these new DLT/Smart Contract tools. There will be ups and downs over this time period, but then a big one will happen which will be driven by something that has nothing to do with the Crypto/Digital Asset industry and finance. Until then the ups and downs can/will be driven by internal crypto/financial services industries merging and growing pains through that process.
  2. Stable Fiat Coins will be issued by many Exchanges/Narrow Banks/Loans/etc in many jurisdictions globally. This means many operators * many regulatory regimes * many digital assets. 

Given that there only 2 levers on the Stable Fiat Coin system, to have an Expansionary Monetary policy, you would expect to see a rise in the value of the DA collateral, &/or a lowering of the Reserve Ratio.  A Contractionary Monetary Policy would seek the opposite, lower DA collateral prices and higher Reserve Ratios.

Imagine this chart breathing in as expansionary causing the base to widen, via lower Reserve Ratios -vs-  Imagine this chart breathing in/expansionary/base widening, via higher DA collateral prices, via higher DA prices. Those would enable an expansion of Stable Fiat Coin printing... the opposite dynamics would function in a Contractionary way.

Taking this forward to how these policy options could be deployed the next time we have a need for expansionary monetary policy, and considering the market dynamics, I think there could manifest a situation where the financial market infrastructure is in place to enable a speed to move value and thus markets faster than ever experienced by investors. On top of that speed, will be a higher degree in interconnectedness ever experienced by investors, which would visually look like a financial topology graph with a high density of connections. 

Those two market dynamics would enable the rapid spread of a financial contagion through the global financial systems. Ok, thats all fine and well... that accounts for the options/behaviors entities who are in a position to respond, and the idea that they may have to respond faster than they ever anticipated having to respond. To account for the diversity of Entitles in a positions to respond (Exchanges/Narrow Banks/Loans/etc), I think that we would see just as diverse of reactions or responses. My guess is that this would unfold with an average or consensus on what "good response" looks like, and the actual responses would cluster around those behaviors.

I have no idea, but can guarantee everyone will collectively lose their sh!t till they get comfortable with the results of the collective monetary policy 4 responses globally, but that happens every time folks get scared they may get caught with their pants down, and not be able to make a margin call, or loan payment, or some obligation. An Obligation is simply a unit of value derived from some collateral, much like a Stable Coin deriving it's value from a pool of DA collateral.

One of the key things to keep in mind is that this new option for Monetary Policy 4, is deployed via Narrow Banks with 100% plus reserves (FXRP is 250% collateralized) so there is room to bring the Reserve Ratio down. This is not so much unlike Commercial Bank Reserve Ratios, except this time they are starting at more than 1, instead of less than one (like a 10% reserve ratio).

This graphic is from a video I did a while back. This thread is about the Right hand side, replace "CBDC" with "Stable Coin". The Left hand side is the existing Commercial Banking Fractional Reserve methods (thats all we have for now, the right side is being created as we speak). The whole graphic is supposed to be a domestic economy, with the CB at the center/top. I think this type of monetary infrastructure framework enables for a more balanced ability to absorb an expansion/contraction. 

1152462108_CBDCmarket.thumb.png.77e2faf1c9d1683ee5816c03c63df777.png

Another thought is that, in the chart above, for a Monetary expansion/contraction on the Right side it would unfold on the balance sheets of Main Street (collateral & stable coin holders), unlike the Left side where the expansion/contraction unfolds on the Central Bank's balance sheet.

 

Edited by KarmaCoverage
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There is a lot of posts already and I needed time to digest only the first post, therefor sorry if I repeat things already mentioned. First of all, a nice out of the box thinking, might have potential :-) The things I see are:

  • Oracles. For the stablecoin solution from D. Schwarz you need oracles, one for USD/XRP price and one for MXN/XRP. In the whole solution that is the most centralized part, just thought it should be mentioned. 
  • xUSD != USD. Even with 200% collateral, there still is a small risk that make the synthetic more riskier than the native coin. Although a xUSD/USD market would be very stable and probably mostly 1:1, it are still two different assets. Compare with other stable-coins like DAI or USDT vs USD.

But overall, there are certainly advantages for the MM in the middle. If he receives synthetic USD (xUSD) at exchange A and can send synthetic MXN (xMXN) at exchange B, then he can rebalance everything in XRP.

Where I see possible issues is going from USD to xUSD and going from xMXN to MXN, you need market for it, even if USD and MXN would be CBDC (which would be kinda cool, but for the solution would not matter) they still are not the same as the synthetic assets.

exchange A could receive USD on his account and create xUSD, but that would be a bit slow.

exchange B could 'withdraw' MXN, send that and destroy xMXN, but that would also be a bit slow. Also, exchange B should have enough MXN deposited in advance.

It would be better if the trade from native to synthetic could take place at the bank ledger (or institutional ledger) to speed things up. That seems not impossible.

In the end, there must still be market makers that make the trade from native to synthetic asset. That's still a bit risky, but maybe less risky than being a market maker in two native assets like USD/MXN. It depends for example on the demand for xMXN. If that drops and the MM needs to get rid of it, then the MM must destroy xMXN in return for XRP and that means risk exposure to MXN/XRP price/market.

 

Just my 2 first cents :mail1:

 

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13 hours ago, jn_r said:

There is a lot of posts already and I needed time to digest only the first post, therefor sorry if I repeat things already mentioned. First of all, a nice out of the box thinking, might have potential :-) The things I see are:

  • Oracles. For the stablecoin solution from D. Schwarz you need oracles, one for USD/XRP price and one for MXN/XRP. In the whole solution that is the most centralized part, just thought it should be mentioned. 
  • xUSD != USD. Even with 200% collateral, there still is a small risk that make the synthetic more riskier than the native coin. Although a xUSD/USD market would be very stable and probably mostly 1:1, it are still two different assets. Compare with other stable-coins like DAI or USDT vs USD.

But overall, there are certainly advantages for the MM in the middle. If he receives synthetic USD (xUSD) at exchange A and can send synthetic MXN (xMXN) at exchange B, then he can rebalance everything in XRP.

Where I see possible issues is going from USD to xUSD and going from xMXN to MXN, you need market for it, even if USD and MXN would be CBDC (which would be kinda cool, but for the solution would not matter) they still are not the same as the synthetic assets.

exchange A could receive USD on his account and create xUSD, but that would be a bit slow.

exchange B could 'withdraw' MXN, send that and destroy xMXN, but that would also be a bit slow. Also, exchange B should have enough MXN deposited in advance.

It would be better if the trade from native to synthetic could take place at the bank ledger (or institutional ledger) to speed things up. That seems not impossible.

In the end, there must still be market makers that make the trade from native to synthetic asset. That's still a bit risky, but maybe less risky than being a market maker in two native assets like USD/MXN. It depends for example on the demand for xMXN. If that drops and the MM needs to get rid of it, then the MM must destroy xMXN in return for XRP and that means risk exposure to MXN/XRP price/market.

 

Just my 2 first cents :mail1:

 

I see another caveat, say e.g. the MM at exchange B wants to create xMXN. he then collaterizes with 200% in XRP. But when he trades the xMXN it comes in the end in the hands of the beneficiary bank. The consequence is that neither MM nor the beneficiary bank can unwind the the collateral. The bank could take over the collateral by sending 200% XRP to the MM and receive ownership of the collateral in return. He would then end up with xMXN and the collateral. He could unwind it now and would receive the XRP back, but the xMXN would also be gone. So, not that it is necessary to be done, but it is not so easy that everybody can unwind a synthetic xMXN. It has to be done by the holder of the collateral.

On top of that I had a thought that there is one party with a lot of dormant XRP, namely Ripple (XRP-II). They could create xMXN, xUSD, xWhateverIsNecessary and place that in the market where necessary (e.g. via loans, or playing the MM themselves). Not sure what the picture then looks like, but it is a possibility.. 

Edited by jn_r
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