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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.

OK so I think we're getting closer now to the new 'x-Assets' model or whatever. Looks like Ripple are pushing the CBDC and stablecoin thing again lately: here and here. And yet we didn't hear any

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11 minutes ago, KarmaCoverage said:

@jn_r great points.

Thanks. It is still confusing but also fascinating to see how it could work with stablecoins based on crypto-collateral (you should read up on Celo, they make it even more complicated combining it with AMM). I haven't had time to shift through the rest of the posts, but will start now ..

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On 9/26/2020 at 2:10 PM, thinlyspread said:

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... ?

@thinlyspread I am not worried by @xAssets threatening legal action for trademark infringement. There is no trademark they can rely on and none that is being infringed anyway.

@xAssets - Welcome to XRPChat. I checked WIPO's database and you're not registered anywhere of interest to us. You've been warned - falsely claiming to be a registered trademark owner is an offence in most jurisdictions and you will be banned if you persist. :bye:

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20 hours ago, KarmaCoverage said:

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.

Brilliant! :D

17 hours ago, jn_r said:

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.

Yes, I kept going back n forth between xUSD/USD and xMXN/MXN markets and just having USD/XRP and MXN/XRP for the base liquidity to enter the system. What we need to consider here is the net impact on the buy/sell side pressure on XRP... I think. But a trade in, or example, xMXN/MXN *is* a trade in XRP/MXN, isn't it? :dthinking:

17 hours ago, jn_r said:

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.

Initially my idea was just that the RippleNet used an "xPool" type thing for rebalancing liquidity at ODL partners/exchanges, with everything "measured in" XRP just to efficiently rebalance the pots/flows. And that the x-assets never touched consumers, it was more for overall netting/settlement. However, I then realized, "oh, maybe exchanges can also list synthetic assets?" which then became "oh, maybe that's the idea of ILP and synthetic autobridging/orderbooks." 

But as you say at some point the "real" fiat must come into/leave the system: to buy XRP, but also XRP sold for "real" fiat. The trick is finding the most net efficient/liquid setup that's sustainable and "a profit deal" for all. 

20 hours ago, KarmaCoverage said:

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).

I think I need to read up more on FXRP and Spark. I feel like they need to put out some bullet point advantages and use cases. As for oracles, I did ask David about a year ago whether this could actually be implemented as a consensus upgrade within/for the XRP ledger as well. With rewards much like the stablecoin "take over" he proposed but instead for the "best" price inputs (some kind of average), but I didn't get a reply hearing about whether XRPL could technically handle this given it's not Turing complete etc. 

5 hours ago, jn_r said:

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.. 

Yes. Ripple *could* use their stash, but I am worried this goes against the idea of "a profit deal" and getting institutional buy pressure to sure up XRP markets. I read somewhere that one of the reasons for revaluation of Ripple's stock price was due to them not being able to actually realize the market value of most of their on-book XRP since selling in such weak markets would crash the price. So its book value must account for illiquidity. So, could the "xPool" (?) be for OTC XRP purchases wherein the "real" assets are held as Reserve for emergency market intervention as previously discussed? Just floating it out there! 

5 hours ago, jn_r said:

So, not that it is necessary to be done, but it is not so easy that everybody can unwind a synthetic xMXN.

Yes this is the nub of the issue and why I need your help on this to think things through. 

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Tangents/thoughts:

– Is there any way to measure net XRP taken from available supply (as collateral) vs being sold for redemption? Probably too many market dynamics. 
– What are geopolitical/regulatory ramifications of a vast international "pool" of resources inc. multiple currencies used to back up synthetic assets? Especially if one crypto (XRP) gets to be the primary shipping container standard for all these synthetics? I also wonder about currency wars where foreign synthetics could be "minted". 
 

Maybe we should break this down into simpler things. How about thinking through step by step in a specific use case given, say, some exchanges and a remittance flow?

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1 hour ago, Pablo said:

@thinlyspread I am not worried by @xAssets threatening legal action for trademark infringement. There is no trademark they can rely on and none that is being infringed anyway.

Thanks Pablo.

@KarmaCoveragethanks for the overview – the big picture diagram. Still mulling over this. Especially regarding monetary policy. You're always a few steps ahead! Will get back to you. 

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6 minutes ago, thinlyspread said:

As for oracles

We will see Distributed Oracles at some point in time. The thing with this is, that there does exist in the real world situations with a Single Point of Truth. Take a Death certificate. Sure work might spread through the social network that John is dead, but you cannot start legally triggering Smart Contracts based upon an Oracle based upon that source of info. The contract must require a Death Cert.

In other cases a Distributed Oracle could be achievable, because the Oracle can rely on a multitude of data sources to verify the Truth it is tasked with verifying. It is a very important part of the whole system's architecture, that must be reliable and as much as possible, not

9 minutes ago, thinlyspread said:

the big picture diagram.

No problem, I enjoy this stuff. That diagram is from my CBDC video, https://www.youtube.com/channel/UC-Qd70Bna09hgfwI6SV5yxQ I want to start making more, I just haven't. Real Estate is going to be huge, Stable Coins seem to be more of a thing than I anticipated, but now I get it, in part thanks to this thread making me think about it.

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23 hours ago, KarmaCoverage said:

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.

This is some brilliant insight. 

In a very (very) simplistic take on such a mechanism, and in a hypothetical world where one (or many) digital assets of choice are accepted or even encouraged, there would be a sort of contraction/expasion between scarce DAs and inflationary fiat as you say.

So where DAs collateralize for synthetic fiat, there could be a cycle that plays out where if DAs are seen as "hard assets" or "safe havens" during inflationary periods (or e.g. because you can get a return on them via liquid lending/staking etc), like gold or commodities cycles, then this raises the price of XRP, which then means less XRP locked as collateral (or, conversely, allows more synthetic fiat can be "issued"). And vice versa. 

Further, if as discussed you imagine a Reserve pool that ultimately backs XRP for systemic intervention / emergency risk mitigation, then that also locks up more and more fiat (or other assets), which may have a deflationary affect, and so on. So there'd be this sort of "breathing" in and out as you put it so poetically.

Maybe "amount of collateral required" could be sort of broad a monetary policy/risk management tool in this context? 

–––––––––––––– 

Lastly, and this is a wild tangent: if (big IF!) XRP – for the sake of argument – became "the" digital reserve currency in such a way, then, you'd have some clever insurance against the loss of global dollar hegemony. If the US dollar comes under serious threat as defacto reserve currency status (and some say it already has), an XRP standard (and I realize this is Pie In The Sky stuff!) could rescue the United States & Allies, because Ripple (as "the bank") are beholden to the United States and its national security. They are, in a general sense, its property. Thus if the crypto/fiat who-backs-who relationship is flipped, the United States retains a controlling stake; actually they may be forced into a position of encouraging a homegrown crypto as defence against just such a maneuver from hostile foreign adversaries. *Cough* China *cough*. 

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11 minutes ago, thinlyspread said:

imagine a Reserve pool that ultimately backs XRP for systemic intervention / emergency risk mitigation, then that also locks up more and more fiat (or other assets), which may have a deflationary affect, and so on.

I'll have to think about this. 

1. if fiat denominated resources are "sunk" into DAs (a transfer on value from one network to another) then you would expect the value of the DAs to be on the increase. A currency increasing in value is deflationary, simply because inflation/deflation has everything to do with Purchasing Power. So if you expect to have more purchasing power at a later time, then you save (no economic flow) so you can buy more with your $1 at a later point in time. This is the fear of Deflation. Hence HODL, not SpenDOL

The reverse is Inflation, which comes with an incentive to spend now (bringing forward spending on the timeline) however it punishes Savings because you lose value over time. Which is the fear of Inflation.

16 minutes ago, thinlyspread said:

So there'd be this sort of "breathing" in and out as you put it so poetically. Useful monetary tool? 

Thanks, Yeah I think of a lot of things on a spectrum with grey scale, or a swinging pendulum, or breathing in and out, or birth and death, but in a cyclic type of way. Nothing is new. Things just change characterizations.  Its like XRP is not a Counter Party-less asset like Gold, because XRPL is the Counter Party. and XRPL is a Clearinghouse which is a type of thing that has been around for ages. The risk has just changed character, so the Counter Party is now a distributed ledger, not someone else who has a chunk of metal they owe you.

21 minutes ago, thinlyspread said:

if (big IF!) XRP – for the sake of argument – became "the" digital reserve currency in such a way, then, you'd have some clever insurance against the loss of global dollar hegemony.

I believe the word "Multi-Polar" has grown in popularity in the Central Banking circles for a reason. It is known and accepted that the USD Reserve status will be retired over the coming years. What will rise is not a Chinese dollar, but a Multi-Polar world where the USD coexists with a hand full of other currencies all as partial Global Reserve status. If XRP were to become part of this basket of accepted global currencies, it would mean prices well above $100USD, in part because USD would be losing value relative to XRP (so XRP would not even need to increase it's utility value to be worth more USD).

25 minutes ago, thinlyspread said:

the United States retains a controlling stake; actually they may be forced into a position of encouraging a homegrown crypto as defence against just such a maneuver from hostile foreign adversaries. *Cough* China *cough*. 

Something like this is a card in the deck, as I observe the situation. I dont take this stuff lightly, the US needs to IMHO get off it's fat happy a$$ and get to work if we desire to retain our financial superiority past 2030.

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The more I've been thinking about it, the more I wonder if this is really much more useful for "Narrow Banks" i.e. apps like Uphold that will become more bank-like over time. They already provide exposure to assets like stocks, commodities, etc. Even provide interest for lock-ups (which itself is a VERY interesting concept for me when you mix it with the idea of collateralized stablecoins!).

Users can get exposure to any asset they like, that's the idea. Uphold's motto is "Anything to Anything". And there's less overhead for the Uphold if they're collateralized derivatives. So let's suppose they switch their "UPUSD" offering to an xUSD (but call it whatever). All the apps/NBs are connected via XRPL in a shared ecosystem for these x-Assets. What if they each take their own collateralization (HODL) risk with the help of their own market makers / liquidity providers, who instead of doing rebalancing for a payments flow between exchanges (far more complex), they do it only to make sure enough XRP is "in the pot" for added demand for various assets?

There could be purchase deals so NBs can get a good price, hold the XRP (and thus reduce sell pressure while helping distribution) and in return get a very fast pool of liquid collateral to issue xUSD, xXAG, xXAU, etc, which is also interoperable (very quickly) with other NBs or wallets, for example, Gatehub, Coinbase, Sologenic... whoever wants in on the system. Huge obvious advantage for XRP with its speed here. 

I don't know how dividends could work and I don't know how this flies legally. I mean, if you offer Apple stocks as xAPPL, surely you can't actually promote "Apple stocks", but only "exposure to" APPL; else you'd have to provide the security contract. While e.g. Revolut offer "exposure to" crypto and not the underlying, I believe they do buy reserves, and a crypto-asset is VERY different from a security. Especially a dividend paying stock. I believe wallets/apps or "narrow banks" have a slight advantage in that they are NOT exchanges and so encourage "HODL", which means they can offer services around those locked-in funds.

Thoughts? I like the simplicity of this kind of x-Assets ecosystem as it seems Uphold, Sologenic, Bitfinex, Tezos, Nexo, Abra et al are pushing in this direction of providing collateralized synthetics (or some other means); but realistically I don't know how the regulators and securities folks see this when it's a "bank".

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Brainstorm insights.

1/ SBI Holdings are going to pay XRP "dividends" (when blink) if min. 100 shares. This may mean that if companies switch to crypto rewards instead of dividends in future, their security stock offering can be "perfectly" tokenized and divs paid out instantly. 

2/ If a user buys xUSD then swaps for xEUR or xAPPL, did they really do a TRADE?! It's all in XRP "under the hood". Think about it. Tax implications? 

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13 hours ago, tulo said:
  • What would be the advantage of x-Asset w.r.t. current stablecoins or pegged coins?
  • Where x-asset would live? Which ledger or DLT? XRPL?
  • If you want to settle to banks in FIAT, who is doing the last step of converting xUSD to USD? And how?

Hey @tulothanks for reading. Yeah this is basically what I'm trying to figure out with you guys' help. 

13 hours ago, tulo said:

Did you read FXRP whitepaper of Flare?

I did but I really need to re-read and try to understand the fine details. What I'd like to see is some key use case examples laid out in steps. 

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I'm not a big fan (nor expert) of stablecoins. AFAIK all of them have drawbacks (they depend on non decentralized/private entities as Theter, they depend on non-decentralized oracles, they depend on collateral which is highly at risk of market swings, ...).

And I must be sincere I don't see any advantage of xAsset w.r.t. other stable coins (or I don't see them :D).

I'd love much more a world currency like Libra, which is naturally pegged to the basket of underlying "collateral", but also that has its problems.

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