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XRP, XRPL will be ‘bridge’ between CBDCs, says Ripple exec


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David Schwartz, CTO at Ripple, recently delivered a lecture at Berkeley, a lecture during which he shared his views on how he sees XRP and XRPL fitting into the broader picture of a world with CBDCs.

I think the benefit of us all being here is to learn from each other. Discussion and challenging each other is part of that and we can't be all right or wrong. That said, atomic swaps work a little as

I think we shouldn't forget CBDCs aren't assets, they're liabilities, because they're backed by fiat. So you're transferring liabilities, not value. Ripple is trying to create an internet of value, no

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On 10/24/2020 at 11:27 AM, XRPage said:

A bridge between CDBCs? That's probably the worst and most absurd use case I have ever heard. Why would you need a bridge asset between digital assets when you can instantly exchange one for another in one or multiple decentralized exchanges in real time. What you need is an aggregated pool (sum of all pools) with enough liquidity, not a bridge asset. 

How long until Ripple switches to a different use case? Accepting bets! 

A decentralised exchange for CBDC’s is highly unlikely. At least, I have yet to see a model for such. Current models are predicting something like this:

0BA0F839-02DB-4EC9-A118-BA8F1B10E434.thumb.jpeg.2ab28643fbe9b91583abe9fe239afb98.jpeg

where banks hold an account at the payment destination. Obviously, this isn’t much different to what we have now but with the speed benefits of DLT, liquidity can be moved around swiftly to facilitate settlement in different jurisdictions if needs be and would reduce the amount overall N/V required.

This system would rely on interoperability between CBDC ledgers and if Central Banks want to make use of DvP, that would need to be considered within that system too. I’m guessing a global system like that is 20 years away, with the likes of the U.S, E.U, U.K, China, Japan etc having a working model a lot sooner.

XRP being used outside of that model is not absurd, especially if it cheaper to do so.

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1 hour ago, Flintstone said:

A decentralised exchange for CBDC’s is highly unlikely.

I don’t see why. I am sure they prefer to see their cbdc traded in a decentralized exchange than seeing Tether or any other private stablecoin. It will also give them more security that no private company intercepts and cancel their transaction.

Anyways, decentralized or centralized exchanges, you don't need xrp to jump from one cbdc to another cbdc. Obviously, I am not the only one who sees this and that's why there is 0 adoption among institutions not getting paid to use xrp. 

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On 10/24/2020 at 12:27 PM, XRPage said:

A bridge between CDBCs? That's probably the worst and most absurd use case I have ever heard. Why would you need a bridge asset between digital assets when you can instantly exchange one for another in one or multiple decentralized exchanges in real time. What you need is an aggregated pool (sum of all pools) with enough liquidity, not a bridge asset. 

How long until Ripple switches to a different use case? Accepting bets! 

I think we shouldn't forget CBDCs aren't assets, they're liabilities, because they're backed by fiat. So you're transferring liabilities, not value. Ripple is trying to create an internet of value, not an internet of liabilities. Also, correct me if I'm wrong, CBDCs do not solve the Triffin dilemma (https://en.wikipedia.org/wiki/Triffin_dilemma).

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1 hour ago, XRPage said:

I don’t see why. I am sure they prefer to see their cbdc traded in a decentralized exchange

The majority of VASP’s now have to comply with the same financial crime rules that apply to traditional financial institutions. Decentralised exchanges would be a regulatory headache and who would be responsible for such?

1 hour ago, XRPage said:

Anyways, decentralized or centralized exchanges, you don't need xrp to jump from one cbdc to another cbdc. Obviously, I am not the only one who sees this and that's why there is 0 adoption among institutions not getting paid to use xrp. 

I agree, XRP is not needed to facilitate a cross-border CBDC payment, but if there is a cheaper alternative, it will likely gain some use.

It’s still early days regarding CBDC vs intermediary assets. Banks are likely more focused on the future use of CBDC’s and how they will influence their current model, rather than currently focusing on a product like ODL. Small fry will have to do Ripple for now.

I would also like to know how/if regulatory uncertainty is holding back adoption. I’m kinda hoping Ripple does leave the U.S or gets a decision soon, so then we will know for sure.

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55 minutes ago, Flintstone said:

I’m kinda hoping Ripple does leave the U.S or gets a decision soon, so then we will know for sure.

Same here, for better or worse. If they move and nothing changes in regards to adoption it will demonstrate that the problem is not regulation and will see what other reasons Ripple comes up with. 

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2 hours ago, Danny said:

I think we shouldn't forget CBDCs aren't assets, they're liabilities, because they're backed by fiat. So you're transferring liabilities, not value. Ripple is trying to create an internet of value, not an internet of liabilities. Also, correct me if I'm wrong, CBDCs do not solve the Triffin dilemma (https://en.wikipedia.org/wiki/Triffin_dilemma).

Not all CBDCs are liabilities. I am talking about native blockchain-based digital currencies. When they are issued by central banks (not banks) they don't need to be backed by any money in a bank account as tether, they are money (native assets), not tokenized money. This is the type of digital currencies for which transactions in a ledger will mean instant and final settlement, and won't need a bridge asset as xrp. 

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On 10/24/2020 at 11:27 AM, XRPage said:

A bridge between CDBCs? That's probably the worst and most absurd use case I have ever heard. Why would you need a bridge asset between digital assets when you can instantly exchange one for another in one or multiple decentralized exchanges in real time. What you need is an aggregated pool (sum of all pools) with enough liquidity, not a bridge asset. 

How long until Ripple switches to a different use case? Accepting bets! 

Exactly. 

CDBCs can run on their own blockchains and have a protocol which can make a smart contract on a different blockchain. I mean, it is obvious that banks are developing their own coins running on their own blockchains. You just have to connect them. Why do you need xrp for this? Remains unclear for me.

You want to transfer from Bank A to Bank B? Sure, bank A makes a smart contract on their blockchain which will initiate a contract on blockchain B. Simple as that. 

0 announcements on ODL throughout the year, even from unknown companies like mercuryfx.. but yet people expect xrp to be adopted by CB. LOL

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1 hour ago, Kiwi said:

Exactly. 

CDBCs can run on their own blockchains and have a protocol which can make a smart contract on a different blockchain. I mean, it is obvious that banks are developing their own coins running on their own blockchains. You just have to connect them. Why do you need xrp for this? Remains unclear for me.

You want to transfer from Bank A to Bank B? Sure, bank A makes a smart contract on their blockchain which will initiate a contract on blockchain B. Simple as that. 

0 announcements on ODL throughout the year, even from unknown companies like mercuryfx.. but yet people expect xrp to be adopted by CB. LOL

Is this why JP Morgan is using a variation of the ethereum blockchain?

As the weeks go by, it becomes clear that the securities lawsuit has held the company Ripple back enough to allow competition to position themselves well. If there's no need for a bridge asset, then what can XRP be used for? 

I speculated, and lost. At least for now. Let's see what the future holds.

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1 hour ago, Kiwi said:

You want to transfer from Bank A to Bank B? Sure, bank A makes a smart contract on their blockchain which will initiate a contract on blockchain B. Simple as that. 

In a different fiat in a different country?  Do they both agree to burn CDBA that goes to the external ledger?  Who audits that?

Its not as ‘simple’ as all that I think.

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1 hour ago, Kiwi said:

Exactly. 

CDBCs can run on their own blockchains and have a protocol which can make a smart contract on a different blockchain. I mean, it is obvious that banks are developing their own coins running on their own blockchains. You just have to connect them. Why do you need xrp for this? Remains unclear for me.

You want to transfer from Bank A to Bank B? Sure, bank A makes a smart contract on their blockchain which will initiate a contract on blockchain B. Simple as that. 

0 announcements on ODL throughout the year, even from unknown companies like mercuryfx.. but yet people expect xrp to be adopted by CB. LOL

 

On 10/25/2020 at 12:38 PM, Flintstone said:

Current models are predicting something like this:

0BA0F839-02DB-4EC9-A118-BA8F1B10E434.thumb.jpeg.2ab28643fbe9b91583abe9fe239afb98.jpeg

where banks hold an account at the payment destination. Obviously, this isn’t much different to what we have now but with the speed benefits of DLT, liquidity can be moved around swiftly to facilitate settlement in different jurisdictions if needs be and would reduce the amount overall N/V required.

This system would rely on interoperability between CBDC ledgers and if Central Banks want to make use of DvP, that would need to be considered within that system too. I’m guessing a global system like that is 20 years away, with the likes of the U.S, E.U, U.K, China, Japan etc having a working model a lot sooner.

XRP being used outside of that model is not absurd, especially if it cheaper to do so.

A Wholesale CBDC does away with the need for correspondent banks. Big banks still need to hold bilateral accounts at each national CBDC. Those smaller banks, money transmitters, SME’s etc who cant afford to keep those bilateral accounts would be charged a fee for using the big banks service.

XRP isn’t poised to take the flow from big banks doing CBDC <-> CBDC
 

It’s poised to take flow from small banks/FI’s, SME’s etc <-> Big Banks

Big banks are the middleman for these smaller FI’s who want to make international payment. This is where ODL is positioned. If ODL is cheaper than what the bigger banks offer, then ODL will likely become a success.

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45 minutes ago, xerxesramesepolybius said:

Yes it makes perfect sense that instead of directly converting between CBDCs you convert into a highly volatile crypto and try to convert to destination currency.

works brilliantly for the parties being subsidised by Ripple

C’mon, keep up. We’re talking about XRP not BTC. 3 seconds of FX risk during an ODL payment - even in it’s present state of low liquidity, is hardly a risk and better than any existing method.

 

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6 hours ago, Kiwi said:

You want to transfer from Bank A to Bank B? Sure, bank A makes a smart contract on their blockchain which will initiate a contract on blockchain B. Simple as that.

 

5 hours ago, BillyOckham said:

In a different fiat in a different country?  Do they both agree to burn CDBA that goes to the external ledger?  Who audits that?

Its not as ‘simple’ as all that I think.

Right, there's a false assumption of interoperability between A and B: assuming that blockchain B recognizes the validity of a smart contract from blockchain A.

What if I wanted to transfer USD from a US bank into Yen at a Japanese bank, what does the smart contract for that look like? And now you've introduced counter-party risk into the transaction by using a contract.

Something like gold has no counter-party risk, once you have it in hand, it's yours. There's no one on the other end of the transaction you have to rely on to hold up 'their' end. All contracts, smart or not, have counter-party risk by nature because they rely on two or more parties to do what they're promising; when one doesn't pay up, the other is left holding the bag.

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19 hours ago, jetbrzzz said:

Right, there's a false assumption of interoperability between A and B: assuming that blockchain B recognizes the validity of a smart contract from blockchain A.

 

There are protocols which lets you do this with literally 2 rows of a code.

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