F-assets will increase the coin supply

[brianwalden]

If you think of FXRP as XRP on the Flare Network rather than an entirely separate coin, then each FXRP will increase the total supply of XRP. As a practical matter, agents will have to hold enough XRP to fulfill their daily transaction volumes, but after that they're free to do whatever they want with the XRP that they received to mint FXRP. And I'm sure they won't just let it sit there idly, the whole philosophy behind DeFi is to put coins to work.

What will this mean as more F-assets are minted? Think about it, a bunch of people have been holding all these dumb tokens for years, essentially locking them up. Now they're going to be giving them to agents who are more concerned about velocity then price - they want the coins moving around because they make their money on the fees when the coins cross networks. I don't know exactly what effect this will have.

[Guest]

It's not going to increase the total supply of any of those tokens. They're a 1:0.95 replacement (5% transaction fee). It brings liquidity to these tokens in terms of bringing them DeFi access and a lot more pairs than are currently possible on centralized exchanges. The only way to unlock the original tokens is to transfer F-Assets back, which burns those assets completely. There's no duplication. 

Agents are NOT necessarily free to do whatever they want with the XRP. They are not getting free access to the XRP. The XRP is locked as collateral and is expected to be returned whenever the original holders want to. The penalties of not giving a full refund are significant. Agents make money off of the transaction fees (5%).

[brianwalden]

2 hours ago, Ripley said:

It's not going to increase the total supply of any of those tokens. They're a 1:0.95 replacement (5% transaction fee). It brings liquidity to these tokens in terms of bringing them DeFi access and a lot more pairs than are currently possible on centralized exchanges. The only way to unlock the original tokens is to transfer F-Assets back, which burns those assets completely. There's no duplication. 

Agents are NOT necessarily free to do whatever they want with the XRP. They are not getting free access to the XRP. The XRP is locked as collateral and is expected to be returned whenever the original holders want to. The penalties of not giving a full refund are significant. Agents make money off of the transaction fees (5%).

[Guest]

37 minutes ago, brianwalden said:

I could be wrong - can you point out how Flare increases total supply of F-assets based on this paper here or any communication by Hugo around this ? 

FXRP Whitepaper

Edit: Evidently I said XRP was the collateral when FLR is. XRP is just locked with the agents. That said, I still don’t see how Flare increases supply. F-Assets are effectively stable coins pegged to their original assets. I get what you are trying to say in the original post, but I would contend that if Agents effectively get “free xrp” - the realistic outcome of your argument, the market will react and reach an equilibrium IMO

Edited May 10, 2021 by Ripley

[Seoulite]

9 hours ago, brianwalden said:

If you think of FXRP as XRP on the Flare Network rather than an entirely separate coin, then each FXRP will increase the total supply of XRP. As a practical matter, agents will have to hold enough XRP to fulfill their daily transaction volumes, but after that they're free to do whatever they want with the XRP that they received to mint FXRP.

The way I understood it is that the agents are not taking ownership of your tokens. I think someone said in another thread this was to avoid the agent becoming a 'custodian' which would require all manner of regulation. Are you sure that the XRP won't be cryptographically locked? If the XRP effectively becomes the property of the agent then isn't there all kinds of problems with that?

[brianwalden]

Back a month ago Flare got pretty feisty on Twitter when they were compared to Wanchain: 

If you dig into the exchange they flat out say that agents are basically just making an exchange across ledgers. They're trading you FXRP for XRP and vice versa. Once the trade is completed the FXRP is yours and the XRP is theirs (or vice versa).

 

[BillyOckham]

15 hours ago, brianwalden said:

If you think of FXRP as XRP on the Flare Network rather than an entirely separate coin, then each FXRP will increase the total supply of XRP

But that is not true.  The XRP have been traded for newly minted F-XRP.  What has increased is F-XRP.  There was absolutely no increase or decrease on the XRPL apart from insignificant burn fee.

It’s an interesting idea though...  essentially a portion of the XRPL has been IOU’d onto the Flare network without in any way affecting the XRP involved.  They still exist on XRPL and are not tied or escrowed or in any way encumbered or restrained.  How does that affect price/value?  I have no idea.

[brianwalden]

I've been thinking about this. Maybe too much. Remember Plato and his idea that, for example, the ideal horse exists in another plane and every horse we see is a pale incarnation of the ideal one.

Instead of thinking of XRP as the ideal, imagine the perfect ripple in some cosmic plane of existence. XRP is just the first instance of the great ripple, but FXRP is a new one. FXRP is not XRP, but XRP and FXRP are both types of ripples. So strictly speaking FXRP doesn't increase the supply of XRP, but it does increase the supply of ripples.

Now think of what a currency is: medium of exchange, store of value, and a unit of account. XRP and FXRP are tied together making them the same unit of account - you can always exchange one for the other 1:1 (minus fees). But XRP lives in a network optimized for payments, making it a better medium of exchange, while FXRP lives on a smart contract network with access to DeFi services, making it a better store of value. At this point in time, using DLT for DeFi is hot and using it for payments is not. FXRP is going to be valued more than XRP, but that added value can't be reflected in the price since they're pegged together. I think instead, it will average out across all ripples, both FXRP and XRP.

So in conclusion I think FXRP will have an inflationary effect on the supply of ripples, but at the same add overall value per ripple. The question will be which one will be greater. What happens, for example, if demand for FXRP causes a decreased demand for XRP? It's kind of like an ecosystem, (trigger warning: bad pun incoming) one little change ripples across the whole system until it finds a new equilibrium.

[brianwalden]

1 minute ago, brianwalden said:

I've been thinking about this. Maybe too much. Remember Plato and his idea that, for example, the ideal horse exists in another plane and every horse we see is a pale incarnation of the ideal one.

Instead of thinking of XRP as the ideal, imagine the perfect ripple in some cosmic plane of existence. XRP is just the first instance of the great ripple, but FXRP is a new one. FXRP is not XRP, but XRP and FXRP are both types of ripples. So strictly speaking FXRP doesn't increase the supply of XRP, but it does increase the supply of ripples.

Now think of what a currency is: medium of exchange, store of value, and a unit of account. XRP and FXRP are tied together making them the same unit of account - you can always exchange one for the other 1:1 (minus fees). But XRP lives in a network optimized for payments, making it a better medium of exchange, while FXRP lives on a smart contract network with access to DeFi services, making it a better store of value. At this point in time, using DLT for DeFi is hot and using it for payments is not. FXRP is going to be valued more than XRP, but that added value can't be reflected in the price since they're pegged together. I think instead, it will average out across all ripples, both FXRP and XRP.

So in conclusion I think FXRP will have an inflationary effect on the supply of ripples, but at the same add overall value per ripple. The question will be which one will be greater. What happens, for example, if demand for FXRP causes a decreased demand for XRP? It's kind of like an ecosystem, (trigger warning: bad pun incoming) one little change ripples across the whole system until it finds a new equilibrium.

Additional thoughts: FXRP and XRP are going to have different perceived values and they're also going to pegged together by the XRP-FXRP bridge. This sounds like the perfect opportunity for arbitrage.

We already know there will be a dollar stablecoin, Aurei (AUR), issued on both Flare and the XRPL. If the price difference between FXRP and AUR on Flare vs. XRP and AUR on the XRPL is greater than the fees involved in moving coins across the two ledgers, you can make easy money. That's good for the agents, good for demand of XRP and FXRP, good for everyone involved I think.

Hey, isn't Hugo's background in derivatives? Do you think this all happened to work out by accident?

[Seoulite]

7 hours ago, brianwalden said:

What happens, for example, if demand for FXRP causes a decreased demand for XRP?

Thanks for sharing your thoughts.

I might be wrong but I believe it will not be possible to buy and sell FXRP directly. That to own FXRP, you must first own XRP. 

If that is correct, then an increased for demand in FXRP will result in a concurrent increase in the demand for XRP. If that is the case, and XRP are being 'locked' to create FXRP, then this will reduce the circulating supply of tradable XRP, in a similar way to staking. 

If FXRP is tradable, then I think that opens up a huge mess of conflicts. I think FXRP is intended to simply utilise the existing value in the XRP in DeFi products. It is not intended to have a separate value at all, simply a separate function as you said.

[BillyOckham]

14 minutes ago, Seoulite said:

I might be wrong but I believe it will not be possible to buy and sell FXRP directly. That to own FXRP, you must first own XRP. 

I’m not sure that is correct.  What makes you think that?

If fXRP exist then they can be sold can’t they?

I think all this quantum multidimensional ripples stuff is a pipe dream (I realise that wasn’t you).  The agents XRP are not locked.  I think people are misconstruing the way this works.

In no way that I can see does minting fXRP reduce XRP circulating supply.

[Seoulite]

23 minutes ago, BillyOckham said:

I’m not sure that is correct.  What makes you think that?

If fXRP exist then they can be sold can’t they?

I think all this quantum multidimensional ripples stuff is a pipe dream (I realise that wasn’t you).  The agents XRP are not locked.  I think people are misconstruing the way this works.

In no way that I can see does minting fXRP reduce XRP circulating supply.

You’re right there’s no reason why they couldn’t be now that I think about it more. 

[brianwalden]

3 hours ago, Seoulite said:

Thanks for sharing your thoughts.

I might be wrong but I believe it will not be possible to buy and sell FXRP directly. That to own FXRP, you must first own XRP. 

If that is correct, then an increased for demand in FXRP will result in a concurrent increase in the demand for XRP. If that is the case, and XRP are being 'locked' to create FXRP, then this will reduce the circulating supply of tradable XRP, in a similar way to staking. 

If FXRP is tradable, then I think that opens up a huge mess of conflicts. I think FXRP is intended to simply utilise the existing value in the XRP in DeFi products. It is not intended to have a separate value at all, simply a separate function as you said.

In the Flare Finance beta you could swap FLR and F-assets in FlareX.

[Seoulite]

6 minutes ago, brianwalden said:

In the Flare Finance beta you could swap FLR and F-assets in FlareX.

Right, I was totally wrong about that. Do you know how similar/different the F-asset system is to the 'wrapping' process, like for wrapped ETH or wrapped BTC? Could that give us some clues about how this is gonna go?

[WrathofKahneman]

15 hours ago, brianwalden said:

Additional thoughts: FXRP and XRP are going to have different perceived values and they're also going to pegged together by the XRP-FXRP bridge. This sounds like the perfect opportunity for arbitrage.

We already know there will be a dollar stablecoin, Aurei (AUR), issued on both Flare and the XRPL. If the price difference between FXRP and AUR on Flare vs. XRP and AUR on the XRPL is greater than the fees involved in moving coins across the two ledgers, you can make easy money. That's good for the agents, good for demand of XRP and FXRP, good for everyone involved I think.

Hey, isn't Hugo's background in derivatives? Do you think this all happened to work out by accident?

That's a helpful description.  I've been curious how AUR & FXRP will coexist for the XRPL and this helps articulate it.