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Explaining XRP


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Can someone explain to me how XRP really works for the non-bank investor. Why would ripple use something that is publicly traded also for bank transactions. Also I guess i fail to see how Banks and ripple would influence Ripple's trading price. I understand it can get pumped on news but other than that. Thank you in advance. 

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7 minutes ago, Storm8559 said:

Can someone explain to me how XRP really works for the non-bank investor. Why would ripple use something that is publicly traded also for bank transactions. Also I guess i fail to see how Banks and ripple would influence Ripple's trading price. I understand it can get pumped on news but other than that. Thank you in advance. 

https://ripple.com/files/xrp_cost_model_paper.pdf

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Is this a viable scenario. Bank market makers want x amount of foreign $$ but it could take that bank two days to compile or free up that much capital. But this bank owns or has access through ripple to enough XRP to go ahead immediatly. The banks agree to trade the value of the local currency for XRP and trade it back at an agreed upon settlement price.  Bank A sends the local fiat to bank B. Bank B instantly sends XRP. And two days later the foreign currency is all gathered and XRP is traded back and the fiat trade is completed.

Edited by 9090
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Well I certainly hope that banks adopt xrp like their own son!  But I have three questions.... if banks decide not to use xrp.... What does that mean for the future of xrp? What other use cases does it have? And what kind of progress is being made toward these alternative use cases?

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6 hours ago, JoelKatz said:

5) Ripple tries to make XRP the premium connector by targeting inefficient corridors.

Hi Dave, thanks for the explanation. On this particular point, can you (or Miguel, etc) give any examples of inefficient corridors you are considering? Like, are we talking really tiny assets, like airplane miles, or just "minor" fiat currencies like, say, South African Rand (or smaller)?

Thanks!

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6 hours ago, JoelKatz said:

The abridged model is this:

1) Ripple gets banks to use its payment technology.

2) Banks integrate Ripple's payment system into their system.

3) This helps to eliminate all the technical obstacles to banks routing payments through a crypto-currency. (Regulatory, compliance, business rules, integration effort, etcetera.)

4) Banks use the system to clear payments with each other, probably using mostly ILP. (ILP is a protocol that permits atomic, cross-ledger payments. Most importantly, it allows a "connector" to facilitate the payment even if that connector is not trusted by either the sender, the recipient, or the source and destination financial institutions.)

5) Ripple tries to make XRP the premium connector by targeting inefficient corridors.

6) If XRP can efficiently bridge X% of payments between banks that use Ripple, it will.

7) This will increase the demand for XRP as connectors need XRP to buy the destination currency for their trades.

8) If XRP is cheap to trade with other currencies, people who don't know what currency they'll need next may hold XRP.

9) If XRP is cheap to trade with other currencies, people who are willing to buy any currency they can get cheaply may hold XRP.

10) This can lead to a cycle of increasing demand.

Ripple may or may not succeed. Ripple's strategy may change. But that's Ripple's plan, in summary.

Or, even shorter, build a massive, level playing field in which assets can compete to bridge payments, then try to make XRP a winner on that playing field.

This is an ambitious, maybe even crazy, plan. But Ripple has raised tens of millions of dollars, has over a hundred full time employees, and our successes to date speak for themselves. That is, of course, no guarantee of success.

I have no doubt the plan has been designed thoroughly, however there is something I don't get in that logic yet. Ripple expects XRP to rise in value if it becomes to perform well as a bridge currency, but my logic tells me the opposite: XRP can perform well as a bridge currency only if it acquires real (not only speculative) value first. I don't see how banks can benefit from bridging through XRP if other participants are not willing to buy and hold because it serves no other real purpose. I would like to think there is something else, other use cases which grant value to XRP. There must be some more value in something like RCL, a distributed source of truth with no counterparty risk, and XRP can be the currency to pay for that source of truth. I don't know... I'm just trying to figure that XRP has a solid and unquestionable base which then supports its role as a bridge currency and not merely speculative value.

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15 minutes ago, xourexe said:

I don't see how banks can benefit from bridging through XRP if other participants are not willing to buy and hold because it serves no other real purpose

To serve fluent bridging it is even better that they do NOT hold but just trade, trade, trade.... as fluent bridging needs high liquidity and low volatility. Nominative value of XRP doesn't matter and may even be as low as 1 cent. But the expectation of course is that Market Makers can make profits on trading ( they will be most serving for liquidity) and banks and their customers can make profit on lower FX/TX costs. As a result, demand for XRP by MM's and banks will surge and therefor price will surge as well....

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41 minutes ago, kanaas said:

To serve fluent bridging it is even better that they do NOT hold but just trade, trade, trade.... as fluent bridging needs high liquidity and low volatility. Nominative value of XRP doesn't matter and may even be as low as 1 cent. But the expectation of course is that Market Makers can make profits on trading ( they will be most serving for liquidity) and banks and their customers can make profit on lower FX/TX costs. As a result, demand for XRP by MM's and banks will surge and therefor price will surge as well....

Agree. Actually, I wasn't sure that 'hold' was an appropriate word, but I used it anyway. Apart from that, I don't see how ultimately it can depend only on market makers either. Are MM's going to make profits just from other MM's by betting like in a casino? There must be other participants in a market driven by some other real purpose which grants value to XRP.

Edited by xourexe
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10 minutes ago, xourexe said:

Agree. Actually, I wasn't sure that 'hold' was an appropriate word, but I used it anyway. Apart from that, I don't see how ultimately it can depend only on market makers either. Are MM's going to make profits just from other MM's by betting like in a casino? There must be other participants in a market driven some other real purpose which grants value to XRP.

Actually MM's have 2 incentives on profits. One is buying pressure and second is payments usage. The first is rather speculative "casino" style, but the second comes from the forex spread. MM's can make a profit on those payments as on average X border payments will have a small penalty on the FX. That's where the profit for the MM has to be, but if there are more MM's, they will compete and as a result spread will be as low as possible or as far as competition can go...

Edited by kanaas
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