Valuation Models - XRP The Digital Currency Vs. Ripple the Company

[Vertigo2131]

Good evening,

I've been following achievements of Ripple (the company).  IMHO, they have a reasonable chance of disrupting the global interbank payment hegemony.  (They have certainly raised alarm within SWIFT) That being said, if Ripple Co. is able to successfully execute against their business plan, what impact (if any) would this success have on valuation of XRP the digital currency.  I've heard anecdotes that a 2 digit (or even 3 digit) XRP price would be stabilizing/expected under a wide-scale adoption scenario; i'm trying to understand  the fundamentals behind that assertion.

Would appreciate your insights on XRP valuation models in such a scenario.

Thanks in advance.

Edited May 25, 2017 by Vertigo2131

[JoelKatz]

Here's how I've been explaining it recently:

1) There's a business that Ripple has providing transaction processing software to banks. It can work without XRP and without any blockchain tech. It improves international payments because it uses end to end messaging to track payment progress, ensure all necessary compliance information is in the transaction in the first place, precisely knows the fees ahead of time, and provides prompt, reliable confirmation of delivery. This is a big enough improvement that banks will use it even if the actual money moves the same way it does now.

2) Ripple has built a public blockchain with a native asset. It has various nice features -- a distributed exchange, good governance, fast transactions, high transaction volume, native multisign, key rotation, payment channels, and so on.

3) The hard part about getting banks to use a blockchain isn't the blockchain, it's everything else. It's governance, compliance, integration with banking systems, and so on. our software does all that stuff, so if routing a payment through XRP is a penny cheaper, the bank can take it. Then we have to make XRP cheaper somewhere that matters.

4) We don't target the biggest corridors like USD->EUR because they're efficient. We target an inefficient, but fairly high volume, corridor. For example, EUR->INR. Market makers have very small profit margins, so even a small incentive to place good EUR<->XRP and XRP<->INR offers can beat what banks are getting now through the correspondent banking system.

5) Once we get one corridor, we hang other countries off each end of the corridor, expanding the reach of XRP.

6) Now, say you're a company like Seagate that pays out money all over the globe. If you have to make payments to five countries in our corridors, you'd rather hold one pile of XRP than five piles of different currencies. That increases demand.

7) Now, say you're a company like Apple with a huge pile of cash. If you want to snap up other assets cheap, you'll need to hold the asset the people selling want. If they're going into any of our corridors, they'll want XRP, so you would want to hold it.

8) If that succeeds, it could increase the price of XRP.

9) Ripple holds a huge pile of XRP and will be the dominant XRP holder for the foreseeable future. But we're primarily VC financed and we get revenue from selling software to banks. We don't use our XRP as a bank account but as a strategic weapon. (Though we do sell some for revenue, we just don't need to for salaries or to keep the lights on.)

10) Anyone who gets XRP from us as part of some deal with a lockup has their incentives aligned with ours. They want the long-term price of XRP to go up too.

I think that pretty much covers our vision. There is, of course, no guarantee of success. This is a pretty crazy thing we're trying to do. But we have 160 full time employees and have raised tens of millions of dollars. We've hired many amazing people, and our track record speaks for itself.

[pucksterpete]

You GO Ripple, Thanks Joel for the info.....Good luck with your other Ventures too

[TplusZero]

Great write-up @JoelKatz ! 

You have a small typo under 4) should be XRP>INR. Just saying as some members probably will link that thread and spread the message.

[JoelKatz]

Thanks.

[HDFatboy]

@JoelKatz - Excellent post and explanation. As one of the key person in company. Have you ALL seen others so call the company's top management willing to spend time this late to read the forum and gave a feedback. This is why I trust Ripple for such a long time. Bay areas (Silicon Valley) is the world MOST famous of the Hi-tech invention and creation, one of the reason is we have all the talented people here who is willing to sacrifice their days and nights to make the world better. They work from their heart to create a better, brighter future. Someone posted earlier an audio interviewed with Miguel. One of the speech he said which I am so touch "If you visit Ripple headquarter, you will notice people are working hard there 24/7 to make the system better. The miracle of bay area/Silicon Valley is not virtual, it is real and Ripple is No Different. I wish and strongly believe Ripple will success and it is happening now. Good Luck Ripple for tomorrow Summit's Demo... 

[Guest]

@JoelKatz do you think we'll start to see institutional investment buying on-ledger any time soon?

i think it's been key to bitcoin's success, since there's no off-ledger way to purchase -- millionaires and billionaires use the same channel as the common plebs

Edited May 25, 2017 by Guest

[Cryptolife]

Thanks for the update.

 

[copeoz]

@JoelKatz keep that info coming.... 

We need to outweigh the negative news with positive forward looking content

[Rchopra]

2 hours ago, JoelKatz said:

Here's how I've been explaining it recently:

1) There's a business that Ripple has providing transaction processing software to banks. It can work without XRP and without any blockchain tech. It improves international payments because it uses end to end messaging to track payment progress, ensure all necessary compliance information is in the transaction in the first place, precisely knows the fees ahead of time, and provides prompt, reliable confirmation of delivery. This is a big enough improvement that banks will use it even if the actual money moves the same way it does now.

2) Ripple has built a public blockchain with a native asset. It has various nice features -- a distributed exchange, good governance, fast transactions, high transaction volume, native multisign, key rotation, payment channels, and so on.

3) The hard part about getting banks to use a blockchain isn't the blockchain, it's everything else. It's governance, compliance, integration with banking systems, and so on. our software does all that stuff, so if routing a payment through XRP is a penny cheaper, the bank can take it. Then we have to make XRP cheaper somewhere that matters.

4) We don't target the biggest corridors like USD->EUR because they're efficient. We target an inefficient, but fairly high volume, corridor. For example, EUR->INR. Market makers have very small profit margins, so even a small incentive to place good EUR<->XRP and XRP<->INR offers can beat what banks are getting now through the correspondent banking system.

5) Once we get one corridor, we hang other countries off each end of the corridor, expanding the reach of XRP.

6) Now, say you're a company like Seagate that pays out money all over the globe. If you have to make payments to five countries in our corridors, you'd rather hold one pile of XRP than five piles of different currencies. That increases demand.

7) Now, say you're a company like Apple with a huge pile of cash. If you want to snap up other assets cheap, you'll need to hold the asset the people selling want. If they're going into any of our corridors, they'll want XRP, so you would want to hold it.

8) If that succeeds, it should massively increase the price of XRP.

9) Ripple holds a huge pile of XRP and will be the dominant XRP holder for the foreseeable future. But we're primarily VC financed and we get revenue from selling software to banks. We don't use our XRP as a bank account but as a strategic weapon. (Though we do sell some for revenue, we just don't need to for salaries or to keep the lights on.)

10) Anyone who gets XRP from us as part of some deal with a lockup has their incentives aligned with ours. They want the long-term price of XRP to go up too.

I think that pretty much covers our vision. There is, of course, no guarantee of success. This is a pretty crazy thing we're trying to do. But we have 160 full time employees and have raised tens of millions of dollars. We've hired many amazing people, and our track record speaks for itself.

Awesome as usual. Can we nominate u for Nobel prize....???

[will4star]

XRP is to fiat/cryptocurrencies what fiat/cryptocurrencies are to physical trade.

 

It is (hopefully going to be) the money for money.

[Rchopra]

2 hours ago, JoelKatz said:

Thanks.

Hi mate. Consensus  is over but no biggie news as hinted by you... whats happening...? Did we miss something...???

[Live4xrp]

2 hours ago, JoelKatz said:

6) Now, say you're a company like Seagate that pays out money all over the globe. If you have to make payments to five countries in our corridors, you'd rather hold one pile of XRP than five piles of different currencies. That increases demand.

7) Now, say you're a company like Apple with a huge pile of cash. If you want to snap up other assets cheap, you'll need to hold the asset the people selling want. If they're going into any of our corridors, they'll want XRP, so you would want to hold it.

8) If that succeeds, it should massively increase the price of XRP.

 

Replace Seagate or Apple by SBI...Hmmm...Getting there! http://asia.nikkei.com/Business/Companies/Japan-s-SBI-megabanks-take-stakes-in-blockchain-group-R3?n_cid=NARAN012

Broad possibilities

Since joining R3's consortium in March 2016, SBI has participated in such efforts as proof-of-concept testing. Now, the Japanese financial services firm will gain board representation at R3. It aims to use the position to lead the consortium's technological development.

SBI has also teamed up with Ripple, the U.S. financial technology startup behind the virtual currency XRP, to form the joint venture SBI Ripple Asia. The SBI group plans to begin operating an exchange for virtual currencies this summer, and plans to launch its own such currency, SBI Coin, down the road.  

http://www.sbigroup.co.jp/english/investors/disclosure/presentation/pdf/170301presentations.pdf

Page 35-40

[Jun]

Joel shouldn't ripple locking up billions of xrp have made the price skyrocket in itself?

[JoelKatz]

27 minutes ago, Rchopra said:

Hi mate. Consensus  is over but no biggie news as hinted by you... whats happening...? Did we miss something...???

I am sorry that wound up misleading people. Let me explain what happened:

Originally, we were going to have three demos at consensus. XRP to ETH using ILP, Banking payments using XRP/paychan under ILP, and a demo of a future vision of a micropayment system over ILP.

We were also going to do several corporation partnership/strategy announcements, including the lockup and the new exchanges and so on at consensus.

It reached the point where there just weren't slots for all the demos or time to do the releases. And it wouldn't have given people time to track us down to discuss new partnerships and so on if those announcements motivated them to talk to us. Also, we expected everyone else to announce at consensus, so we might have gotten lost in the noise.

So the strategy changed. We announced more things before consensus and at some point, we just decided to announce pretty much everything before consensus to go in consensus on a high with everyone already wanting to talk to us about what we were doing.

The strategy, I think, worked well. We did enter consensus with a high level of excitement. Lots of people wanted to work for us, and we had lots of high-level talks with all kinds of people. We had lots of companies offer to run validators in lots of jurisdictions. It was awesome.

But the downside was that we didn't announce very much new at consensus, though that was the original plan.

Again, I apologize for misleading people. That was totally my fault. I was really excited about we had coming and really couldn't resist sharing my enthusiasm. I'd say I'll be more careful in the future, but I think that would be kind of a sad thing. Know that I will always try to be completely honest and say only what I genuinely believe but that sometimes things will change and that is beyond my control.