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Is there any merit to this anti-Ripple position?


zak833

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2 hours ago, tulo said:

@Roborovskii actually you can avoid nostro account by just modernizing the actual way of payment, for example with ripple software, but avoiding using any XRP. ILP would be enough and the actual liquidity provider between EUR and GBP could simply switch to ILP liquidity, without having to spread liquidity in two more pairs that are GBP:XRP and EUR:XRP, increasing risks related to holding a volatile crypto and reducing the total liquidity.

without some form of collateral formation guarantee of "value" in its own "worth" - there is NO WAY of  avoiding a "reserve account" showing that collateral capability. Just by using ILP, when you transfer x amount of value, what is the collateral that guarantees x values worth is real ? 

this comment saying just modernizing will eliminate need for a nostro account  (aka a reserve account guaranteeing worth) - is errant and untrue. 

If someone is going to payout x value on my request, he shoudl know i am able to pay him/her/them that x amount. this shoudl be shown some way or the other, modernized or not. 

in other words, at all times , whatever the technology or modernization, there HAS to be a collateral that is representing the value and its worth. if at some point collateral is absent, then value transfer does becomes a risk. technology can provide a better collateral to take this risk ( ex XRP ) - but not eliminate collateral. 

I have seen many people coming from many background who miss this point ( even very intelligent in other fields etc). 

Kindly, R8

Edited by R8102V1D2D
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1 hour ago, RipAndDip said:

Does this mean we would see FIs pop up whose sole purpose is to maintain nostro in order to facilitate XRP trades? Does this already happen? I.e. instead of banks holding their own nostro accounts, that function is outsourced to local trusted providers.

That very function would belong to market-makers. They take the risk of holdings issuances from partner banks/exchanges, as well as XRP. This risk is part and parcel of market-making; and in return they earn profits from bridging the network through arbitrage and providing liquidity in the orderbooks of currency pairs. Therefore you could say that "nostro" (under the banking business) is effectively now taken over by "market-making funds" (under the market-making business).

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I am not trying to be anti xrp here, but why don't countries just use USD as the bridge currency? Why XRP? Sorry for my incompetence.

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19 minutes ago, ripple2k20 said:

I am not trying to be anti xrp here, but why don't countries just use USD as the bridge currency? Why XRP? Sorry for my incompetence.

Any issuance on RCL has counter-party risk. When you say USD, it could be USD.bankofamerica, USD.creditsuisse, USD.bitstamp, USD.ripple2k20.

On XRP-ledger (RCL), XRP is the only native currency that has no issuer, thus no counter-party risk within the network.

If you're talking geopolitical, not all countries would want to hold more US debt than they already have.

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18 hours ago, Roborovskii said:

Any issuance on RCL has counter-party risk. When you say USD, it could be USD.bankofamerica, USD.creditsuisse, USD.bitstamp, USD.ripple2k20.

On XRP-ledger (RCL), XRP is the only native currency that has no issuer, thus no counter-party risk within the network.

If you're talking geopolitical, not all countries would want to hold more US debt than they already have.

yes, also, holding xrp is cheap in principle because you don't have to hold open accounts all over the world for your preferred currency(ies), even with usd you need a funded account set up somewhere in the USA (not so easy for some countries), with xrp you are just connected to the "cloud" for free, and can even hop into USD issuances temporarily if you want anyway 

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That very function would belong to market-makers. They take the risk of holdings issuances from partner banks/exchanges, as well as XRP. This risk is part and parcel of market-making; and in return they earn profits from bridging the network through arbitrage and providing liquidity in the orderbooks of currency pairs. Therefore you could say that "nostro" (under the banking business) is effectively now taken over by "market-making funds" (under the market-making business).

I just wanna know one thing. Where does the market-maker keep his funds? Country of origin perhaps? And how can a market maker pay someone in say, Madagascar in real time?
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1 hour ago, OctagonFS said:


I just wanna know one thing. Where does the market-maker keep his funds? Country of origin perhaps? And how can a market maker pay someone in say, Madagascar in real time?

A market-maker bridging currency pairs on XRP-ledger (RCL) would have multiple hot and cold wallets depending on the number of pairs they play with, and the number of algorithms they run. They would likely have accounts on the gateways/exchanges/banks whose issuances they hold; to cash out and rebalance their funds where necessary. Country of origin wouldn't matter too much just as long as they can be verified on the exchanges/banks.

Edited by Roborovskii
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@Roborovskii and @R8102V1D2D

Probably it is not clear to you how ILP and nostro/vostro account works.

I try in the following to explain why XRP are not necessary and they add an order of complexity and why nostro/vostro account can be "replaced" with ILP without XRP.

The basic concept to understand is how ILP works. Several ledgers (can be a private ledger of a bank) agree on a protocol (the ILP), and "connectors" act as bridge between ledgers. Connectors are "users" (hedge funds, banks, privates, ...) that own an account in 2 ledgers (for example Bank of America and PayPal) and can publish offers to trade currencies between the two ledgers. When a payment across N ledgers (N1, N2,...NN) occurs, the money is "transferred" between N-1 connectors. I said transferred, but what happens in practice (here is the magic of ILP) is that money never leaves any ledger, there is a simple atomic settlement on the single ledgers. Let's say for example there are ledger L1 and ledger L2. There is a connector C12 that is willing to accept USD of L1 for EUR of L2. That means that when an user (bob) with USD on L1 wants to send some EUR to Alice on L2, what happens is that there is a shift of USD on L1 from bob to C12 and a shift of EUR from C12 to Alice. You can notice how the nostro/vostro accounts are shifted on the shoulder of the connector C12, that has accounts in both L1 and L2 and holds funds there. So the banks don't have to have nostro accouts all over the world. The connector in this case is a market maker that puts the liquidity and takes some risks with (usually) the goal of making some gain from the spread of his offers.

This makes some interesting points:

  • Banks don't need anymore nostro accounts because connectors are providing the liquidity. (banks can be connectors to but only because they could use it as business, not because of necessity).
  • The risks are on the shoulders of the market makers (the connectors)
  • Adding more hops in a path payment results in higher fee, since every connector charges something for its gain (the most common will be probably a spread in every pair). So having a path GBP-->EUR is cheaper than having GBP-->XRP-->EUR, because every hop adds the "fee" due to spread.

So by modernizing the current methods and moving to ILP can remove nostro/vostro accounts. Moving the liquidity that is already present in pairs such as GBP:USD (that now is on forex for exampe) to ILP will allow to maintain current liquidity. Having XRP in the middle means higher costs (longer paths) and higher risks for connectors since XRP is a very volatile currency.

Also the motivation of XRP useful for low liquidity pairs doesn't have any foundation for me. Because it would be the same cost of building a path between two low liquidity currencies and XRP (Example: INR.somebank-->XRP-->ZWD.somebank) and the same illiquid currency and USD (INR.somebank-->USD.BoA-->ZWD.somebank). I want to see real data to explain me a realistic scenario where XRP would be useful.

I agree that if ALL ledgers would have the main liquidity vs XRP there could be advantages in liquidity, but it will never happen in practice (too high risk for MM in holding the volatile XRP).

The main challenging in having a useful bridge currency are:

  1. Speed: low settlement time. XRP has it
  2. Volumes: high transactions volumes. current 1000 TPS of XRP are not enough.
  3. Low volatility. XRP absolutely doesn't have this.
  4. No counterparty risk. When and IF RCL will be really decentralized, XRP could have this solved.
  5. ILP connected. XRP has this.
  6. Open market: everybody can trade the currency. XRP has this.

So I think there is still space in crypto world for the real BRIDGE CURRENCY!

Actually a big bank issuing USD has: 1,2,3. Could easily have 5 and in 4 the counterparty risk is very low, so it would be better positioned than XRP.

 

Also @Roborovskii and @R8102V1D2D, can you pleas explain to me how using XRP the banks can avoid having nostro/vostro accounts according to your idea?

 

On 6/17/2017 at 6:38 PM, Roborovskii said:

This risk is part and parcel of market-making; and in return they earn profits from bridging the network through arbitrage and providing liquidity in the orderbooks of currency pairs.

Through arbitrage??? This is a clear symptom you didn't understand anything :blink: It's via the spread, the arbitrage is a completely different story.

 

On 6/17/2017 at 6:03 PM, R8102V1D2D said:

this comment saying just modernizing will eliminate need for a nostro account  (aka a reserve account guaranteeing worth) - is errant and untrue. 

read above

Edited by tulo
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On 6/17/2017 at 4:56 PM, Montoya said:

I would like someone to explain to me how one goes from US-GBP without going through a correspondent bank or using XRP, as the author implies is possible. The author of the article seems to not understand how remittances work or how Ripple works. I see a lot of people on here make that mistake as well. Does he believe that banks will simply accept each others' IOUs? Eventually they will want settlement. Does he think ripple can magically transport physical bills across the ocean? They are stuck with a correspondent bank just like before. This is no improvement on the current system. Ripple without xrp is simply swift. It is a messaging system. XRP is key to the whole thing because it allows settlement. It does this by replacing Nostro accounts with liquidity pools provided by traders. The authors article is a straw man. There is no such thing as US-GBP market. Never has been and never can be. There is a US-correspondent bank-GBP market. But Ripple is betting that banks would prefer US-XRP-GBP.

Read my previous post. The answer is ILP! :)

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42 minutes ago, tulo said:

I agree that if ALL ledgers would have the main liquidity vs XRP there could be advantages in liquidity, but it will never happen in practice (too high risk for MM in holding the volatile XRP).

 

 

 

This is one of the problems with your argument. I don't believe that ALL the ledgers need to have the main liquidity as XRP for the XRP to be a viable option for banks. I think a more acute point would be talking about "how much" XRP liquidity we will need before it becomes viable to banks. Just by getting XRP into banks in developing areas of the world and in little used fiat corridors might be enough.

And to kind of step back from the entire argument for a moment:

Just by getting banks to use the ILP and Ripple connect and IOUs within the Internet of Value is good for XRP because it opens up the use of the Internet of Value for the use of corporations, individuals, iot connected devices etc.

Now, I think the question of will corporations/individuals etc use XRP or an IOU on the internet of Value is a much more obvious answer. They will obviously use XRP. Separate discussion, but my point is, Banks using the Ripple solution at all even for IOUs is great for XRP, because all we REALLY need is to get entities on the internet of value, then there are MANY situations where XRP is the better option.

 

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2 minutes ago, Cryptowhatcher said:

Just by getting XRP into banks in developing areas of the world and in little used fiat corridors might be enough.

What do you mean by "getting XRP into banks"?

3 minutes ago, Cryptowhatcher said:

Now, I think the question of will corporations/individuals etc use XRP or an IOU on the internet of Value is a much more obvious answer. They will obviously use XRP.

Why? This is the point of this discussion. I can't see any big advantage compared to a USD ledger of a big bank. Or a new cryptocurrency with points 1,2,3,4,5...

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10 minutes ago, tulo said:

What do you mean by "getting XRP into banks"?

Why? This is the point of this discussion. I can't see any big advantage compared to a USD ledger of a big bank. Or a new cryptocurrency with points 1,2,3,4,5...

Excuse the innacurate language. Typing this on my mobile while doing other things as usual. Convincing some smaller banks to use XRP for remmitance.

But like I said, I think the problem with your argument is you assume everyone has to use XRP for it to be viable. I completely disagree with that.

About your second point:

For smaller entities like individuals etc who won't be able to have their own MMs, by using the XRPL they will have access to all the existing MM on the XRPL. So why would the choose USD over XRP in that scenario, XRP has no CP risk and has access to the MMs on the XRPL.

 

Edited by Cryptowhatcher
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