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Bendecos

ripple challenge to swift

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http://treasurytoday.com/2017/07/ripple-vs-swift-payment-r-evolution-ttpv?platform=hootsuite

 

Ripple cannot, however, ever offer corporates the elimination of settlement risk as postulated. They are neither a CLS-like system nor a Central Bank. What they offer is real-time bilateral clearing. Whilst a significant improvement as described, it is only temporarily more than Swift currently offers - until they themselves introduce a DLT service option, that is. Member-owned Swift maintains a natural advantage over any commercial vendor. No matter how a Silicon Valley fintech like Ripple may try, they'll be severely challenged to ever overcome that inherent preference.

 

any validity to this comment?

 

Edited by Bendecos
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59 minutes ago, Bendecos said:

any validity to this comment?

 

There was this one guy on LinkedIn who seemed to be stalking Ripple articles so he could leave critical comments and argue with anyone else who commented. I think this is that guy, haha. 

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Good call TiffanyHayden ! Thats consistent with and similar to how i felt 

i actually felt his comment was inconsistent with the flow of the article.... what i mean by that was the article was presented in a balanced, measured way and then it appeared this guys comment was the typical response  of a jilted lover !

Edited by Bendecos
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So, what is settlement risk? Wikipedia explains it thus, "Settlement risk is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement."
The classic example was a bank that received the funds for a large collection of international payments and was supposed to pass on the outgoing funds to other domestic banks. The bank simply failed to open, disappearing with the money they received in exchange for the funds they never delivered. This is called "Herstatt risk" after the name of this bank. You can read more about it on the wikipedia page.
CLS provides netting of payments. It eliminates Herstatt risk by using a combination of simultaneous exchange (to protect from people spending funds they don't have) combined with insurance (to ensure the underlying funds are custodied reliably).
Ripple's solution IS a CLS-like system. Specifically, ILP does provide for atomic, simultaneous movement of a number of assets.
However, it is vastly superior to CLS because it can accommodate assets that live on very different ledgers with very different semantics without loss of atomicity. It does not require the parties to trust the ledgers the assets live on. It does not require a single, trusted central authority. It does not need to be a walled garden.
ILP does eliminate Herstatt risk because the XRP is actually guaranteed to be delivered to the recipient with the transaction. No insurance is necessary because the XRP only exists on the ledger, so there is no counterparty to fail to secure the underlying asset. You do need to hedge the risk of XRP value volatility. But I think an open system will beat a walled garden every time.
As for Swift having a natural advantage, I think they also have lots of natural disadvantages. They're not an innovation driven, agile company. Their stakeholders really have no reason to want to see Swift invest the kind of money it would take for them to build such a system when Ripple is already building it. Swift has nothing like XRP, so they have no way to get Ripple's revenue model. So we can justify spending a lot more than they can and our stakeholders are in for the high risks involved and don't mind disrupting the status quo in banking.
That said, I wouldn't say there's no validity to what he's saying. I've always conceded that Ripple is swinging for the fences, attempting to change the world in a radical way. The safe bet is always against that, but the smart bet ...

So it boils down to who to trust more: a corresponding settlement bank led by a few humans or an independent settlement network/coin led by a global community...

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51 minutes ago, JoelKatz said:

So, what is settlement risk? Wikipedia explains it thus, "Settlement risk is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement."

The classic example was a bank that received the funds for a large collection of international payments and was supposed to pass on the outgoing funds to other domestic banks. The bank simply failed to open, disappearing with the money they received in exchange for the funds they never delivered. This is called "Herstatt risk" after the name of this bank. You can read more about it on the wikipedia page.

CLS provides netting of payments. It eliminates Herstatt risk by using a combination of simultaneous exchange (to protect from people spending funds they don't have) combined with insurance (to ensure the underlying funds are custodied reliably).

Ripple's solution IS a CLS-like system. Specifically, ILP does provide for atomic, simultaneous movement of a number of assets.

However, it is vastly superior to CLS because it can accommodate assets that live on very different ledgers with very different semantics without loss of atomicity. It does not require the parties to trust the ledgers the assets live on. It does not require a single, trusted central authority. It does not need to be a walled garden.

ILP does eliminate Herstatt risk because the XRP is actually guaranteed to be delivered to the recipient with the transaction. No insurance is necessary because the XRP only exists on the ledger, so there is no counterparty to fail to secure the underlying asset. You do need to hedge the risk of XRP value volatility. But I think an open system will beat a walled garden every time.

As for Swift having a natural advantage, I think they also have lots of natural disadvantages. They're not an innovation driven, agile company. Their stakeholders really have no reason to want to see Swift invest the kind of money it would take for them to build such a system when Ripple is already building it. Swift has nothing like XRP, so they have no way to get Ripple's revenue model. So we can justify spending a lot more than they can and our stakeholders are in for the high risks involved and don't mind disrupting the status quo in banking.

That said, I wouldn't say there's no validity to what he's saying. I've always conceded that Ripple is swinging for the fences, attempting to change the world in a radical way. The safe bet is always against that, but the smart bet ...

Great job guys. Keep going :)

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Yes this is a very clear way to look at it Kanaas.Would you have any idea on the target market sentiment, feeling out there in general

 

ok its been well documented that there is an anti ripple campaign out there in cryptoland( btw dont care about that to be honest) , and you have read my reviews on some bankers ( we are talking less than 10) but in the grand scheme ... what real perceptions of ripple is there in bankland?

i am beginningto get the feeling the bankers i have spoken to ( Estonia, Finland, Latvia ) may either not understand Ripple in its entirety... they are young guys in their 40's)so we can dismiss the " resistance to change scenario"

Edited by Bendecos

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44 minutes ago, JoelKatz said:

That was an interesting read. One of the comments below the article interested me.

"The majority of SWIFT payments occur within 24 hours - and a good proportion within an hour or even minutes. Delays are typically caused not by the infrastructure, but by banking calendar mismatches, and incomplete or invalid payment instructions. Ripple has not yet proposed a solution to these - delivery of a smart contract doesn't ensure the beneficiary has use of the funds."

I am not sure about the validity of this, but I think he does bring up an interesting point about what causes the initial delays.

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1 hour ago, JoelKatz said:

So, what is settlement risk? Wikipedia explains it thus, "Settlement risk is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement."

The classic example was a bank that received the funds for a large collection of international payments and was supposed to pass on the outgoing funds to other domestic banks. The bank simply failed to open, disappearing with the money they received in exchange for the funds they never delivered. This is called "Herstatt risk" after the name of this bank. You can read more about it on the wikipedia page.

CLS provides netting of payments. It eliminates Herstatt risk by using a combination of simultaneous exchange (to protect from people spending funds they don't have) combined with insurance (to ensure the underlying funds are custodied reliably).

Ripple's solution IS a CLS-like system. Specifically, ILP does provide for atomic, simultaneous movement of a number of assets.

However, it is vastly superior to CLS because it can accommodate assets that live on very different ledgers with very different semantics without loss of atomicity. It does not require the parties to trust the ledgers the assets live on. It does not require a single, trusted central authority. It does not need to be a walled garden.

ILP does eliminate Herstatt risk because the XRP is actually guaranteed to be delivered to the recipient with the transaction. No insurance is necessary because the XRP only exists on the ledger, so there is no counterparty to fail to secure the underlying asset. You do need to hedge the risk of XRP value volatility. But I think an open system will beat a walled garden every time.

As for Swift having a natural advantage, I think they also have lots of natural disadvantages. They're not an innovation driven, agile company. Their stakeholders really have no reason to want to see Swift invest the kind of money it would take for them to build such a system when Ripple is already building it. Swift has nothing like XRP, so they have no way to get Ripple's revenue model. So we can justify spending a lot more than they can and our stakeholders are in for the high risks involved and don't mind disrupting the status quo in banking.

That said, I wouldn't say there's no validity to what he's saying. I've always conceded that Ripple is swinging for the fences, attempting to change the world in a radical way. The safe bet is always against that, but the smart bet ...

Not agreed that Ripple isn't direct competition against Swift. Swift cannot be seen without their connection with settlement partners. Their messages systems indeed is payments, but Swift also exists by a network of correspondent banks for settlement. Agreed that Ripple and interledger can add on their messages and just do the settlement part, but saying Swift is no direct competition is not exactly the truth ... But indeed they could (should) cooperate...

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