How xRapid Works..and Doesn't

Sep 24, 2018

Been pretty exciting this past week! Out of nowhere a massive doubling (almost triple at some point) of price! Hooray! XRP finally showing some nuts after months of depressing heart-wrenching catastrophic hanging-from-the-rafters bullshit! What does it all mean, where is it coming from? Is xRapid the cause? Is it PNC using Ripple? Is it because you're wearing your lucky socks?

Luckily for you (me), you found this blog (or I sent you here because you're the millionth person to ask me the same damn questions because nobody takes the time to review my endless tweets on this topic even though I cover this in enormous painstaking detail that would answer all your questions to your satisfaction with links and everything because I'm a professional). But before you read this, also be sure you've read this blog entry because it primes you for the concepts in here. And with certainty I'll be updating this blog post often to answer more questions that I didn't originally address, or to fix mistakes that I never make.

You've been hearing a lot about Ripple's wonderful product xRapid, but you're just not sure if what you're seeing with the price has anything to do with it? Well, for certain it was all speculative and NOT any real-world usage of xRapid. Besides the fact that xRapid still hasn't been released to the public, there are reliable ways to distinguish speculation from xRapid utility volume. I explain all, below, but first, let's open up xRapid a bit so we can better understand it.

To contrast against Ripple's other banking product xCurrent:


  • Used by banks (and other financial institutions) to send money from one country to another
  • Messaging layer over nostro'd funds.
  • Allows banks to quickly and cheaply settle pre-allocated funds globally.
  • Similar to but perfectly replaces the function of SWIFT.
  • Saves banks 30-40% over SWIFT


  • Also used by banks (and other financial institutions) to send money from one country to another
  • Uses XRP to settle between any form of two currencies, including other cryptos
  • Allows banks to quickly and cheaply settle globally, without pre-allocated funds
  • A completely different approach to cross-border transfers from how SWIFT does it.
  • Saves banks 40-70% over SWIFT

How does xRapid work? Simple. Let's say I'm a bank in Mexico, and I need to get money to a bank in India. The Mexican bank already has an account at a Mexican crypto exchange, and already has xRapid installed. Likewise, the Indian bank has an account at an Indian crypto exchange, and already has xRapid installed.

Step 1: The Mexican bank types into the xRapid interface:

  • The destination bank's exchange XRP address to receive funds,
  • some other bank-related details (name of destination bank, who ultimately gets the money, etc.),
  • and the amount to transfer.

Step 2: xRapid comes back with fees to perform this function. These fees are the total of:

  • Service charges paid to Ripple to use xRapid (no stats on this because they are tailored to the company and not disclosed)
  • Expected Mexican exchange costs from converting Mexican pesos to XRP (service fees, slippage based on the current state of order books, etc.). These costs get more expensive as the size of the transfer increases because the more money involved, the more price slippage on the exchanges
  • XRPL transaction fees (the burnt XRP)
  • Expected Indian exchange fees from converting XRP to Rupees. Same list as first exchange

Step 3: The Mexican bankers now decides if it makes more sense to use xRapid, or xCurrent, or SWIFT. Lots of parameters to consider:

  • Are the xRapid fees/costs going to be higher than SWIFT?
  • How fast does the transfer have to be?
  • How long does the bank want to be exposed to volatility?

It doesn't always make sense to use xRapid because if the price of XRP is too low, then the slippage will not make xRapid cost-effective, and the banks will revert to either xCurrent (if both banks are using it), or fall back to SWIFT if this transaction would be cheaper and fast 'enough'. IN NO CASES ARE THE BANKS GOING TO PAY ENORMOUS SLIPPAGE TO INCREASE THE PRICE OF XRP JUST TO BE ABLE TO SEND LARGE TRANSFERS!!! Beat that through your head. Even David Schwartz states growth will be slow and steady with small amounts to start. Banks are in the business to make money, not to make all us XRP-hodlers millionaires. I've seen endless references to the banks forcing the price of XRP up because they need to make larger transfers, but that's just not how it works. I'll explain more farther down.

Step 4: Let's say that the cost of using xRapid for this particular transaction makes sense. The Mexican bank hits the "GO!" button. At this time, Ripple collects its service charge (if applicable) just for using xRapid, unrelated to the transfer fees.

Step 5: xRapid instantly automatically instructs the Mexican exchange to purchase the appropriate amount of XRP using the Pesos the bank already has on the exchange. Within a few moments, up to a minute or so, the bank now owns XRP, and the Mexican exchange has made its fees. This purchase contributes to the overall market volume that we all see here.

Step 6: xRapid now instructs the Mexican exchange to send these XRP to the Indian bank's Indian exchange XRP address, in India, where Indians live. Very important to understand that this is nothing more than a transaction on the XRP ledger (XRPL) from one address to another, which happens in 3-4 seconds, and costs nearly nothing in burn fees; though the exchanges may impose other withdrawal/deposit fees. This step shows up in the Ripple Payments chart here

Step 7: The Indian exchange receives the XRP and credits it to the Indian bank's exchange account (minus possible deposit fees)

Step 8: xRapid at the Indian bank senses that deposit, and now automatically instructs the Indian exchange to sell that XRP for Rupees, minus exchange fees.

Done! In just a few minutes from start to finish, the Indian bank now has the Rupees under its control in the Indian exchange's custodian facility and the transfer is considered settled, so the Indian bank is able to pay creditors or customers knowing they have those funds secured (no more counterparty risk). Notice during this process that TWO exchanges were involved, for the two conversions (Pesos -> XRP, and XRP -> Rupees), and that the XRP ledger was hit only ONCE when the actual 'value was moved' from Mexico to India.

Having said all of this, another alternative is for these banks to source their XRP from third party liquidity providers instead of exchanges. Fundamentally, everything works the same as if they were exchanges, but the XRP purchases/sales made with LPs do not show up as volume in the markets, only the XRP Ledger sees it, and this is very important; ALL xRapid transfers ALWAYS hit the ledger, even if they don't hit the markets right away.

LPs are expected to come online as bank demand for XRP increases. And even though they don't directly contribute to XRP market volume, they still increase overall demand for XRP, and that XRP will eventually come from the exchanges at some point, so it actually has a latent effect on increasing the volume, and hence demand, and hence price, and hence lambo.

What can we expect with the price? There are now two parts to the price of XRP:

  1. Speculation - This is the value added to XRP by speculators. They are either reacting to good news (FOMO), like the pending release of xRapid, or PNC Bank joining RippleNet, or defecting from Bitcoin (shitcoin?) because of a major bug discovery, etc. And it can also be value 'removed' from the price because of some bullTushar FUD.

  2. Utility - This is the value added to XRP by xRapid, and other examples, such as Coil's web monetization, or WietseWinds TipBot, and of course any other purchases that are made with XRP in any form.

We all know that speculation makes the damn price go crazy, like some goddam monkey frenetically bouncing around with no rhyme or reason, as all bullshit TA artisans could attest to that (if they had one ounce of humility to be honest about it). Whales manipulate the crap out of XRP, and we often see XRP moving in tandem with all the other coins, particularly when there's low trading volume.

It is clear XRP's price is nearly 100% speculative valuation at the time of writing this, which also means there's very little utility pricing. It is possible for XRP to go to near zero in value in a purely speculative environment. How can we tell what is speculative versus utility? Well, very easily.

  1. Speculation Transactions - mostly shows up in the markets, but not on the XRPL. When you buy and sell on the markets, you're not really hitting the XRP ledger, you're just trading in a virtual environment on the market, so of course you'll not see your trades in the ledger, and this is a good thing because we don't want to flood the XRPL with all these millions of trades; that wouldn't make any sense. This type of activity can be seen on typical sites like CoinMarketCap and LiveCoinWatch. This kind of activity will NOT reflect in the next point...

  2. Utility Transactions (Payments) - these are actual movements of XRP on the XRP Ledger, which can be seen on the Payments chart at Ripple's excellent chart site

One very important aspect to understand about xRapid that's unique to it, is that xRapid drives BOTH market AND ledger transactions, in a ratio of 2 to 1 because there's two exchange transactions and one ledger transaction for every xRapid transfer. In this way, it's possible to figure out approximately how much of the current price of XRP is due to speculation, or utility.

The easiest way to see this is by comparing the first and third figure shown on this page (total market exchange volume versus total ledger volume). This will suffice for now, but as further XRP adoption takes hold in other business sectors, the ledger volume should outstrip market volume, but we're a very long ways from that yet. By comparing these two figures, you can easily determine how much speculation versus utility there is. If the market volume is far greater than the ledger volume, THEN IT'S NOT XRAPID DRIVING THE PRICE!! WHY AM I YELLING?!!

What does this all mean for the price of XRP?

To make things a bit easier to understand, let's use an elevating platform analogy: today, we are on the BOTTOM FLOOR, meaning the price can actually touch zero, and the idiot speculation monkey is bouncing like crazy on the platform, randomly influencing the price of XRP. So it's the combined height of the platform and the idiot monkey bouncing on that platform that determines the price of XRP at any given moment. Sometimes the monkey jumps high into the air (pump), and sometimes that monkey gets a royal slap-down from a whale, and he just lies there on the platform, near death (dump).

Now that utility is about to come on board, that 'floor' will rise, very slowly, but surely. We can't get rid of that goddam speculative monkey that keeps the price volatile, but the monkey cannot go through the floor as it rises. As further xRapid adoption continues, the floor will accelerate some, going up faster than before. The monkey will continue the pumps and dumps, but the rising floor will guarantee at least a minimum value, and it's this value you should be paying attention to. Betting on the monkey is senseless, but betting on the rising floor, is smart money.

Hopefully you can understand now that xRAPID UTILITY USAGE WILL NOT MOONSHOT XRP OVERNIGHT!!! Sure, there may be some massive FOMO buy-in once banks announce they are starting to use xRapid, and that will send the monkey hundreds of feet into the air, but, only speculation creates parabolics, and what monkeys go up...must come down. The XRP speculation monkey can't fly. There is NOT trillions of dollars parked on the sidelines waiting for the xRapid gates to open, that's just not how businesses work. FIs will pick at xRapid, tease it, roll it around in their mouths, and eventually mount it and give it the business, but that will take time to build to that comfort level, so forget about the platform launching to the moon. It's a slow, steady, but accelerating process.

There is however, an interesting synergy between the monkey and the rising utility platform. As demonstrated earlier, xRapid transaction size is limited by slippage costs. If the price of XRP is too low, it reduces the practical size of the possible xRapid transfers. But when speculators drive the monkey part of the price up, now it becomes possible for larger xRapid transactions to occur. In other words, the speculator monkey can help lift the platform, as if the monkey was attached to the platform by a bungee cord. When it jumps high into the air, it pulls on the bungee and ever-so-slightly raises the utility platform to new heights of stability.

I know it's starting slowly, but it's going to pick up speed over time, and it will just keep going up. There are very few things that could stop or reverse the platform, like competition, or abusive regulation, but these hurdles seem inconsequential at this time so at least for the short term, that platform will do its thing and provide a nice foundation for XRP's value, no matter what the monkey is doing on top of it.

The ride up has begun, be glad you got on on the ground floor. Sure, it's never as fast as we'd like it, but I'd take a slowly rising platform over betting on the monkey any day. Don't ask me about price predictions please, it's all a guess at this point; just know it will get better. To quote-mine Stefan Thomas (citation requested, I can't find that video again) regarding how much higher XRP must be to effectively service cross-border transfers, he said, "orders of magnitude higher". So forget about the volatility, find something to preoccupy you for the next few years while this investment bakes, and for Christ's sake wash those socks.

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