The Bionic XRP

Nov 23, 2019

It's a bird! It's a plane!'s... SUPER DUPER MEGA ULTRA...SUPER...THE GREATEST...XRP LEDGER!! HOOORAY!!! It can cure world hunger, stop bullets with its face, make everyone billionaires overnight, and just about anything at all better than anything. Superman looks like a raging fecalpheliac compared to SUPER XRP!!!...

If this is how your head works, goddam you people are annoying.

This is about how crazy XRP Fever has gotten. Massive disconnect from reality. Why? Because stupid people apply the concept of 'blind faith' into every aspect of their lives and don't even try to understand how the tech works. OK, it's not easy to understand, I get that, but if you don't understand something, you can't very well have an opinion on its technical abilities right? Sorry, that was logic again, I know you hate it, not as much as it hates you though.

Let's go back in time a bit. It wasn't so long ago that a few people got together to create a massively improved blockchain over Bitcoin (I swear this isn't another Bitcoin-bashing blog), with the primary objective of servicing encumbered payment corridors. That's it. Out of that was born the XRP ledger. It's 187 times more transactions per second (many payments per block), hundreds times faster to settle (short block time closings), disturbingly cheaper, and remarkably more secure than Bitcoin even with far fewer nodes.

With these modest and achievable ambitions, Ripple wrapped XRP in their product line, and we are all currently witnessing XRP's progress along the path to these goals. Having said that, there seems to be an 'army' of slobbering hopium maniacs that have somehow successfully twisted and contorted the reality of XRP into a reverberating echo chamber of hysterical cray-cray theories and extrapolations that are a downright insult to anyone that spends 5 minutes trying to understand the technology.

I recognize that some of these people are aware of their purposeful FOMO misinformation dissemination in the attempt to garner readers\followers\subscribers for monetary gains, and they're easily dismissed in a flick of blocking, but there are so many more people that are just looking blindly into the sun and swearing they see leprechauns.

Here's a long list of cray-cray ideas that just keep circulating:

XRP will be the only remaining coin in existence some day

Whut? Based on what exactly? Where in the entire history of anything has there ever been just one currency? Different currencies do different things better than others, and there will always be interested groups that want their own currency. I know it's easy to look at the thousands of coins out there and say that most of them will go to zero, and you'd be right, but then there's the remaining bunch that all have earned their right to exist, and even then, more thousands of coins will keep coming, over and over and over, and the best will continue to surface to the top. So instead of saying there can only be one, try saying, only the best coins will survive. Bitcoin is garbage and won't make it ok I'm done.

XRP will replace fiat

Sovereign money isn't going anywhere. It may become purely digital (CBDCs, which will be centralized, not to be confused with third-party stablecoins), but governments need to control production of their money, otherwise they can't predictably spend money, which they need to in order to operate effectively.

Anarchists (really dumb people, akin to flat-Earthers) would have you believe that with a stateless currency, we can self-organize and not need a government, but what they don't get is that if we eliminated the government and attempted to self-organize, we'd eventually end up recreating the fucking government!

That's literally what self-organization means. It doesn't mean that there's no law, no leadership, no taxes; I mean, most people are complete assholes, right? How does one operate without a governing body to keep people in check? If anarchists really think we can all live peacefully as neighbors and yet leave fucking dog-shit on my lawn without getting axe-murdered, they're going to find out pretty quickly that they want that state-sponsored police option; maybe a SWAT team too depending on the size of their dog.

The government isn't some mafia that just forced its way into power over the civilization, no, civilization organized the government mafia! I don't like inefficient bloated government bullshit any more than the next guy, but if I have to put up with the government, versus some warlord dictator plundering my country and enslaving my supposed daughters I've never met, I'd rather begrudgingly pay my taxes, thank you. (P.S. If we dissolve into anarchy, I will be your dictator, careful what you wish for)

XRP will be used by everyone for everything

It's amazing to me that the shortcomings of Bitcoin are (now) so painfully obvious, and we spend a good amount of time mocking those dickheads that really believe that Bitcoin will some day be a global currency, and yet, XRP, with only a couple orders of magnitude more transaction throughput than Bitcoin, suddenly is now a candidate for global retail? Huh?? Jesus people, I mean, it's not even 200 times more transactions per second (TPS) than Bitcoin. So let's do some simple math. If Bitcoin can't even get out of the gate at 7-10 TPS (still makes me laugh ok I'm done), rendering it completely useless as a global currency, do you really think 200 times more TPS is going to fix that??

Ok, Let's look at it another way. There are many stats surrounding the Visa network capacity, but apparently 65K tps is their capacity, and many make the counterargument that generally they are nowhere near that in day-to-day transactions, BUT, ask yourself, why do they need 65K then? They didn't just randomly pick that number, no, they are building for 'peak load', and for 'future growth'. It stands to reason that to parallel the function of Visa, you'd need to match their system capacity right? (fucking logic again!)

So let's compare, Visa 65K TPS capacity; XRP 1.5K TPS. Whaa whaaa.. Destroyed. And that's just Visa. Cash is still king, particularly in lesser developed countries. Needless to say, to scale up to the world stage, we'd need to support potentially hundreds of thousands (millions?) of transactions per second.

That of course, also leads to Jevons Paradox, which again amplifies the demand on the transactions. You can't look at today's global transaction rate and imagine it in a blockchain world. No, blockchain will enable many more opportunities for transactions to occur, like there are exponentially more emails today than there ever could be if they were paper mail.

And I haven't even brought up the previously impossible but now possible micropayments ecosystem. Micropayments have already proven to be a dominant force in the consumption of ledger transactions, even with only a few use cases currently in action. What's going to happen when every goddam piece of technology in the world wants to send micropayments through the Internet of Things (IoT)? I even had to use a separate scale on this chart to be able to fit the number of micropayments transactions because it so dwarfs everything else.

OH, and the best for last. I completely understand why Ripple embedded a decentralized exchange into the XRP ledger (allowing for atomic swaps), but it comes at the cost of even MORE consumed transactions. Businesses are already starting to glob onto the idea that they can use the decentralized ledger for their own industry, consuming ledger transactions with almost no benefit to XRP. That's right every trade-related transaction made on the ledger also consumes some of the maximum transaction rate.

1500 TPS is a joke. It will NEVER be REMOTELY enough to service all the above at a global scale. Not in your wildest dreams.

But but but...XRP is supposed to be 50k TPS! No wait 70k TPS! no wait, TRILLIONS!! HA HA HA!!

Two concepts:

  1. On-ledger payments: These are payments that are settled instantly in the actual ledger, and can be made from anyone to anyone with no preconditions. These types of transactions are limited to the theoretical 1500 TPS that you keep hearing about. Also, all decentralized trade and IOU transactions are on-ledger.

  2. Paychans (off-ledger) payments: These are XRP payments that are facilitated via a prefunded exclusively two-party channel. Because these channels don't impact the ledger, payments made through these channels can be as fast as the two parties can communicate. Very very fast. Often you'll see reference to 50k TPS per channel. And theoretically since there is no limit to the number of channels, the sum aggregate of paychan transactions around the world could amount to trillions of transactions per second, woohoo!! SEE!! IT'S UNSTOPPABLE!! HA HA HA!!

Wait wait, pull your hand out of your underwear. Paychans don't really solve the scaling issue. First of all, the context of the payments will dictate whether it's even possible to use paychans. If it looks like one person/company will be making relatively frequent payments to another person/company, then yes, set up a paychan, and make those payments off-ledger.

Where paychans don't make sense is in a few scenarios:

  • Where prefunding isn't an option, such as if the sender doesn't get the funds until they need to send it.

  • Where the sender can't afford to open a prefunded paychan for every single entity it wants to conduct business with

  • Where payments would be infrequent, resulting in more paychan-setup/settlement transactions than payments

  • Where payments would be at most one or two times (like P2P, or retail at a store), hitting the ledger the same number of times as setting up a paychan anyways

And finally, paychans STILL hit the ledger when they are settled! Nobody really has been paid until settlement, so it's unlikely most paychans would remain open for very long, people got to get paid for reals! In other words, millions of paychans still result in millions of on-ledger transactions, consuming their share of the 1500 TPS.

So yes, paychans will artificially inflate the real-world throughput of the XRP ledger, far beyond 1500 TPS. Will it get to Visa's 65K? Will it keep up with Jevons Paradox? Will it apply to enough use cases that most transactions happen off-ledger? I have zero confidence that paychans will significantly extend the scalability of the ledger to the global stage.

Ironically, I can right now give a solid serendipitous example for why. As of this writing, the XRP ledger is under spam attack. Harmless enough, but the ledger is already at 13% capacity. I repeat: the ledger, under attack by one pathetic loser, ONE, has been pushed to 13% capacity. I'm sorry, world currency? huh? Wake the fuck up people. 1500 TPS is nothing, and paychans aren't going to solve anything.

Before you go jump out a window, I want to reiterate the harmless aspect of the 'spam' attack. Sure there is a ton of nonsense transactions, but these jerkoffs are paying for each of those transactions. Their intent is to seek out weaknesses in the ledger, which aren't surfacing, so if anything, this attack is proving to the world that the ledger is indestructible and that spamming the ledger is just a waste of the asshole attackers money and inherently self-defeating. Everybody have a good laugh at them. L O L jerkoffs.

So what is the fallout if we hit 1500 TPS? Is it the end of XRP? Is it the end of the world? Glad you asked. It means a few things:

  1. Fees will increase from inconsequential, rapidly to consequential. People have to compete to have their payments go through and much like Bitcoin, fees will rise to match demand.

  2. Micropayments will get slaughtered. Their entire business model depends on microscopic fees. For any duration where the ledger is full and fees are potentially higher than the micropayments themselves, well, not a very profitable business at that point. I even expect it will be competing micropayments use-cases that fill the ledger and beat each other up long before larger payments ramp up.

  3. Delays will mount, particularly for those payments that aren't willing to pay competitive fees and are willing to wait for natural lulls in the transaction rate.

  4. Competing coins will suddenly become more desirable, much like XRP became more desirable than Bitcoin because of cheap fees.

This all sums into one result, the 1500 TPS creates a hard line for further adoption. Sure, if people are willing to wait, or pay more fees, it will work just fine, but it's at this point that the XRP ledger will be pushing back. 1500 TPS is a hard ceiling.

Sounds so dire right? But it's the same for every coin. Let me just throw a bit of comfort your way. If we ever get to sustained 1500 TPS and more (not by attack, but by utility volume), your little bag of XRP will be worth a lot more than the 26 fucking cents it is today. Yes, I gave a very vague non-committal prediction there.

Scaling, and I mean true infinite global scaling, can only be had by sharding. Sharding is the simple concept of breaking the blockchain into segments so that when you make a payment, not every single validator is involved. So instead of 1000 validators that all cross-talk for a million transactions, now you have 2000 validators, split into 1000-validator chunks that handle 500,000 transactions apiece. Same level of security, but the rate of consensus goes up with every new chunk of validators. Sounds simple but it's a monster to make reliable, though I do have confidence that when the time comes, XRP can evolve to achieve this.

That said, ANY coin can evolve to achieve global scalability (yes, even BTC, if you can convince all the miners to take a pay cut, pffft..ok I'm done). There's nothing about XRP's current state that affords it any advantage whatsoever to achieve this level of scaling before or over any other coin. There are even coins already out there that purport to scale in this fashion (with what compromises, who knows?), but what I'm getting at is that the discussion of XRP as it exists today, to become a global currency, is premature and has NOTHING to do with its current/future success or popularity. The technical barriers to this possibility MUST BE surmounted before it can become a reality. XRP today is in no way leading the race to global scalability.

Won't Cobalt solve all of XRP's problems?

Cobalt has become something of a miracle drug. No, Cobalt is not the XRP panacea. Cobalt was mostly a security upgrade for the XRP ledger, safely allowing for less UNL overlap between validators, though the original designs for Cobalt have been distilled down into a mere XRP ledger update and is no longer a massive upgrade.

The idea that Cobalt could radically improve the speed of XRP is a misunderstanding. The original Cobalt design allowed for a transaction processor that could be somewhat faster (like Aardvark), but at best it may have doubled the throughput. The real transaction bottleneck is mostly due to the 'crosstalk' required between all the validators in order to come to consensus. In other words, it takes time for the validators to talk to each other, and no matter how fast each individual computer could process transactions in a silo, that communication must still happen.

To really highlight this point, if there was only a single validator on a massive Internet pipe, it could probably process hundreds of thousands of transactions per seconds (at the cost of decentralization of course). So it's not the ledger that's the slow part, nor the validators' computers, it's the communications between all the validators that takes time, and that's not easy to radically speed up over the Internet. The ceiling is created by the network of globally disparate validators needing to constantly talk to each other, so there's no software solution to this.

It's also been thought that Cobalt addresses the pending Quantum Computing threat, but Cobalt does nothing to address this at all. There is an expected 5-10 year window before they believe this could be a real threat. Furthermore, it will be next to impossible to upgrade the XRP ledger to be Quantum Resistant (QR) instantly for everyone because everyone would have to migrate their coins simultaneously to the new platform, which would be impossible to coordinate.

Any upgrade they do to achieve QR would require an entirely new technology that isn't compatible with the existing one. Therefore, until someone actively moves their XRP into a new QR XRP address, they remain exposed to the threat. Sure, most people would move their money, but there will always be those that didn't do it in time and got their coins snatched by China (is that racist?)(Ok, I meant Russia. No, Iran.. North Korea..)

You may be thinking to yourself, "well, why don't they just move my XRP into a QR safe address for me?". Think about it. How would you get those funds with your current unsafe keys? It's not like they know you and can email you to remind you to update your keys to QR-keys. It's because you have the unsafe keys that the requirement to move to QR-safe addresses falls upon you, and the transition will be sloppy and full of pain for some. Many stragglers might lose everything.

XRP will be the global reserve currency

Miguel Vias once stated something to the effect that he'd like to see XRP become the globe's reserve currency, but I think his statement, "A digital asset may well be included in baskets of world reserve currencies in the years to come" is much clearer. He's stating quite clearly that there will be multiple reserve currencies, and was subtexting that XRP may be one of those.

The term reserve currency is very loaded, more from the implications than the lack of clear definition. The 'implications' that seem to create moonbabies every minute, is the notion that XRP will replace the US Dollar as the globe's most prominent reserve currency. It won't. It actually can't, for the technical reasons of scale that I've been going on about for the last mile of text, but for even more lucid reasons that I'll point out below.

A reserve currency is the currency that both parties during an exchange will mutually agree to a value for. The US Dollar currently serves this purpose nicely, but it's also a sovereign currency, which makes it rather contentious (Triffin Dilemma) in trying to serve both functions. This makes the idea of a non-sovereign currency particularly enticing as a reserve currency for the purposes of exchange.

Enter XRP. Why this works well for XRP is the idea that ODL removes the need to stockpile XRP. This is the future of liquidity. No longer will value-transmitters need to have their own liquidity to send value, the notion of ODL has detached liquidity provisioning into specialized entities, not unlike the role of correspondent banks.

As for Miguel's allusion to a 'basket' of reserve currencies. Let's just play with the idea that he could've meant SDRs. As they stand today, SDRs can only host true sovereign currencies. SDRs will be deprecated by evolving IMF strategies, such as the inevitable walled-garden IMFCoin.

XRP, majority owned by Ripple, and the ledger controlled by a cluster of validators with the ability to vote in any manner that may or may not represent the interests of the IMF, will NEVER be part of the IMF strategy. I know, I know, you've seen Christine Lagarde and Brad making out in the bathroom stall, fine. That doesn't mean anything. Brad's just providing consultancy services (maybe some tongue action) for the IMF and taking advantage of photo ops for marketing purposes (I photoshopped "eat me Jed" on his head).

Then there's also this notion of 'foreign reserves'. This is the biggie, and I think this is where most hopium junkies take Miguel's intent. Imagine countries stockpiling billions of dollars of XRP! OMG, it's the wettest XRP wet dream imaginable.

Not going to happen.

Already told you why. Do you really think some country is going to pour billions of dollars into something that say a hundred validators might suddenly decide and vote they're not entitled to for whatever reason? Said another way, governments won't trust anything they can't threaten with nukes.

So what the fuck did Miguel mean by digital currency (XRP?) in a basket? I too firmly believe that digital currencies will become part of these SDR-esque products, and will also be stockpiled by governments, but they will be CBDCs and IMF coins, not private majority-held privately-governanced public coins like XRP. It's an absurd risk these governing bodies will not indulge in.

So you think Ripple will just give all their XRP to the IMF? wha..wha...huh? Seriously? Why? Give me one fucking rational reason why they would do that? Why doesn't Bill Gates give his money to the IMF then? How about Warren Buffet? Ripple is not a non-profit, they are for profit. Giving their warchest away SERVES THEM NO PURPOSE! It just shuts them down. And even if they did this, it still doesn't address the issue that the validators would be in control, and XRP still doesn't scale to the globe, so the IMF STILL wouldn't use it. Let me slap that tinhat off your head..

Forced to take his statement point blank, maybe he did believe XRP could achieve US Dollar reserve status and be stockpiled in the billions by countries and rolled into SDRs. Nah, nobody's that delusional.

XRP will bring down the financial system

More anarchist horseshit. People that think this believe that the entire function of a bank is a bank account, so the mere act of keeping your life savings in your crypto wallet means the banks now have no purpose. Trust me, the financial system will evolve to embrace these blockchain technologies. The ultimate denominator of insatiable greed will forever permeate into all aspects of value and so even if we close the brick-and-mortar banks, stay tuned for their digital doppelgangers. If anything, it will become more insidious and trapping. You haven't seen the worst of humanity yet.

Countries will issue CBDCs on the XRP ledger

Never. Not ever. Like so ridiculous, it hurts to have to explain it.

Like any coin, if enough incentive exists, the immutability of the blockchain can be overruled. XRP is no exception. Validators are gods, and if they decide together on making a change, they can do whatever they want, for e.g.:

-Remove Ripple's escrow

-Change/censor accounts

-Destroy the blockchain

There's no govt in the WORLD that's going to issue their currency on the XRP ledger, leaving them exposed to the potential collaboration of the validators to impose sanctions/controls over their currency. For example, if China decided to officially issue currency on the XRP Ledger, the validators could quite easily decide to punish China for human rights abuses and lock up their money. That's not inconceivable at all. No country is going to give control of their money to the validators so just stop with the nonsense.

CBDCs do NOT require decentralization in order to be trusted. That's the difference between crypto and fiat. Fiat is backed by the government, and rather than deal with the limited scaling and complexity of decentralization, governments will just simply issue coins from a centralized database where scaling isn't an issue.

Company A uses Product Blah, and company B uses Product Blah, so A must use B, blah blah

Corda Settler does not allow Swift to use XRP. Companies use Corda Settler to choose between using Swift OR XRP. Corda Settler is the soda machine, Swift is Coke, and XRP is Pepsi. Saying Swift can use XRP via Settler is like saying Coke can use the vending machine to sell Pepsi. I will insta-block anyone that even mentions Swift using XRP via Settler. If you don't take the time to research before you debate, then you don't deserve people's time.

There are two XRP ledgers, one for retail and a private one for banks

There is some bizarre conspiracy theory circulating that the banks are working with a different PRIVATE XRP ledger that has a totally different price than the retail XRP price we see. People actually believe this is how the banks are getting into XRP on the inside so only they get to benefit from the price increase and the retail XRP will never go up. The rich stay rich! It's all RIGGED!

No, this is just another whackadoodle tinhat rationalization for why the price isn't going up. Direct questions to David Schwartz haven't produced exceptionally clear answers, so let me help you understand. First, he says, "The authoritative record of who has what XRP is the XRP Ledger". Simply put, there is only one XRP ledger, the public ledger, clarified by his continued statement, "There are ways that you can use real XRP on the private ledgers but that would require operators of the private ledgers to get XRP from somewhere in order to do the bridging". Read that very carefully. He's not saying there is a private XRP ledger, he's saying XRP CAN BE USED on other private ledgers, not unlike how BTC IOUs are being used on the XRP ledger. He's also saying that the XRP must come from THE PUBLIC LEDGER, which means that of course it has the same price, because it's the one and only XRP! It doesn't change price because it gets roped onto another ledger, any more than BTC IOUs are a different price on the XRP Ledger than anywhere else.

Couldn't they back XRP with gold to drive the price up?

The confusion surrounding this never-ending meme stems from the failure to grasp that assets can only be one of two types:

  1. Backed. An example of a backed asset is paper money, coupons, bearer bonds, etc. If a coin is backed, that means the price is guaranteed by a third party to match whatever it is backed by. A gold-backed coin means that the price of the coin is tied to match the price of gold. Essentially the coin is a coupon for a specific weight of gold.

  2. Self-valued. An example of a self-valued asset is gold, or platinum, or Bitcoin, or XRP. A coin that is self-valued isn't backed by anything, it is simply valuable in and of itself. It directly serves the function of an asset, it's not a coupon. Its price is determined by what people are willing to pay for it.

I hope it's self-evident that a coin can't be both backed and self-valued at the same time, but if it's not, let me put it this way, when you sell something, you have to decide what it's worth. If it is backed by gold at $5, and self-valued at 25 cents, what does that mean? How much is it worth? That's right, it can't be worth both 25 cents and $5 at the same time, so it's either backed OR self-valued.

XRP is self-valued, as we witness every day as the whales beat the shit out of the price in the mindnumbing slog of this bear market. Many people get the crazy idea in their heads that, "hey, let's just back it with gold, and all our problems go away!". No, stop. Listen to me. You are confusing the idea of 'propping' with 'backing'. Closely related, but propping is just the temporary strategic price-fixing caused by someone making buy walls (paid for with gold?), versus backing which is someone making buy sell walls to control the price so it stays commensurate with what is backing it. The difference between the two is the motivation. Propping is for profit, backing is for pegging. Make sense?

Now, when most people talk about backing XRP with gold, they're actually thinking of 'propping' it with someone's massive sales of gold, which is ridiculous because who the hell wants to prop up the price of XRP by selling all their gold? What could possibly be their motivation?

True backing of XRP with gold isn't feasible, for the reason I already outlined, XRP can't both be backed and self-valued. Not to say it can't convert from self-valued TO backed, but you have to ask yourself, why? Why the fuck would some company want to bear the responsibility of pegging XRP to gold? I know some people think that this would skyrocket the value, so play this out with me, two scenarios:

  1. XRP is pegged to gold at the current price. Let's just say they peg XRP to 5 mg of gold so the current price of XRP matches. Fine. Now in order for XRP to become more valuable, gold has to go up, right? Remember, now XRP is a gold-backed coin, so the value comes from gold. If people start overbidding the price of XRP, the backer will be forced to sell their XRP to bring the price back down so it stays locked to gold. This means if we want profit, we'd have to wait for gold to double, triple, etc, to make any money. Gold has never moved like crypto. Do you really want to be tied to gold instead of the free-floating XRP?

  2. The other scenario is that someone decides to guarantee that XRP is worth $10 worth of gold. The very first thing I'm going to do is sell every goddam XRP I have and build a rocket to go live on my moonbase. Thank you sucker gold-bug, thank you mathematically illiterate traders, fuck you grade-school teachers that said I'd never make anything of myself, etc.

Not going to happen. My teachers were never wrong. Nobody is going to give money away for free, particularly investors.

People are obsessed with the idea that a radical price change can happen, and are quite creative in blurring lines of logic in order to see that which isn't there. No gold-bug in the universe is going to suddenly decide, "hey, I want to give all my gold away, so I'm going to randomly back XRP with gold at $10 so all these tinhat turds can cash me out to buy lambos."

If there's one takeaway from the massively exhausting blog, please let it be this: The market is just a machine to confuse and deceive you into thinking there's more money out there than there really is. All the money you will ever make comes from other people, the machine doesn't create any of it. Therefore, the idea that the price can pump to ridiculous highs and everyone gets rich, completely loses sight of the fact that that money needs to come from somewhere! The ONLY way to get more money out of this market, is to wait till more comes into it.

I know so many of you are going to think this is an XRP FUD piece, but that's because you're an idiot. I've never been so optimistic in my life about XRP, and nothing about the path the XRP has taken has either surprised or disappointed me. Why? Because at no time did I ever pull a magic wand out of my ass and cast a unicorn spell on poor XRP. I stayed on Earth, and Ripple/XRP is right on track. Not being planted on Earth just leads to tears and resentment.

Once utility gets a stronger foothold, we should see some price correlation, but because we don't currently have enough utility, the price is still firmly in the control of the whales that continue to rape the markets. Don't believe the price, don't believe the hype. XRP is but a fucking bridge currency with real-world limitations, not some supernatural sex toy to give you endless POs.

Ahh.. I'm about to gorge on a glorious steak while watching some random chick flick. Looks like we'll both be crying tonight.

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