XRP – Explaining Stable Coin functionality enhancement


hello we’re let’s get started
I have no financial interests I have no sponsored links today’s topic
will be about the proposed stable coin feature David Charles made a video about
recently I will try to break it down in two ways I will try to break it down on
the technical level to see what it means technically on the xop ledger and also
try to take a look at the economical perspective why it’s important first off
there won’t be the XOR P stable coin what David Watts proposed is a
functionality enhancement on the extra P lecture which will provide many
different kind of stable coins being created for matter of simplicity let’s
go with the example that I will create the i pinky coin the I P C as this
stable coin feature is just a proposed functionality most terms or parameters
are subject to change slightly as example in his video David Schwartz
mentioned stable coin should be backed by 1.5 times the amount or the value in
X or P that could be subject to be changed however for the IPC I pinkie
coin let’s stick with that 1.5 x backing now let’s get into it I want to create
the IPC I want to issue $10,000 worth of IPC that will basically mean that I will
have to back kind of like put in escrow more or less $15,000 worth of X or P
that’s the backing or the collateral behind the IPC and here we touched the
first financial term already but many don’t quite understand collateral let me
explain it like that you need a loan or mortgage from your bank in order to buy
a house now the bank won’t give it to you just as such they want the security
in order for when you’re not being able to pay the rents the raids anymore that
they have something in hand and usually that’s the house itself so the house is
the collateral for the mortgage or the loan you will get so in case you do not
pay any more then the bank has a right to take the house and sell the house and
this is already very crucial to understand as with traditional stable
coins like Heather there is no way to check if the stable coin is actually
backed by the appropriate amount of US dollar however in that system because
it’s handled we had a distributed ledger technology
it can be enforced by the algorithms and that means that the that any of those
stable coins which may be created on the xop ledger have to be backed by a
certain amount of X or P and that backing will have a minimum which is
even slightly above the total value they which was proposed is 5% so that won’t
mean that you would need to back up 5% more in value of XP than you want to eat
you in the stable kind this is very crucial to understand the last point I
made because you will always be able to redeem X or P for the stable coin you
bought so the gap the value of the stable point is totally guaranteed
because there will always be a backing of the stable coin
so don’t forget that now we know that total amount of IPC is or will be backed
by an equivalent or higher amount of X or P being put into a hold kind of I
think they call it a position if I’m not wrong but where does the IPC get its
price from that will be the functionality of the price feed the
price feed will do the pegging between an asset and the stable coin so most
easy most typically a price feed made may pack the value of a such a stable
point to a fiat currency but it could be packed to anything to gold or stock as
well it just needs to be packed to something where that possible investors
on the xop ledger into this table coin will trust that’s the important thing
for simplicity I chose a stock which has a round figure so that my $10,000 worth
in IPC candy can be properly divided by I chose waterphone which is more or less
at 20 dollars that will allow me to issue 500 IPC to make a total value of
$10,000 so now we’re done with it we have implemented
the two technical cornerstones so that I can issue the IPC we have the backing
with an appropriate total value of x or P which in the example of daily charts
is 1.5 times higher than the total amount of in value of the stable Konami
showing I’m issuing $10,000 worth of IPC which means I need to collateralize with
X of P and the value of $15,000 and the second thing is the pegging I packed the
IPC to the share price of the vodafone share or stock which is at $20 currently
more or less which lets me issue 500 I P sees now with the guaranteed
collateralization we have two problems xop price may drop let’s take 50% that
means my $15,000 worth of X or P will drop to seven and a half thousand in
dollar in value which will not be enough to collateralize the hundred the $10,000
in IPC anymore the second problem which could arise the packed stock the
Vodafone stock increases a hundred percent from $20 to $40 which basically
would require more xop to be backed as a collateral than the existing $15,000 XOR
P minimum collateralized positions or under collateralized
positions may be taken over by any person who has an account on the xop
ledger who is willing to put the required additional XOR P as collateral
into the position that’s one solution to remedy the situation there’s two
possibilities our position or a stable coin can risk getting into a minimum or
under collateral as a collateralized situation one is the price of X of P
drops you can see that in the red marked cell with 20 cent assuming that the
current prices at $0.25 per X or P the second possibility could be that that
the asset I have my stable coin packed – in that case the Vodafone shares stock
soar that would be the second red marked cell where the waterphone stocks or from
$20 to $24 which basically means that we are under collateralized one solution to
rika lateralized properly is to pay down basically to take IPC out of the system
in that case 20% because the X of P price dropped 20% and water phone stock
price rose 20% and as you can see the numbers fit if I take out 20% of IPC all
of a sudden I’m properly collateralized again another possibility to Rika
lateralized the position is to put more X of P into the position an issuer of a
stable point in that coin in that situation me with the IPC
I have two possibilities to mitigate the situation the risk of X of P dropping in
price I could mitigate by going short on X or P which basically would give me the
return ones X of P drops in price in order to be able to buy more XP to wreak
electrolyze or I could go long on the water from stock so when the water phone
stock really goes high I could make the appropriate profit
I could go long on other options or the stock itself and thus I would I would
basically have the the additional cash at hand in order to buy enough X of P to
reek electrolyze properly this basically concludes the technical aspect of the
stable coin we now know what the collateral is X of P we know how the
pegging works to some trusted source with the external price feed and we also
know how we can mitigate the risk of our stable can be minimum collateralized or
under collateralized now let’s take a look at economical advantages of such
stable coins by adding this feature for stable coins on the X or P letter the
extra P asset itself will have properties of a store of value as the
appropriate amount of X or P always needs to be put kind of like in escrow
into the position of the stable coin being issued it also minimizes the
downward selling pressure due to the fact that X rapid basically or users
wanting to transmit to transact money cross borders they will not need to go
through the external exchanges anymore they can just do those trends
on the decks the decentralized exchange on the xop ledger this will for sure as
you may have guessed in the meantime reduce the circulating supply of X or P
and thus increase the price drastically it will be quasi a market place for
derivatives as the stable coins can be backed to anything it will bring utility
to the X of P decks the decentralized exchange on the xop ledger and last but
not least it drives on ledger liquidity it is also important to understand that
this feature will be made available for retail and institutional market for
retail there will be companies building interfaces for kyc and other legal and
compliance requirements banks on ripple net will be happy about that
additional functionality so they can hedge the X of P volatility which is
always what financial institutions are doing hatching meaning reducing the risk
of losing money that will now provide the traditional market products they’re
used to that will give them the bank’s more reasons to ultimate to ultimately
hold X of P and stable coins both to use for all types of purposes because
they’re complementary to each other final note this stable coin
functionality is way better than the currently known fiat backed stable coins
such as tether because the X of P ledger unique features of the decks
decentralized exchange and ripple funding the ecosystem
around it that makes it superior to all other currently known stable coins on
any other lecture

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