Universal Reserve Asset

[PatrickLRiley]

Proposed Amendment for XRP Ledger: Universal Reserve Asset

Title: Universal Reserve Asset
Type: Draft
Author: Patrick L Riley, Quantum Financial Systems LLC
Affiliations: Quantum Financial Systems, Reaper Financial, Ascension Index, Ark Institute, PiLLARS, BOX Media

Abstract

This amendment proposes the establishment of a Universal Reserve Asset feature on the XRP Ledger. The amendment suggests that 1% of the volume of all XRP transactions paired with any other asset be automatically allocated to a reserve XRP wallet. This wallet would serve as a stability mechanism, maintaining a minimum floor value for paired assets and ensuring that no asset can go to zero against XRP. This reserve allocation and mechanism is to be managed automatically within the ledger to accomplish true decentralization.

Proposal Details

1. Reserve Allocation Mechanism:

   • A reserve of 1% from the volume of every transaction between XRP and any other asset will be allocated to an XRP reserve wallet in support of the paired asset.
   • For instance, in the case of a daily volume of $100 billion in BTC/XRP or XRP/BTC, $1 billion worth of XRP will be added to the reserve wallet.
   • This reserve wallet will automatically create a limit order in the reserve wallet to support a floor price for paired assets, which is calculated as the entire supply of BTC divided by the XRP balance reserve for the pairing.

2. Reserve Wallet Characteristics:

   • Access to the reserve wallet is not available to any party. XRP from the reserve can only be retrieved through limit order fulfillment in the specified pairing.
   • Any paired asset sold into the reserve wallet for XRP will be automatically burnt, thus preserving the floor value of the asset in XRP.

3. Floor Price Enforcement:

   • The reserve mechanism ensures that no asset paired with XRP can decline below a value determined by the reserve wallet, creating a minimum viable value for any asset traded against XRP.

Advantages

1. XRP as a Permissionless Reserve Asset:

   • This amendment will position XRP as a decentralized reserve asset for any pairings within the XRP Ledger, without requiring permissions or third-party involvement.

2. Inherent Floor Value for XRP-Paired Assets:

   • All assets paired with XRP gain a minimum floor price based on prior volume which continually grows with additional volume, ensuring even the most volatile assets retain a baseline value against XRP, mitigating the risk of any paired asset going to zero.

3. Increased XRP Demand and Price Elasticity:

   • By reserving a portion of XRP for each pairing, the amendment introduces supply pressure, potentially driving up the demand and price elasticity of XRP in the market. This means that everything added to the ledger has an immediate and measurable impact on the value of XRP.

4. Neutral Ownership and Minimum Liquidity:

   • The liquidity created through the reserve mechanism is not controlled by any single entity. The minimum liquidity pool for each pair is neutral and can only be tapped through asset burning, promoting decentralized financial stability.

5. XRP as a Decentralized Global Reserve:

   • With this mechanism, XRP can act as a universal reserve asset, decentralizing reserve power and potentially supporting any digital or fiat-backed stablecoin, CBDC, or other assets on the ledger without relying on government or Ripple Labs to position accordingly.

Conclusion

The Universal Reserve Asset amendment will empower XRP as a global reserve currency, leveraging automated on-ledger mechanisms to bolster asset value stability across all XRP pairings and foster a decentralized financial ecosystem. This amendment is a proactive approach towards XRP's potential to serve as a world reserve asset, unbound by traditional central banking systems.

[xVet]

How can an account where xrp is being sent on every transaction help with token price stability?

[PatrickLRiley]

The wallet would be tasked to setting limit buy orders of XRP for Asset B where the price is the balance of the wallet divided by the total supply of the opposing asset. This means that all assets traded against XRP would always have a minimum value in XRP which would grow relative to the adoption of Asset B. XRP adoption would grow as well by being the reserve currency of all pairings and by increasing scarcity and demand. I.e. the Bakkes pipeline flow model mixed with the https://xrpillars.com/ PiLLAR Fund, but automated to support any asset that interacts with XRP.

[Briandavidbrown1983]

This amendment is a bold move toward positioning XRP as a universal reserve asset with built-in decentralized mechanisms for stability. By embedding a 1% transaction-based reserve allocation, it could encourage long-term stability and wider adoption of XRP, both as a currency and as a foundation for other assets on the XRPL. The amendment’s decentralization and liquidity assurances might make XRP an appealing asset for both retail and institutional users, fostering a resilient ecosystem on the XRPL.

[mvadari]

Removing the XLS as this is a pre-standard proposal, and only standard proposals have XLS designation and numbers.

[PatrickLRiley]

Thanks

[Island-Ghost]

Great start. Would love to see a demo on test net💗. I will share this and hopefully get some constructive input. And some helpful devs that have been aski g me how or when something like this will be available. Thank you.

[dangell7]

It would need to continuously set limit orders much like a algorithmic stable coin with the price of the asset to stay consistent with the market. While this is possible this is exactly why AMM's were created. I would use that instead.

The asset can still go to zero if the market price is 0 and I'm not sure requiring everyone who transacts to pay a 1% fee would go over well.

But its an interesting idea

[PatrickLRiley]

The market price could never be zero as the Reserve Wallet would always be making an offer for 100% of the supply.

[Briandavidbrown1983]

How will the Universal Reserve Asset amendment address potential challenges related to transaction costs, liquidity sustainability, and the complexity of floor price enforcement, especially under high-volume conditions or volatile market scenarios?

[PatrickLRiley]

Lean six sigma, by following strict and simple rules for incoming XRP from volume and placing the limit buy order on a scheduled interval.

[KBBK12]

decentralized reserve that would help keep the value of any asset traded with it more stable. I like this! It could play a bigger role in global finance without relying on traditional banks.