xRapid — Separating Signal from Background

As fans of XRP know, xRapid is Ripple’s solution for on-demand liquidity, aimed at payment providers and financial institutions dealing with cross-border money transfer. There is a lot of controversy surrounding whether anyone is actually using xRapid in a commercial setting and what the transaction volumes look like.

Utilization of XRP by xRapid is currently considered as one of the key factors of XRP’s long-term value proposition. It is therefore interesting to explore the public ledger history for signs of xRapid activity with the eventual goal to quantify this activity and monitor its evolution.

Note: information and conclusions below might be wrong or incomplete , limited by the author’s knowledge. Please reach out if you have more complete or more up-to-date information.

TL;DR

Summary of what is known

Below follows a brief recap of what is known about the functionality of xRapid and it’s current state of adoption.

a) Process

As explained by Asheesh Birla in this recent video, an xRapid transaction consists of the following process: 1.) transfer of fiat to a partner exchange and purchase of XRP, 2.) transfer of XRP to another partner exchange, and 3.) selling of XRP at the 2nd exchange and transfer of fiat of the exchange. Only the second step involves an actual XRP transaction.

b) Partners

Below is the list of partner exchanges and commercial customers know to be using or are considering to use xRapid. As evident by the recent flood of news, the ecosystem is rapidly expanding at the moment.

Existing partner exchanges: Bitstamp, Bittrex, Bitso, Coins.ph

Future partner exchanges: SBI VC, UAE Exchange, Binance

Existing fintech customers: Cuallix, Mercury FX, IDT, Zip Remit, Sadad Bahrain

Future fintech customers: Catalyst Corporate Federal Credit Union, MoneyGram, Western Union, Viamericas, Cambridge Global Payments, Currencies Direct, Kuwait Financial House

c) Example

Ripple’s David Schwartz has posted a video of a live demo xRapid transaction. He later also provided the transaction hash. Inspecting this particular XRP transaction between Bitstamp and Bitso reveals the destination tag of the receiving account: 25490962 (keep this number in mind for later).

Methodology

a) Simplifying assumptions

In order to receive any signal from the noisy background some reasonable assumptions need to be made, as explained hereafter.

Transaction characteristics: It is reasonable to expect that xRapid customers will have their own separate accounts setup at partner exchanges. Additionally, as there is probably no benefit of having multiple accounts on the same exchange, all xRapid transactions initiated by a customer to a destination will share the Destination Tag! It is also likely that all xRapid transactions from a customer in a given corridor will be for comparable amount of XRP.

Uni-directionality: I have limited my search to uni-directional transactions, as remittance flows are highly directional. While it is true that marker makers will eventually send the XRP back to the originating exchange, this process will probably follow a different pattern.

Promoted corridors: I will analyze more in depth the potential remittance traffic to Mexico and Philippines.

b) Known exchange addresses

With the help of Bithomp (and Google), I was able to find these:

c) Querying the XRP ledger

Thanks to the relentless work of @WietseWind, it is now possible to query the XRP ledger using Google’s Big Query platform.

  • The first query obtains all XRP payment transactions between the 4 known xRapid exchanges, excluding payments from the an exchange to itself as these obviously cannot be from xRapid.
  • The second query adds the “leg” field (directional pair of source and destination) and calculates the difference in time and XRP amount between a given transaction and its closest preceding or following transaction in time, limited to transactions of same leg and destination tag.

The results are then exported to Google Cloud Service to be analyzed further.

Query 1. Obtain inter-exchange payment transactions.
Query 2. Preprocess the inter-exchange traffic (this query needs the results of the first query being stored in the ´xRapid.InterExchange´ table).

d) Analyzing the transactions for potential signs of xRapid

For analysis the data is visualized in Tableau Desktop (public edition).

Results

The step-wise analysis is summarized below.

Figure 1 shows the overall daily activity of inter-exchange payment transactions from 2017 onward (before that time there is scarcely any inter-exchange traffic). The transaction count is shown in yellow, and the total XRP amount per day in blue. It is obvious that the 2018- bear market has had an impact.

Figure 1. Daily total amount and count of inter-exchange payment transactions since 2017.

It is insightful to compare this inter-exchange activity with the overall ledger activity, as shown in Figure 2. The proportion of inter-exchange transactions, in comparison to total number of payment transactions, ranges from ~ 0.5% (recently) to ~ 2% (in the past). The recent trend of increasing number of all payment transactions , which is not being reflected proportionally in the inter-exchange traffic, can be interpreted as a possible sign of XRP adoption among users, as well as for other use cases.

Figure 2. Daily count of XRP payment (from xrpcharts).

In order to discern any interesting patterns, each inter-exchange transaction is individually depicted in the scatter plot on Figure 3. Transactions are colored by the directional exchange pair. Note the peculiar “banding” pattern of Bitstamp ⇨ Bittrex (bright green) and Bittrex ⇨ Bitstamp (purple) transactions (I have no clue what that is… arbitrage or market making?).

Figure 3. All inter-exchange payment transactions since 2017, colored by the (directional) exchange pair. Note: Vertical axis is shown in log scale.

The situation becomes more interesting on Figure 4, showing the inter-exchange traffic in the direction of the promoted xRapid corridors (⇨MXN, ⇨PHP). Overlaid on the plot are three vertical lines representing important dates for xRapid.

It is rather surprising to see that the 25490962 destination tag in the Bitstamp⇨Bitso leg became really active shortly after the anouncement of Cuallix (remember, this tag was also used in the live xRapid demo transaction!). Moreover, there appears to be a period of testing (by this entity) shortly prior to that announcement (the half-pink/half-gray worm-like cluster of transactions in the upper pane). What is really strange about this tag is that the typical amount per transaction is rather small, ~25–50 XRP. Another interesting tag in Bitstamp ⇨ Bitso is 30106572, which also became active shortly after the Cuallix announcement. In contrast to 25490962, 30106572 transfers larger amounts of XRP, most often exactly 20k per transaction.

Likewise interesting are destination tags 5 and 967 in the Bitstamp ⇨ Coins.ph leg. Tag 5 became active almost immediately after Coins.ph was announced as an xRapid partner, and 967 shortly after xRapid was commercially available. Destination tag 5 is up to date the most active entity, transferring up to 5k XRP per transaction (there appears to be a ceiling configured at 5k since December 2018).

Figure 4. All inter-exchange payment transactions for Bitstamp ⇨ Bitso, Bitstamp ⇨Coins.ph, Bittrex ⇨Bitso, and Bittrex ⇨Coins.ph since 2017, colored by the destination tag. Note: Vertical axis is shown in log scale.

Inspired by these findings, I’ve made Figure 5 showing the weekly count of transactions for the top 5 most active destination tags (by total count) for each directed exchange pair (the vertical axis is shown in log scale). I find it perplexing that I cannot find any interesting traffic in the Bittrex ⇨ Bitso leg that would fit what one would expect of xRapid (could it be that Bittrex is not yet utilized by xRapid customers?). In the Bitstamp ⇨ Bitso and Bitstamp ⇨ Coins.ph legs, we find the same tags as already identified before.

Figure 5. Top 5 most active Destination Tags per directional exchange pair. Shown is the weekly count of transactions in log scale. Note that tag 25490962 (the same tag as was used in the public xRapid demo transaction!) is the second most active tag from Bitstamp ⇨ Bitso!

From the above analysis, only destination tags 25490962, 30106572, 5, 967 match the xRapid expectations. Therefore, the monthly XRP volume for these tags is shown in Figure 6.

Figure 6. Tentative xRapid traffic towards Mexico and Philippines. Y axis shows the monthly total XRP amount. Note that the February 2019 amount is biased as the month is not yet over.

Of these, only tags 30106572 and 5 have any appreciable volume, transferring ~ 1M XRP per month. The other two are only transferring thousands per month. The total monthly volume of all 4 identified tags is finally shown in Figure 7. Behold the tentative xRapid signal!

Figure 7. Tentative xRapid traffic towards Mexico and Philippines (combined). Y axis shows the monthly total XRP amount. Note that the February 2019 amount is biased as the month is not yet over.

Conclusions

Crawl, walk, run ;-)

Contact me at at Reddit: u/H_M_X_

Unicorn employee…