1/14: @JoelKatz video about CBDCs and NFTs set off a lightbulb for me - and I think he revealed something very important that will dispel the false narrative that Ripple’s CBDC plan does not use XRP.

Also, I think finally figured out what the term "flip the switch" means.

2/14: First, he said this regarding CBDCs:

“Imagine every major financial institution in the world, able to settle every major fiat asset from compatible jurisdictions, down to a central banks ledger, in a few seconds… How is that not a very big deal?”

3/14: But then he mentioned the term “sidechain of XRPL” and there was an a-ha moment for me.

Now, this is going to get super technical, so I want to make clear now that while this is all nuanced, it creates a scenario that is massive and gives it all a technical basis.

4/14: So, what is a sidechain?
A side chain is basically a fork of a ledger that can use the native asset of the original ledger while maintaining its own set of rules and its own bookkeeping.

5/14: For our purposes, this means that contrary to previous beliefs, these CBDCs (previously assumed to be just private XRPL forks), might actually be XRPL sidechains and therefor may in fact still use the native asset XRP.

6/14: Ok, you might be saying, what's the difference between a private XRPL and an XRPL side chain? Well, a private XRPL would achieve interoperability with public XRPL w IOUs centrally issued on both ledgers.

7/14: This is not ideal for many reasons, as it's centralized on both ends (Ripple's and the CB's), and in this case, XRP is not needed in anyway for the private version.

8/14: But, a sidechain XRPL would allow the CB sidechain the ability to be private, be centralized, and yet still utilize the decentralized asset XRP for settlement on both ledgers.

9/14: Now, David said CB's want an off button, that is why they will not issue directly on XRPL. But with an XRPL sidechain, you still have that off button.

And now...

10/14: Let’s think about when David said the CBDCs will be walled gardens UNTIL they are ready to bring down those walls. When the walls are ready to come down, the central banks (not Ripple) could press another button, or “switch”, to lower those walls…

11/14: With a sidechain, the CB can “flip the switch” and the private and public XRPLs magically become interoperable and you'll be able to move any asset from any ledger to any other without resorting to issuing XRP as an IOU on private ledgers.

This is true interoperability.

12/14: Think of how Binance Smart Chain (fork of Ethereum) issues ERC20 tokens on its chain (called BEP20 tokens on BSC) but still controls everything and still needs to use BNB (their native asset). This is how the central banks could use the private ledgers.

13/14: The world David was describing today is a world with a big button that central banks can press to lower the walls and unleash the IOV.

And when that switch is flipped, everyone can use XRP everywhere.

14/14: To sum up, the idea “private XRPLs will never use XRP”, is probably wrong. The type of interoperable CBDC system David is describing seems a lot like a city of sidechains where CBs keep their control, yet one flip of the switch lowers the walls and two worlds become one.