Ripple CTO interview: Growth from the bottom up, rebuttal to criticism | CoinDesk JAPAN

David Schwartz, chief technology officer (CTO) of Ripple Labs, is a fan of parts of the crypto industry, particularly the crypto asset XRP (XRP). , is respected like a guru among the so-called “XRP Army”.

But the XRP Ledger, the blockchain created by Ripple Labs, has its critics, from Bitcoin and Ethereum purists to the U.S. Securities and Exchange Commission.

When Ripple won its long-running legal battle with the SEC six months ago, it ended years of stagnation for the company.

The legal battle has made it difficult for Ripple to attract banks and other customers to its XRP ledger and RippleNet, the cross-border payments platform for institutional investors that uses XRP.

However, it's not just the lawsuits that have hindered their adoption.Since their establishment, Ripple and the XRP Ledger have not been able to garner support from developers, unlike leading crypto assets such as Bitcoin and Ethereum. But a legal victory could bring more developers into the fold.

These topics were brought up in the interview with Mr. Schwartz. Schwartz spoke about the aftermath of the victory over the SEC, how to engage with XRP enthusiasts, the XRP Ledger's decentralized approach, and more.

Impact and prevalence of litigation

──Now that the SEC lawsuit against Ripple Labs has been resolved, is it becoming more popular among banks and financial institutions?

schwartz:I think financial institutions have been slow to adopt blockchain technology, and specifically the adoption of communicating on the blockchain. There are many hurdles, including sanctions screening. However, technologies that are not so closely tied to Layer 1 technologies are becoming more widespread.

RippleNet makes payments using XRP and digital assets. Digital assets move on the XRP ledger. In some ways, this embraces blockchain, but it also isolates the factors that make it difficult for financial institutions to adopt blockchain technology.

When financial institutions try to utilize the features of the XRP ledger like a DEX (decentralized exchange), there is a barrier in that regulatory compliance is extremely difficult.

Currently, the popularity of XRP ledger is remarkable. There are over 1000 projects, new stakeholders like XRPL Commons, and hackathons. However, it can be said to be an infrastructure for dissemination from the bottom up. With the exception of tokens, I don't think there will be much top-down adoption by financial institutions.

──What impact did the SEC lawsuit have on your company's customer acquisition?

schwartz:It is easy to understand that the exchange delisted XRP, and I think it had a huge impact. When developing Layer 2 and sidechains, the appeal point was that anyone could easily obtain and hold XRP.

If you develop your own token, there are big problems: how to deliver it to people, and how to sell it. For example, let's say you start a new blockchain with new tokens and I provide you with all the infrastructure and get paid in new tokens. If I sell that token, I'm putting myself and your project in jeopardy.

If you use XRP as a token, you don't have to worry about circulation. Because it's already in circulation. If people can't easily obtain and hold XRP, there's no point in promoting it.

Not being able to open an account with Coinbase to buy and hold XRP is a major hurdle for such a strategy. That actually happened and it definitely had an impact.

Surprisingly, on the RippleNet side, the impact was not as great as expected. Because most of the deals we were doing weren't in America. Most of its meaningful trading volume is in Asia Pacific and the Middle East, with MoneyGram perhaps the notable exception.

──I hear that they have started testing a new feature called “Hooks” that will add smart contract-like functionality to the XRP ledger. What is the roadmap for that feature and why is it important?

schwartz:We have little to do with the team developing Hooks. He met with them a few times and said, “Isn't that great?'' For a while, they thought the XRP ledger itself might be the one to adopt, and it's still a possibility, but it would be a huge change.

This is extremely risky in two ways. One is that if there was a problem that broke the XRP ledger, it would be a multi-billion dollar problem for many people. In that sense, the risk is high. And the other thing is, we want the XRP ledger to be great for payments, but Hooks could make it more like Ethereum.

They will use the XRP ledger's technology to launch their own network and see how well it performs. However, if it proves to be very successful and does not degrade the network for other uses, there may be a proposal to add it to the XRP ledger's mainnet in a year or two.

Relationships with enthusiasts and developers

──Ripple has historically had reputational issues stemming from its ties to the “XRP Army,” the fervent fans of the XRP token. Are there any challenges with having such passionate fans? Are you struggling with the expectations they place on you and the developers of the XRP Ledger?

schwartz: It's definitely a blessing, but it's also a struggle. I think it's great that we have such passionate fans even though we're not a listed company. It's strange to have a fan base comparable to a company like Tesla or Apple, with people following everything the company does and following all the inner workings of the company. Such fans exist at Tesla and Apple, and in some cases, they can even project a strange kind of madness.

If it goes too far, I think it can give a bad impression to people who are involved in development and want to be constructive.

The problem is that when I interact with people, people criticize me for provoking them. But if I don't get involved, people say, “You're ignoring the problem.” “Whether you do something or not, people will complain about it.''

To be honest, if someone is saying something that seems wrong, I don't know exactly. For example, if someone said, “Amazon plans to start supporting XRP payments tomorrow,” that would definitely be a lie. But that doesn't mean it's completely possible.

So what if, although it seems highly unlikely, someone says something like that often, and one time it's true, and then I say it's not true?

Someone will buy or sell digital assets based on what I say. Unbelievable things can happen, so you must always be extremely careful.

──We hear a lot from Ethereum developers, Solana developers, Cosmos developers, etc., but it feels like Ripple hasn't been part of the developer conversation, at least for a while. Why do you think that is?

schwartz:I think you're right, in order to grow from the bottom up in this industry, you need to bring developers into your platform.

The reason Bitcoin has been able to attract so many developers is because for a long time there was only Bitcoin. If you wanted to work in this field, Bitcoin was the only option. And on Ethereum, the Ethereum Virtual Machine (EVM) became the standard, with Vitalik Buterin touting that “you can develop anything on this platform.”

When it comes to the XRP ledger, there is a defined role for development. For example, it is not possible to develop a DEX because there is already a DEX. It is not possible to develop an NFT platform because NFT platforms already exist. So it doesn't seem to be very exciting for developers. Because it already has the best features.

I think that's better because it's perfect for what you want people to use, but it actually makes it harder to get developers into the ecosystem.

blockchain for payments

──You have previously said that we are moving towards a multi-chain crypto ecosystem, where different chains have different strengths and use cases. In terms of thinking about these different niches and specializations, does this mean that the XRP Ledger will ultimately be the winner in payments?

schwartzA: I definitely think the XRP Ledger should be the winner for cross-currency payments and liquidity provision. That's what the XRP Ledger was developed for, and everything is optimized for that specific use case. If the XRP Ledger fails there, it will fail in a specific use case that everyone envisioned as it evolves, similar to Google failing in search.

However, the system could evolve with chains optimized for smart contract chains, real-world asset (RWA) tokenization, carbon markets, tokenized securities, stablecoins, and any other use case. There is also.

It is also possible to imagine that the XRP ledger will become a hub and use cases like this will spread around it. I would rather succeed in another use case than fail.

──You're touting Ripple's technology as a potential platform to power a government-backed CBDC (Central Bank Digital Currency), but there's a lot of room in the crypto world for blockchain to be used in that way. There are also vocal libertarians who oppose it. How does your strategy reconcile this spirit of crypto assets?

schwartz: If you live in America, it makes a lot of sense to object. But what's happening is that there are people in the world who have their accounts closed for no reason. Just touching crypto assets will result in your account being closed. I can't make any claims. they didn't break the law.

When you're run by the government, you actually have due process rights. If the government had to close my bank account, I could challenge it in court. They can also request evidence and cross-examine witnesses. You can't do that in a private system.

So, paradoxically, a more libertarian position would be that the government should run it.

Against the criticism that it is centralized

──How does Ripple respond to criticism that it is more centralized than other blockchains? In recent years, chains with different consensus mechanisms have been appearing one after another, especially Ethereum and Bitcoin. Do you feel that the world is becoming more accepting of your technical approach?

schwartz:I think so. What people have discovered is that these technologies work just fine. Almost anything you want to do with blockchain can be done if everyone knows that all transactions are public.

All state is public and everyone knows what every transaction does. The only time a consensus mechanism is absolutely necessary is to arrange transactions in an agreed upon order. Otherwise, wouldn't it be possible to send the same amount of currency to “Sam” and “Brad”?

For the sake of argument, let's say that I will never convince you that our consensus is decentralized. I don't think so, but let's say you think so.

The only thing we have consensus on is the ordering of transactions. Nothing else. For example, there is no distribution of rewards. Of course, consensus cannot say that an invalid transaction is valid, nor can it say that a valid transaction is invalid. Because everyone knows it.

So, if you're just lining up transactions, is that a big problem even if the transaction ordering was completely centralized?

──Isn't there a case where a more decentralized transaction ordering is desired? What if someone orders transactions to outwit other traders?

schwartz: Ethereum allows this by design. If that concern remains, Ethereum is the worst at it. The XRP ledger, at least by design, does not allow a single entity to do that.

How decentralized does it need to be? What you need are all validators that are not under the control of a common entity trying to deceive you.

──In Ripple's case, it seems like you have to have some level of trust that a bunch of permissioned validators won't scam you, right?

schwartz: Once a validator lines up a transaction in a malicious way, the community must decide whether or not to support it.

Same goes for censorship and Bitcoin. Some people say that miners can censor, but that is not actually the case. If they censor it, the community can switch Bitcoin to proof-of-stake. Mutually assured destruction.

The same thing will happen with the XRP ledger. Suppose that there begin to exist addresses on the XRP ledger that the government says are terrorist organizations, and some validators no longer allow such transactions. When that happens, it slows down, becomes less stable, and ultimately makes it impossible for those people to get into it. That could happen.

Will the community say, “Are we going to pick a validator from another jurisdiction? Or will that add value to the system, so that's fine?” Maybe I'll fork it, but the exact same thing will happen.

They say there are such concerns because the XRP ledger is centralized, but it's the same thing. Validator control issues do not affect any of these issues.

I think people trying to sell us very expensive systems portray all of its features as benefits.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Ripple Labs CTO David Schwartz (Ripple)
｜Original text: Ripple's David Schwartz Talks 'Bottom-Up Growth' on XRP Ledger, Rebuts Critics: Q&A