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Here is an index of posts where I summarize and give my thoughts on a podcast called Block Stars with David Schwartz. If you haven't listened to any of the podcasts, I highly encourage you to listen to them! They're really great!

Blog Posts (with podcast link):

1. Episode 1: How Digital Assets Will Help Create a Sustainable Global Economy | My Thoughts | Podcast Link
2. Episode 2: How Sustainable Blockchains Will Boost Adoption | My Thoughts | Podcast Link
3. Episode 3: Increasing Crypto Literacy for Everyone | My Thoughts | Podcast Link
4. Episode 4: Biometric Authentication and Cryptocurrency | My Thoughts | Podcast Link
5. Episode 5: Why Deep Liquidity Is the Key to Institutional Investment in Blockchain | My Thoughts | Podcast Link
6. Episode 6: Mainstream Consumers and Enterprises Join the Blockchain | My Thoughts | Podcast Link
7. Episode 7: Digital Assets Need Smart Regulation | My Thoughts | Podcast Link
8. Episode 8: An Economic Historian’s Take on a Crisis Without Past Parallels | My Thoughts | Podcast Link
9. Episode 9: How Bitcoin’s Limitations Inspired the XRP Ledger | My Thoughts | Podcast Link
10. Episode 10: Why Unifying Payments Infrastructure Will Boost Financial Inclusion | My Thoughts | Podcast Link
11. Episode 11: Why Sustainability Is Essential for the Future of Money| My Thoughts | Podcast Link

Note: All Header Images credited to Pixabay (edited).

In the third episode of Block Stars, David Schwartz interviews the CEO of Binance.US, Catherine Coley, who used to be the Head of XRP Institutional Liquidity at Ripple.

In this episode, they discuss the importance of growing the general public's knowledge of blockchain and cryptocurrency, especially in light of present day circumstances.

Note: there are comments in the episode on the halving of Bitcoin that were obviously made prior to it (the halving happened on March 11, 2020, while the episode aired on May 5th). The episode summary will just reiterate what they talked about, while my thoughts on it will be commentary after the event.

Episode Summary

After her years at Ripple, Coley joined the Binance team to start Binance.US, a currency exchange platform specifically targeted for the United States. Previously, the main Binance platform, which originated in China, had also served the United States along with other locales around the world. However, due to regulatory concerns, the United States was cut off from the global Binance exchange in 2019, and the team decided to start a smaller, US-focused exchange called Binance.US.

The United States, which is usually on the forefront of technological innovation, seems to have lagged behind the rest of the developed world in regards to cryptocurrency and blockchain. Coley argues that this may be because much of the issues that are solved by cryptocurrency don't really exist in the United States. Whereas those who live in areas like Hong Kong, Singapore, and even those in the Eurozone often must cross international boundaries in regular business dealings, people who live in the United States have the benefit of not needing to exchange currencies every time they go to another State. This ease of use for US fiat as both a national and world reserve currency, along with the fact that the United States has very strong and stable systems for trade, has arguably lessened the need to participate in a global economy. Thus, such innovation hasn't developed much until now.

While Coley is optimistic that regulators in the United States will come around to put positive regulations in place for cryptocurrencies, it may be some time before this can happen. This may be due, once again, to a lack of exposure to cryptocurrency and even things like online presence for many policy-makers in the US currently. Instead, it may require new policy-makers who are “more digitally native” for a landscape change in crypto regulation.

However, this hasn't necessarily stopped Coley and her team from trying to educate law-makers about crypto and blockchain. This means breaking down the difficult technical language which often exists in blockchain into more practical, daily terms.

The conversation then turns to Bitcoin and what it brought to the table in terms of bringing the idea of peer-to-peer networks into digital finance, where no central entity would be able to control the flow of an exchange. Coley admits that she initially misunderstood what the point of Bitcoin was. From its lack of speed to its fee structure, it seemed to not be very useful for the very utility it was designed for. However, these inefficiencies don't necessarily mean that the network is worthless, since the foundation of it is the lack of central authority, not speed or cheapness in transaction. This is the strength of Bitcoin, its decentralized structural integrity as a solution to centralized finance.

The narrative around Bitcoin has certainly changed. Its initial selling point, as given by Satoshi Nakamoto's white paper, was its ability to transfer peer-to-peer without a central authority. Now, however, the nomenclature around Bitcoin has changed into it being “digital gold”. Coley believes that getting back to the initial idea of Bitcoin as a transfer of value is important, especially in light of COVID-19 and the global shutdown, with the United States sending stimulus packages to individual citizens and businesses. Bitcoin may be a better and more accessible solution for these types of situations than what is currently being used today.

But, just as money is used in almost every aspect of modern life, there could be many kinds of roles that Bitcoin and other digital assets could fulfill. This would include streaming micropayments to large sums that still need to be distributed around the world for things like big building projects. All things that normal fiat is used for, digital currencies can have a real world use-case for.

Because Bitcoin was born from a time where people saw how the federal reserve printed an unlimited amount of fiat (a situation being paralleled today), it was natural for its creator(s) to put a hard limit on the amount of Bitcoins that could ever be created (21 million). This may be the impetus behind labeling Bitcoin as digital gold. First, there is no real way to suddenly create a bunch of gold at a time. Second, it takes work and effort (thus money) to mine gold. These two factors make the asset less vulnerable to inflation. For Coley, she looks at ways to take the fundamental ideology behind Bitcoin, and how it could apply more practically or understandably for the general public. As she says,

Crypto doesn't have to be cryptic.

Part of the genius of Bitcoin seems to be a sort of cycle of incentives. Due to the cap on the total number of Bitcoins available, people are incentivized to get in early. But, as time goes on, Bitcoin becomes harder to 'mine' as well. This comes in the form of a 'halving”, in which the number of Bitcoins received as a reward for creating a block on the chain are reduced by half. These halving events are hardcoded into the structure of the network, so that as we get closer to having 21 million Bitcoins received, the more difficult it will be to obtain Bitcoin through mining.

This fundamental aspect of Bitcoin actually brings people into the principles of macro economics. As people come to understand it, they are basically receiving an education on various aspects of economics, from trade and exchange to the pros and cons of limited supply and variable supply. But because of the technicalities of crypto, there is so much to learn that there is a real difficulty here in educating the public. Both Schwartz and Coley admit that, even today, they feel like there is still so much more to learn and understand about the space, even with their all time spent in it so far.

Even so, educating the public about cryptocurrency often begins with helping people understand the normal foundations behind economics, and going from there to the benefits that crypto and blockchain can bring into the space. Coley makes the point here that, in today's 'social distancing' climate, people would have an easier time understanding why sending digital assets is superior to the need to physically move and touch fiat.

With the Bitcoin halving coming up in May, Coley argues that this time, there may be a different outcome than previous ones, where halving correlated with future increases in price. This difference would be that there is now far more mainstream attention focused on Bitcoin. Of course, everything here is speculative, as markets aren't really predictable. But with more education and more awareness, there may be demand for Bitcoin that, in conjunction with the halving, produces an inflated price.

Turning more towards the current pandemic and economic crisis, Coley states that, despite the general global shutdown, exchanges like Binance.US have not necessarily seen a disruption in day-to-day operation. This could illustrate the robustness of digital-based companies, and especially the security of cryptocurrencies in economic down-turns. Not being tied down to physical locations and physical assets gives people the ability to continue to do what they want or need in life, no matter external circumstances. Thus, for people who are looking at where next to go in life, she recommends taking a strong look at organizations which are digitally-based, and thus show more resiliency in real-world catastrophes.

She also recognizes that there are energy-wasting deficiencies that are affecting the natural environment in crypto. Like Blinder from the second episode, she sees this to be an important focus. However, there is an argument that, for the most part, crypto mining farms are in isolated areas, where energy is subsidized or the climate helps to reduce the waste required for the sites. But this still needs to be held in check, since those who can profit from increased mining may not hesitate to do so, even if it has negative consequences for the environment.

Winding down, when asked to speculate about the future vision for crypto, Coley shares a story about how she was able to send money to a friend across the world in almost no time. For her, to see that she could send that friend the money, and for that friend to then be able to go use that money immediately, impressed upon her the great potential this technology has. While the concept is extraordinarily simple, it was something that we couldn't do even a couple decades ago.

And now, it could be possible for everyone. By democratizing finances, Bitcoin and crypto has brought the idea of discussing money to the dinner table, where it no longer needs to be taboo, but helpful, informative, and opens the doors for all.

My Thoughts

There was a lot of the material from this episode which overlapped with previous ones, including energy efficiencies and mass adoption. That being said, there were still a few interesting points brought up during this third episode.

The Bitcoin Halving

Let's get this one out of the way first, since the halving has already happened. The 'prediction' that happened from the episode was that, because of a more mainstream focus on Bitcoin and its already high market cap, there may be a difference in what happens in the price than before. Most people who hold Bitcoin, of course, hope this would catalyze an even greater growth in the coin's price.

I think it's interesting to note, as linked above, that while a halving may have resulted in a small price dump immediately afterwards, the trend has always been an increase in price over the long term. So much so, that outside of the immediate dump, after a halving, the price of the coin never went back to those lower levels before the event occurred.

So, while historical trends are not a guarantee of future events, it's certainly interesting to see that each halving has always preceded a long term pump in price that have never returned back.

Regulation

Here is where I believe I actually differ from many people in regards to the relationship between regulation and the adoption and price of cryptocurrency. Looking around the XRP and Ripple subreddits, as well as different interviews with Ripple employees, it seems many are hopeful that clarity in regulation will finally open the way to mainstream adoption, and then to a heavier increase in price, on various cryptocurrencies.

And while I don't fully disagree with this sentiment, I don't believe that an increase in adoption of crypto requires clarity in regulation, and I certainly don't think regulatory clarity will automatically pump the price of any coin. First, the principle idea behind any economic value is supply and demand. If the supply of an asset is greater than demand, the price will decrease. If the demand is greater, then the price will increase. And so, if the demand to use any particular coin is greater than the supply of coins available, then prices for it will rise. Second, when we look at Bitcoin and Ethereum, their price increases aren't necessarily correlated with any kind of regulation, and they have certainly been successful in terms of adoption so far.

That being said, regulation in any space can certainly help encourage adoption. When businesses know and understand how they can use something legally, they will be able to better take advantage of that utility for themselves. Because of this, when the clarity comes, there could be an influx of businesses that use crypto and blockchain on a greater scale. But, if that influx doesn't bottle up the flow of supply for any particular coin, prices may never correlate with any sort of utility.

The Blend of Digital and Real

I really loved two other concepts Coley talked about during the interview. The first was the realization that companies which have a large digital component are less susceptible to economic downturns and catastrophes, like the pandemic we are now experiencing. The second was her story of sending money to a friend who could use it for something as simple as a burger moments later.

I think these two things really give us a glimpse of a future where the digital realm is much more integrated into the real world. I believe that as we see companies which have embraced digital technologies like blockchain and the Internet survive and even thrive through recessions and downturns, it will encourage other businesses to copy if they want to do the same.

And, in a very real way, blockchain-based systems give such an advantage to businesses. It gives them the ability to conduct business even when physical locations aren't available. It has the potential to disconnect businesses from dependency on other companies like Square or Paypal if they don't need or can't use them. And it can even help small businesses participate in a global economy, so that even if their local state or country isn't doing well, they can still benefit from others around the world.

Such a world, I believe, is one which is beneficial for everyone who can participate.

In the second episode of Block Stars, David Schwartz interviews AIKON's CEO, Mark Blinder. Now, forgive my ignorance, but I had no idea who Mark Blinder was before the podcast. So listening to this podcast was quite enlightening!

In this episode, they discuss the current barriers to mass adoption of blockchain, including usability and environmental sustainability, and how they may be overcome for the benefit of people around the world.

Episode Summary

The introduction was made for people just like me who had no idea what AIKON is. In Mark Blinder's own words:

“AIKON is a company that was founded with the vision of helping to spread mass adoption of blockchain.”

AIKON's main product is ORE ID (Open Rights Exchange ID), which connects online accounts (e.g. Facebook, email, etc.) to various blockchain solutions such as Ethereum or EOS. ORE ID acts as a simple blockchain for holding identities and allowing those identities to be able access certain things. In this way, it cannot be programmed the way Ethereum can (with Turing Complete smart contracts, DAPPs, etc.).

The focus for AIKON right now, according to Blinder, is to help connect businesses to blockchain solutions. These businesses already serve a set demographic of customers, and so AIKON simply takes the data stored for those customers and attaches them to unique IDs which are unencumbered by constraints of centralized server systems (due to the blockchain nature of ORE ID).

From here the interview shifts to the main focus of the topic for the podcast: how environmental sustainability is a key component in mass adoption of blockchain.

Blinder's interest in the subject revolves around a personal conviction of moral responsibility for taking better care of the environment. His conviction has led him to frequently look for ways that his businesses can do better, as well as encourage other businesses to do the same. Since he works with blockchain companies, this has led to him scrutinizing the impact that the technology can have on the environment.

Specifically, he points out that proof-of-work systems, such as Bitcoin and the current stage of the Ethereum blockchain, are fundamentally just exchanging energy for money. In a proof-of-work system, as the value of the coin goes up, the cost of maintaining that network also goes higher. As an example, in order for Bitcoin to continue operating currently, its network requires as much electricity as a city like Las Vegas. But back in 2017, when Bitcoin hit its all-time high, it drew as much power as entire countries.

There are a couple solutions to the problem. First would be using a different protocol, such as consensus or proof-of-stake, rather than proof-of-work. But this doesn't solve everything, as different protocols have their own vulnerabilities. For example, in the proof-of-stake model, if a person or group obtains a majority share of the coins (51%), they can essentially attack the network.

Instead, Blinder argues that the tech industry as a whole, as well as blockchain companies, need to switch to renewable sources of energy, as Genesis Mining does in Iceland. This is because, even if there are companies out there that tout their use of renewable energy sources, if others don't, it renders the whole point moot. And so if the entire industry can move over to renewable sources, then the incentive to not use renewables would not really be there.

According to the energy companies he's dealt with, the best way to move the world into renewables may be to give people the ability to sell their privately generated power. Ironically, this kind of system would be most effective with a decentralized solution like blockchain. In this way, blockchain could actually be part of the solution for the current energy crisis.

The technology for renewables currently exists. From cheap solar rooftops to electric vehicle charging, especially in the United States, a society that runs primarily on renewables seems to be within reach. It's only the innovation in both distribution and usability that is lagging behind.

Because of the energy consumption, there seems to be little need for a proof-of-work blockchain outside of Bitcoin. After all, these systems are basically created to be as inefficient as possible, so as to create value. And because of the value of Bitcoin in the space currently, there is already incentive to move away from proof-of-work. After all, why have an inefficient system that can't generate much value when you can have a much more efficient system that could actually be worth something?

But what if technology innovation in energy exponentially grows as in other sectors? Could a future exist where the energy required for proof-of-work is so negligible (in comparison to other sources of consumption) that this whole point becomes obsolete? Blinder answers this by suggesting that, if the electricity is free, and the value of proof-of-work systems is dependent on electricity being spent, then the value at that point may also be worthless.

In a world that runs on cheap, environmentally sustainable energy, Blinder believes that a representative governance system, similar to the United States political system, would be the best way to run a blockchain. In a system like this, validators would be chosen by users based on their expertise, performance, and ability to run the chain well. He acknowledges the XRP's consensus system is similar to this, where consensus is done based on how well each validator does to promote the system.

Blinder also believes that mass adoption will come for blockchain when user experience improves dramatically. The question for many companies, including AIKON, is how to serve both the consumers who want to have all the control (i.e. private keys) and those who don't. They desire to have a user experience that is just as easy and simple as the major parts of the Internet today (e.g. Netflix, Facebook, etc.), while also being environmentally beneficial. Elon Musk's Tesla company is a good example of this, where they not only have a car that has less of a carbon footprint, but also one which is familiar to drive as well as aesthetically pleasing.

After all, the theoretical ideology behind blockchain is sound. It offers a way for people to participate in a global financial system that doesn't need 'gatekeepers' or 'authorities' to mediate between transactions, and also doesn't treat various people in an unfair or unequal way. And so it's easy to see that, if any individual were to be given this ability, and it has a familiar and friendly user interface, then the natural response would be to use it with no questions asked.

Certainly, there is blockchain's shady history to consider. From Bitcoin's use in black markets to the plethora of ICO scams in 2017, some are certainly right to approach blockchain cautiously.

But in the end, blockchain seems is revolutionary by nature. Just as the Internet took over smaller local networks, public blockchains have the appeal and ability to cross borders for people who really need them. While it may take a long time, even multiple decades, for the technology to become ubiquitous, even today, we can see the benefits. A woman in Afghanistan once told Mark Blinder,

I love Bitcoin. It's the first time women in my country could have money that the men in their family didn't know about.

Thus, crypto can touch lives that even the best intentioned governments and businesses cannot be bothered to help. From Afghanistan to Argentina to Zimbabwe as well as to the Western World, the hints of how blockchain is changing the world is already here. Thus, though the road may be long, adoption looks all but inevitable.

From AIKON's perspective, the next step in adoption is not to try to force users to fully understand tech, but instead to help users get a foot in the door first. After all, most people or even businesses that rely on third-party databases for their needs don't need to know that those databases are now hosted on a blockchain. But once those customers do realize it, then they can begin to take control of their own data, and how it interacts with others, if they so desire.

Theoretically, the roadmap to mass adoption may look something like this: The first phase of the “hype cycle”, in which speculation is what drives the tech, has mostly passed. Instead, the current phase is 'laying down the pipes' of how blockchain functions interoperate with both each other and other current technologies. Then, when all the fundamentals are set, a third wave that produces real change can begin to materialize in the wider world.

This would be similar to how the Internet grew from hype in the dot-com era to now, where a large percentage of the world, even in developing countries, is using it. Even now, blockchain may parallel the Internet in that a lot of current blockchain companies will fail, just as a lot of Internet companies failed in the early 2000s. Even companies that have great ideas might fail, only for those ideas to be taken up by another company later at a more opportune time and become a dominant force with it.

Winding down the interview, Schwartz asks Mark Blinder to give listeners suggestions for switching to renewables. In addition to finding sources for renewables in daily life (e.g. switch car to electric, get solar panels) as well as letting us know some benefits in doing so, he once again stresses pushing for an industry-wide change for tech companies to go to renewables, including cloud and server hosts running on 100% renewables and blockchain companies leaving proof-of-work, as well as talking to politicians to push these agendas as well.

My Thoughts
Like the previous episode, there's a bit of fluff at the end where Mark Blinder talks about some of his favorite books (they're definitely interesting suggestions). But it didn't have much to do with the topic at hand.

But WOW, is there a lot of stuff here. Some of the topics mentioned, such as the suggestion for blockchain to look at representational political systems for guidance on governance or the idea that adoption of blockchain will come when user experience dramatically improves, I've explored before in previous posts, so I won't repeat myself here. Instead, here are a couple things that I want to look at that I haven't written about before.

Blockchain and the Environment
While I've realized awhile ago that proof-of-work was an energy-wasting danger, I never thought the scale of Bitcoin had such a footprint until Mark Blinder mentions it in the interview. The idea that, at one point, the cost of running the Bitcoin network rivaled that of the entire energy grid of Ecuador is insane to me. It really puts into perspective the current need to reduce this dependency on such a resource-destroying system.

I find the point Blinder makes about cheap energy making the value of proof-of-work coins worthless interesting. It seems to me that the inherent value of blockchain is in its ability to transfer value without the need for an intermediary. And, while the value of such a tool can go up or down, this function of 'trust-less' transfer should give any blockchain coin some value, provided there aren't competitors that are just uniformly better. Like proof-of-stake. Or consensus systems.

So while any proof-of-work system can be obsolesced by better protocols, where individuals can transfer value far better, faster, and as frictionless as possible, if those systems do not become a revelation in better user experience, then the proof-of-work system will have value even in an environment of cheap energy. Because the value placed on a coin isn't just the energy used to create it, though it's certainly a factor. But the value of the coin is also in its utility, as well as scarcity, things which are natural in the world of economics.

And if one can always transfer some amount of value around the world without needing to go through a bank, many would choose to do so. Thus giving the network value.

A Rant Against Bitcoin
Something that I find puzzling is how Mark, as well as others in the space, still vouch for Bitcoin. Despite its now antiquated nature, despite is power-hungry cost, and despite the actual centralization of the whole system, it seems like both still espouse the view that Bitcoin is like digital gold, and it will continue to run and be an important system in the future. This is the first and only time I've ever heard of people saying a technology that was the advent of an innovative invention will never become obsolete!

It would be like someone telling me that the Ford Model T, because it was the first car and revolutionized transportation, would never become obsolete because it's “transportation gold” (whatever the heck that means). Or that we're always going to be using vacuum tubes for power, because even though there are far more efficient and consistent transistors for power, the vacuum tube was first, and therefore, it's “transistor gold”. It's a really weird analogy that I can't get behind, has no historical precedence, and I'll probably never really understand.

Of course, I'll try to keep an open mind, for anyone that wants to help me understand.

Giving Value to Individuals
The quote from the Afghan woman Blinder mentioned gave me pause. I've always thought that humanitarian efforts and other similar projects would be the forefront beneficiaries of blockchain technologies. But to have it made so real while listening to the interview really gave me a lot of hope and optimism about this whole enterprise.

When I think about the technology behind blockchain, it really does seem like a very simple idea (in hindsight, obviously). It's a system that acts like a ledger, in which each entry must include all previous entries. Thus, the ledger becomes basically immutable. And the evolution of this tech has given rise to security that is very difficult to break.

And such systems will eventually allow all people from every part of the world to not only voice their own thoughts, like the Internet has, but finally freely do whatever they damn well please.

https://youtu.be/4D8rPVTKHdI

For this week's 'music video', I attempted to port over the concepts in the first patch I blogged about, called Meandering Station, into the iOS music platform. Namely, the generative nature of a peaceful piano playing in an urban soundscape. Like in Meandering Station, Urban Floats doesn't require any human input for the music to flow freely (outside of starting it), though, as you can see, I did certainly have some.

It was an interesting exercise, porting over workflows and ideas from one software platform to another. On the desktop, for modular-style music, I use a program called VCV Rack, which imitates a modular Eurorack environment in software.

One of the difficult things about Eurorack modular (at least that I've found) is the need to connect a lot of different modules in order to do even a simple sound. Not only does this take up real estate (or in my case, screen real estate), but because each of these modules fully function on their own in real time, having multiples of these in a software setup often takes up a ton of my computer's CPU power, as well as draining my computer's battery.

A crazy thing is that, these days, an iPad Pro is more powerful than a lot of full-on desktop or laptops. In fact, the current 2020 iPad Pro is more powerful than my 2013 Macbook Pro! Because of this, I've been wanting to see just how much parity I can pull off between my iOS setup and my normal PC setup.

This is (in a way) the first step into that. And what I've found is that iOS, through the use of MIDI control and various VSTs, is much easier to set up initially. By using MIDI control apps like Rozeta to do the modulation and note generation for me, I can have just as much flexible control as a genuine modular system.

There are other advantages in this as well. Because most iOS apps have polyphony (the ability to play multiple notes at the same time), I don't need to worry much about routing multiple different note generators into one (or even multiple) modules. Furthermore, the iOS interface is touch-based, and so I don't always need to attach MIDI controllers to it to be able to change more than one parameter at the same time.

But then, there are disadvantages. This gets a little technical, but MIDI control only has 128 points of change. This is supposed to increase with MIDI 2.0, but that hasn't been implemented yet in most apps (as far as I know). CV is near infinite. This basically means that any change I make won't be very smooth. You can actually see this in the video when you look at how the LFO I've attached to parameters do “jumps” instead of moving smoothly.

The other disadvantage is in the lack of universality in control. In a Eurorack system, CV controls everything. So I can take something like a note generator and plug it into the volume parameter of a module, and let those notes skip that parameter around. In MIDI, you need to find the right control changes (note, control, program, etc.) and you can't criss-cross them like Eurorack. This basically means that, for better or for worse, you're locked into whatever the app creators want you to be locked into, rather than a true 'sandbox' type feel.

It was quite fascinating to think about and do this port. Because of the advantages and disadvantages of both systems, chances are, I won't be fully committing to one or the other. Instead, I'll probably be trying to meld the two systems together, in an attempt to do away with both systems' disadvantages, and hopefully have and more fun way to play music.

I hope you enjoyed! See you next time!

David Schwartz is currently one of my favorite people in tech, as well as probably one of the smartest people in the cryptocurrency space right now. So when he announced that he was making a podcast interviewing different blockchain experts and innovators, I was excited as all get-out.

As I was listening to the first episode, I realized that this would be a great opportunity to really dig into the thoughts and concepts being explored in these recordings, and write down my own thoughts on what's being discussed.

So, while I don't know how frequent these episodes are going to be or how long the series will continue, I'll be doing my best with each release to write down some notes and impressions of what's being discussed in each episode.

In this first episode, David Schwartz interviews Ripple Co-Founder and Executive Chairman Chris Larsen and the circumstances and history surrounding the rise of blockchain. Below, I will attempt to summarize the episode as best as I can. You can listen to the episode yourself here.

Episode Summary

After initial introductions mentioning Chris Larsen’s positive test results for COVID-19 and his subsequent recovery, the duo quickly head into the circumstances surrounding the rise of Bitcoin and cryptocurrency. As a summary, when the mortgage housing crisis of 2008 happened and shook the global economy, a few different projects took off which had the aim of creating currencies which weren’t controlled by federal governments began to gain traction. This included Linden Dollars from the game Second Life.

The one that broke out, of course, was Bitcoin, which Larsen argues that it came out at the right place and right time. It took advantage of the fear and bitter attitudes that was really gaining ground around the world, and the bubble of that mistrust is what lead to the so-called ‘trust-less system’ of blockchain. Larsen speculates on whether Bitcoin would have been even more successful under the Occupy Wall Street protests rather than a 'tech utopian' idea.

Instead, Bitcoin (according to Larsen) was born out of libertarian-styled 'true believers' who believed that banks and governments were incorrigible, and the best way would be to do away with all of it and put financial power back into the hands of everyday people. Larsen argues, though, that people are still people, and there is a certain shallowness of understanding that we could trust in code more than human beings, even though human beings are the ones that designed the code. This seems to be his main argument against “trust-less-ness” of blockchain.

Instead, blockchain and Bitcoin is simply the next step to make the world a little bit better. It's an iterative (albeit important) step, rather than some complete revolution that could solve the financial systems of the world. Larsen sees that the libertarian-styled mindset behind Bitcoin and blockchain is a net positive, as it has given rise to new ideas and ways of thinking that adds innovation back into fin-tech.

As Larsen sees it, for the world's financial system to ultimately be changed, the 'core' thing that needs to happen is the application of blockchain technology (which certainly is a breakthrough) to numerous different areas, and see which problems it solves the best. This, over the past 5 years, has been happening in a seemingly healthy way, as its development has been well-balanced between 'revolution' and 'incremental iteration'. The transformation he sees happening is when, ultimately, you will have a few key currencies that become the de facto ones that will be relied upon by everyone around the world.

Since Ripple concentrates on cross-border remittances, Schwartz asks him to explain what the big deal about all that is. Larsen likens it to the communication problems the world had before the Internet. Just as there were issues that delayed or even prevented communication to happen between people (and thus ideas would be unable to grow where needed), the ability of blockchain can 'interoperate' between countries to move real value between people in very different locales. This ultimately affects everyone, because it prevents people in less developed countries from participating in the global economy. This means that even a person in America doesn't have much access to the value or labor of someone who would want to give it to him or her the most.

The need at this moment for this idea of globalization to occur then, is 'regulatory clarity'. There has been some around the world, but major laws which can clarify the use or misuse of blockchain have not yet happened, especially in the United States. The problem, as Schwartz puts it, is not necessarily whether those laws exist, but lack of clarity in the application of even current laws to blockchain, which is a very new frontier. Larsen recognizes that there have been both bad actors as well as some very blunt anti-government or anti-regulation action on the part of blockchain developers. But these barriers don't exclude the good actors in the space, which needs to be introduced to regulators to help them understand the space better.

The conversation then turns to the founding of Ripple Labs all the way back in 2012. The idea behind XRP was explicit desire to “create a better Bitcoin”. The problems of Bitcoin included the power required to run it, a lack of ability to interoperate between different sources of value, and its requirement of miners who could ultimately re-write the ledger if they had the desire and financial power to do so. While Ripple started as a consumer-oriented company, they realized that enterprise was really the area they believed would be best affected by their technology. After all, businesses serve customers. Thus, they focused on this niche problem of cross-border payments that businesses had (which is actually very dated and slow).

The advantage of focusing on this small area is ability to 'piggyback' on the things businesses are already do successfully, while helping the smaller areas where those businesses were weak (aka. using the XRP Ledger). Here, Larsen talks about that, perhaps in the future, there would be big businesses that serve consumers with blockchain, just as Google or Facebook do today, but that presently is probably not yet possible.

For Larsen, an Internet of Value is the last step towards a truly realized globalization. We can already move physical objects, no matter what it is, for very little cost. We can move information the same way. But an interoperable way of transferring finance in the same way hasn't happened yet. Thus, distributed interoperable ledgers like XRP can pave the way for a transformation of lives around the world.

Specifically, XRP and the XRP Ledger was designed to be fast, inexpensive, and open to everyone and anyone. It doesn't need miners, which solves many of the problems mentioned with re-writing the ledger and wasting massive amounts of energy. Larsen argues that the need for miners actually centralizes Bitcoin and other blockchain projects like it. With the developing tensions between the United States and China, the idea of China having control over much of the mining for Bitcoin would be cause for concern. Such concerns don't exist for XRP and the XRP Ledger, which rely consensus.

As they wrap up, Larsen outlines what he thinks the 'utopia' would look like: a world where value can be sent from anyone, anywhere to anyone, anywhere. Citing the Bill and Melinda Gates Foundation, there are 2 billion people in developing countries who aren't able to access a global economy through traditional financial institutions (aka. global banks). Enabling these people is perhaps the greatest benefit of the Internet of Value.

Thoughts and Commentary

The rest of it had some fun testimonials from both about their early days of developing and using XRP. They're really great stories, so I encourage anyone interested to listen to the entire podcast, but I won't summarize them here, since that wouldn't be in the purview of this blog.

Looking back and typing these notes up, I've realized just how focused and almost 'tunnel-visioned' (in a good way) Ripple has been over the last few years. I've been following Ripple since the early days of 2017, and as Chris Larsen talked about the dream to have an interoperable distributed ledger that could enable those who don't have access to traditional banking to thrive, it became apparent just how single-minded Ripple really is (again, in a good way). They define the idea of taking a really niche thing and just going for it.

Blockchains aren't Trust-less?

I was a bit surprised with Larsen's differing opinion that blockchains were not inherently trust-less. As he said, it was the reason behind many others' (including my own) interest in the technology. But as I listened to his reasoning, I can sympathize with it. Even recently, with the events of Black Thursday on March 12, we can see that there are still a lot of problems to do with people and coding, even with decentralized finances.

The biggest example (in my mind) was MakerDao's Multi-collateral DAI, and the liquidation event which happened during that time. If you go on their subreddit, even now, many people have lost faith in the project and refuse to use DAI simply because of what happened at that time (though the developers claim to have fixed it). Just as Larsen said, the system isn't 100% void of the need for trust.

I think, however, that when most people have been informed of the “trust-less” nature of blockchain, what they're really thinking of is the lack of need for an intermediary between transactions. If I'm using something like XRP, I no longer need to have a bank or other financial institution tell me when or how I can transfer value to another person, provided they have access to similar tech. So, in this way, I think blockchain can be inherently trust-less.

Is Globalization Inevitable?

One major thing Larsen hints at is the seeming inevitability of globalism. Now, I have to be careful here, since I don't know how he defines what globalism means. But there are certainly many people these days who are against the idea of globalism. Brexit is perhaps the most prominent example of people beginning to turn away from the idea and looking back towards a certain nationalism.

It's interesting to think about. On the one hand, having a global economy which allows us to ship goods from anywhere in the world has lifted a lot of developing countries out of poverty. Being able to get goods made in a cheaper part of the world to deliver has reduced cost and increased competition in many ways. But on the other hand, it has also drained some countries of the ability to produce for themselves and become dependent on governments that don't always have anyone else's best interests in mind. The United States, having a majority of its imports from China, has seen just how dependent it's become on Chinese goods.

It's a tough problem, and while the solutions that an Internet of Value would bring certainly has the potential to further bring people in developing countries out of poverty, I think the issues of globalism are more than just the 'three legs' (distribution, information, and value) that Larsen professed.

Final Thoughts

So that's the end of my thoughts on the first episode! It was really great to listen to, and I feel like I learned a lot about Ripple's ideas and fundamental strategy in the developing world of blockchain. I look forward to continuing to listen to and write about my thoughts on upcoming episodes!

In Part 1 (I've changed the name a little to reflect this on-going series), I talked about the rise and evolution of traditional tech and the Internet, and began to talk about how they can inform us (and hopefully blockchain developers themselves) about the direction that blockchain could potentially go into. Specifically, I mentioned that, if blockchain is to going to be successful, it needs to solve problems that people already have, but address them in a way that is far better than its current competition, as well as easy to use so that a new mass of consumers can quickly become acclimated to and take advantage of the change.

In this second part, I want to theorize on what blockchain is good for, and how it can be applied in the world. For the most part, perhaps because of the infamy of Bitcoin, most of the development for blockchain technologies have come in the form of reinventing finances to be an immediate monetary transaction platform that anyone can use. But I don't believe that's the only thing that blockchain can (or should) be used for.

Disclaimer: Everything said here is obviously just my own opinion and perspective. I could be completely wrong on some of this stuff.

A Practical Definition of Blockchain

First, I think it would be a good thing to define what blockchain actually is, and what it does practically. According to wikipedia, blockchain is:

a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data

What does that mean, though?

Let's pretend we have a book. In it, there is a list of names. The first is just a simple name, “Tom”. The second part of the list also has the name “Tom”, but has the next name “Jane”. Third on the list, we have both “Tom” and “Jane”, and also a new name, “Phillip”. In fact, each subsequent name on the list has all the names that come before it, as well as a new name. And in order to add a new name into this book, we always need to have the same names that have come before (consensus), before adding our own new name. If we try to add a name without the previous ones, the book rejects our new entry.

By nature, then, this book (or ledger) is extremely secure, since I can't retroactively go back and change a name on the list. If I try to, then I have to change every single subsequent item on that list. But because the ledger rejects any entry that doesn't match the rest of the consensus, we are unable to actually change anything in a blockchain.Ok, we know what it does. But why is it so important?

Since the ledger itself is essentially unbreakable, it gives me the ability to know an exact history of events without needing to verify it with anything or anyone else. I don't need two or more ledgers because the one I have can't really be changed. If anyone tries to, they will be rejected.

Finance is the most obvious application for something like this. In the trading of goods and services, if I want to be a good manager, I need a list of who has paid for what, and that list needs to be nearly impossible to screw around with. And so, the blockchain finds its most native application in the decentralization of finances (DeFi) because there is no single central authority outside of the ledger that is needed to make sure that all transactions recorded are legitimate.

But what else could blockchain technology be used for?

**Blockchain vs. Databases
**One of the uses I've been pondering is the use of blockchains in one of my favorite past-times: Gaming. But some of the ideas put forth in the use of blockchain for gaming seem to be misunderstanding what blockchain is good for.

Take this Extra Credits video, for instance. While I deeply admire the team behind Extra Credits for their contributions to the gaming space (especially in terms of theory behind game development), I think in this video, they've missed the mark a bit.

In the video, they espouse the idea of using blockchain for detailing the history of particular items across time. These histories would also give the item small bonuses that, in time, would make it a truly legendary and valuable thing to have. This idea may seem on the surface to be a great use for blockchain, until we realize that we already have something that fits this far better than a blockchain ever could: a database.

Databases have a similar function to blockchains. In our metaphor, they record names in a ledger which can then be used for reference by external apps and software. Databases don't have blockchain's inherent security. However, the one thing that databases do have is the reason they're still so valuable today: speed.

This is because blockchain's inherent security is also its (somewhat) fatal flaw: the act of the system (no matter if it's PoW, PoS, or consensus) checking to make sure that each block is valid slows its ability to create more blocks in real time. While some have gotten quite fast, so far, databases are still the fastest way to do this.

And since video games like the one proposed would have millions of similar items, inscribing those millions of items with new names and histories as they happen in real time would halt the system so fast that the game would likely be slowed down because of it. It would be a fix for an invented problem, one which could be solved without blockchains anyway.

And so we've come to the problem of blockchain today: what problems do blockchains solve which aren't already solved by other methods?

It seems to me that any solution needs to desire the inherent security of blockchain more than speed to accomplish a task. In other words, the problem needs to require security before speed above all else.

**Value through Gaming Economies
**First, let's look at an application that's similar to current DeFi, and see how that can branch out into other sectors of tech.

The Ripple funded group Forte has been creating a platform for game companies to use blockchain in their products. According to their website, their goal is:

Building a community-owned gaming platform with breakthrough technologies and new economic models presents an opportunity to change the games industry forever.

Since I don't have access to their platform, I can only conjecture at this point. What this probably means is that Forte is building a platform from which gaming companies can connect their various in-game economies to in order to create a more robust and secure mega-economy for games in general.

Something like this does currently exist (after a fashion) on Valve's Steam platform. On Steam, I can play multiple different games from a variety of different companies. In doing so, I can earn collectors items such as trading cards or even in-game items sometimes. I can then sell these different items in the Steam Community Marketplace and use that money inside the platform to purchase other games or things.

What's important to understand here is that the Steam Community Marketplace is a closed garden. This means that whatever I decide to earn, buy, or sell in it forever remains inside. I can't farm items or cards in one game on steam, sell those cards, funnel the funds back to my bank account, then go buy some coffee at Starbucks with the money I made.

And even if I could, that sequence of tedious events is practically begging for a better user experience which blockchain can adequately solve quite simply.

Imagine a world where the video games we play can create for us some kind of value that we can then use to trade on an open, global market. I can play or win a few matches on Super Smash Bros, build a few houses and infrastructure in Minecraft, and do a few trades in my favorite MMORPG. Those actions create some sort of value that I can then immediately and directly use to go buy my next lunch.

Or a second scenario: I'm primarily a professional DOTA 2 esports player. But there are times when I'd rather play Fallout or World of Warcraft. When I play those games, the in-game rewards I collect or obtain, I can trade for value which I can then send into DOTA to purchase new skins and other items.

In this way, games can participate in a world economy that is ultimately mutually beneficial to everyone.

It's not that Valve's Steam platform can't do this today. Theoretically, they can issue a “Steam Credit Card” which allows its users to spend money they've earn inside its platform elsewhere. And by issuing a credit card they're in control of, they would be able to keep the walled garden idea inside the platform.

But not every game goes through Steam. And many video game companies would rather design their own solutions that they're in control of, rather than be subject to any other publishers' whims.

And this is where Forte and its (presumably XRP and ILP-based) economic gaming platform comes in. It offers an in-built economy that can potentially cross between any and all other gaming blockchains, so that no matter what, the games that developers are creating would have tradable value in the real world.

The success of this vision depends on a growing network effect. Like Ripple and its ODL software, Forte would need to create a network of well-developed games that use their platform. These fun-to-play games would encourage players to use their games as a self-funding or trading platform across multiple genres. Then, slowly, players who realize they can gain value out of their gaming time will start to only play games which participate in this network (since those are the only ones with real value). Then, as that base grows bigger, other developers would be pressured into making sure their games work well with Forte's software, since gamers gravitate towards it. The cycle then starts to compound, to the point where both consumers and developers are participating on an open exchange platform run by blockchain technology.

Digital Rights Management: Finally Done Right?

A second area which can benefit from blockchain technology is in the realm of Digital Rights Management, or DRM.

Even today, DRM is a pretty dirty word amongst consumers. At first, it was purely an attempt to combat piracy. But the unfair restrictions created for consumers ended up backfiring for a lot of developers and license holders, to the point that, currently, there's still a lot of piracy and anti-EULA attitudes going around.

The problem with DRM and gaining access to art and software has always been immediacy and simplicity. Just like how iTunes and Spotify resolved a lot of musical piracy issues by simplifying the process of getting to listen to the music we want, we can apply this mold to DRM as a whole.

So how does blockchain further solve this problem?

Let's look at it from a software publishers' point of view. Again, I'm looking at video games. Piracy for video games is a problem since code frameworks for access keys are easily broken. But on a blockchain, there can only exist a limited number of these keys. And since these keys can be stored on tokens in the blockchain ecosystem, the problem of made-up access keys is solved as well.

Let's say a game company creates a key blockchain for a new game. Each one sold will have an indivisible token which has a unique key to access the game.

Whenever the player logs onto the game, it requires a legitimate key of which there are a limited number. That token key is transferred to the developer's wallet for as long as the game is being played. When the game deactivates or disconnects, the token key then goes back to the player holding it (by smart contract).

This solves a number of issues. It immediately solves piracy, since no player could access the game without it being a legitimate copy. But it also solves the issue of returning games, players lending copies of games to friends, and a number of other headaches developers and publishers have had for a while. And if done correctly, blockchain can streamline the solution to these problems for everyone involved.

What About Artists and Creatives?

For artists and other creatives, I believe that the problem with DRM, copyright, and licensing isn't piracy. As a musician and synth enthusiast, I don't actually mind much if people who listen to my music download it for free. I know that those who truly enjoy my creations would usually want to support me of their own volition (financially or otherwise). That's why I think current efforts with DRM and its ilk are addressing the wrong problem.

Instead, blockchain could be used by artists to give tokens to their supporters in order to access more of or better versions of their content.

Imagine: if I as a musician am planning a concert. Only those who have my special tokens can come to the concert. I can then sell these tokens to my followers who want to join me. After selling them, my followers can, of course, do whatever they want with it. But each of these tokens can have some kind of memorabilia attached to them (perhaps free access to certain merchandise or other a personal signature or something).

I can even do something similar to the Extra Credits video posted above. Each person who has a token who joins gets some recognition on chain for joining my concert. And since (again) there are a limited number of tokens, these things can eventually become collectors items for special fans and the like.

This scenario would be far better than the video game one given, since (for the most part) I don't really require any speed for these kinds of transaction. I require security above all, because I don't want some mistake to be recorded on chain and a fan to get upset because they were cheated out of their token.

Whoops

WOW, ok, I've written waaay too much this time. I'll follow up with a third part with some final thoughts on Coil and whatever else comes to mind in exploring blockchain. Hope you enjoyed!