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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!