ichthyoid

In the 9th episode of Block Stars, David Schwartz interviews Coil's CEO Stefan Thomas! In it, they talk about the development of Bitcoin, and their resultant work on the XRP Ledger. It is the first part in a two part series.

If you want to see my summary and thoughts on other episodes, please go here. Otherwise, here is the summary and my thoughts on this 9th insightful interview.

Episode Summary

Stefan Thomas was actually a former employee of Ripple who held David Schwartz' current position at the company. Originally a freelance web developer, Thomas ran into problems while attempting to find out how to pay various international clients. It was due to these kinds of problems that both Schwartz and Thomas became involved in Bitcoin development. Thomas himself actually worked on Bitcoin while it was still in a testnet “beta” phase. One of the proposals he mentioned making was to create a browser-based cryptography system so that people who wanted to use Bitcoin didn't need to download the entire blockchain.

Thus, Bitcoin JS was created to re-implement Bitcoin for future mass adoption. Even though Satoshi Nakamoto's Bitcoin white paper didn't seem to make any effort towards any kind of mainstream adoption, Thomas felt this was the way forward to develop the technology further. However, they quickly came upon problems in how to progress Bitcoin further. Many ideas that were proposed to make Bitcoin better were never implemented, as rolling out advancements into the network could take a very long time, since any decentralized network requires that all the nodes in the network make the same change, or else there would be a hard fork. This disheartened Thomas greatly about distributed ledger projects.

And so, though he initially rejected the idea, Stefan Thomas eventually came to work on the XRP Ledger because of the team of people behind Ripple. Being able to work on the XRP Ledger seemed to be “like skipping ahead into the future” (in his own words). Being able to support different currencies and faster confirmation times and other things besides was like being able to evolve the original concept behind Bitcoin in a much more immediate way. That being said, XRP wasn't a fork of Bitcoin like much of the space at that point, but rather an entirely new blockchain built from the ground up. Because it was its own thing, the company was able to work on it on its own testnet and development phases without much public participation.

At Ripple, Thomas' job was to build a user client for XRP, since he did similar things for Bitcoin, as well as other projects. One of the more controversial moves was not building a smart contract capability into the XRP Ledger. This part of the podcast gets a little technical. But basically, this decision was due to complexities involved in using Google's Native Client, which didn't require developers to learn new programming language, but had issues like non-deterministic results (which compromise the security of the XRP Ledger) as well as lack of ease of communication between different systems. Stefan likened it to the abandoned approach of storing code inside a database, where a difference in what code is stored with which database actually created different databases, which, in distributed ledger terms, would completely halt the ability of a blockchain to continue to run.

Instead, a different approach, sometimes called the 3-tier architecture, was tried. This is where the basic data is stored backend, and a “stateless business logic layer,” which had different services which could communicate with each other (as well as with those outside of the system), existed to allow applications on top of all that to have more architecture flexibility. Had they added in functionality without this 3-tier architecture approach, it would have created an incredibly complex system like Ethereum. In such a system, things like denial of service attacks or even just extremely complex smart contracts would slow down or even disrupt the system by an incredible amount. Instead, the team decided that performance and security were the more urgent demands to be met, and that smart contracts could be a system which exist, but not within the actual ledger.

This leads the discussion to Codius and the Interledger Protocol (ILP). The idea would be to have decentralized applications that can affect change on the ledger, but are still independent from it. This was the basis for Codius, as well as ILP. In Stefan's own words, these different systems (i.e. XRP Ledger, ILP, Codius, etc.) all came about by deconstructing the whole system of blockchain, and understanding the different roles of each part of that system. The example he gives is how smart contract systems, which are essentially independent from the actual blockchain, don't always use the blockchain when running their code. In these circumstances, how do you pay the people who are running the code, without making them vulnerable to spammers? The way to pay, of course, is by allowing users to pay with whatever they want, rather than being locked into a specific blockchain. And thus, ILP, which allows transactions between blockchains and even non-blockchain forms of currency, was developed.

The conversation then turns to Coil and web monetization. As Thomas worked on ILP, the next step to ILP didn't seem to be a technological problem, but an adoption problem. The design of ILP made it useful for transacting any kind of currency in small amounts as well as cross-border, and was easily scalable. Concurrent to investigating problem was the problems with Youtube censorship and privacy, as well as certain web business models. Thus, it seemed like web monetization was a perfect application to build for ILP adoption. After all, advertising on the web, and the privacy invasions that result, is the primary way most things are paid for on the Internet. But that isn't really how most things are done in the real world. Instead, we pay directly for the good or service we want.

This makes creating a web business a two-fold process. First, is to invent your product or service. But second, it's also to come up with a way to get customers to pay. Thus, Coil and its new web monetization paradigm seeks to solve the payments problem. In this way, it's important to understand that Coil isn't a cryptocurrency or blockchain company (just like Uber isn't really an oil company), but rather uses cryptocurrency (currently XRP) when it's advantageous to do so.

My Thoughts

It's fascinating, and very apparent early in the interview, especially with Thomas's emphasis on paying international clients, how Ripple began its journey into cross-border payments. Given that the weaknesses he saw in Bitcoin had to do with ease of use and development as well as his origin as a web developer who found it difficult to pay international clients, it's easy to see how Stefan was drawn to the work that Ripple was doing.

It also seems like the original intent behind Bitcoin was to be a cross-border payment system. Or rather, it was meant to be a border agnostic way of payment—meaning that Bitcoin was designed to be able to circumvent any worry about borders and nations. It's similar to how the general Internet is designed.

If it is true that the basic philosophical foundation of both the Internet and blockchain (which are really one thing, and blockchain is basically Web 3.0) is found in global communication, then the speed and security of that communication, as well as ease of use and accessibility, will be the determining factors of whether any particular coin or Internet utility has value.

This can already be seen in the ways the Internet operates. The gradual development of broadband and cellular data has shown that speed is the most important infrastructure. Ease of use and accessibility are what current tech giants like Facebook, Amazon, and Apple tout, and are arguably what made those companies the most successful. Security is an interesting issue, but in the present day, most of us have some sort of trust in the sites and services we use. Or at the very least, we trust them more than the ones that we don't use.

This leads me back to blockchain. It seems pretty apparent that these principles are also what are driving much of the valuation of different cryptocurrencies today. Blockchain is, of course, natively secure due to its decentralized nature. Ease of use and access is also driving a lot of valuation. For example, cryptos like Basic Attention Token (BAT), Chainlink, Tezos, and others have arguably had a pretty great year so far. BAT in particular has a reach with creators, with now almost a million creators who receive tips and donations, as well as millions of people who use the brave browser.

Speed has yet to play a factor for crypto, however. For example, Bitcoin is valued extraordinarily highly, and yet its transaction speeds are abysmal. Ethereum recently had insanely high gas prices as well, which clogs up the speed of transactions unless one wants to pay those insane prices, and yet it is #2 in market cap. It seems as if crypto has yet to deeply value speed in spite of that important factor in how the Internet itself works.

Which brings me back to Ripple and XRP. As per the interview, the design of XRP was optimized for speed and security. In terms of valuation, it is currently sitting in the respectable #3 slot. Yet, in comparison to both Ethereum and Bitcoin, its technology is far beyond what both of those have. While Bitcoin can do around 4-5 transactions per second, and Ethereum can hit 44 transactions per second, the XRP Ledger can do 1,500 transactions per second, and if payment channels are enabled, can handle more than 65,000 transactions per second. Furthermore, because Federated Byzantine Agreement is the consensus mechanism behind XRP Ledger (rather than PoW or PoS), it is actually far more secure than those others as well.

But more importantly than tech, it seems that the work being done with XRP is much further reaching than any others. From Ripple's partnerships with Bank of America to Coil's partnerships with Wordpress and leading comedy websites, and others like Kava and Flare as well, it seems like XRP is poised to become the backbone of a new phase of the Internet going into the future.

It was great to be able to hear from Coil's CEO, and be able to see the man behind the ideas on which this blogging platform was founded on. Though this first part doesn't really go into Coil that much, it has certainly primed my excitement for the next episode. See you there!