[MUSIC PLAYING]
[APPLAUSE]
SPEAKER 1: Thank you so much
for the kind intro, Dave.
I'm not the man of
the hour, though.
These two are.
We have the founder of
Ripple, Chris Larsen,
and we have its current
CTO, Stefan Thomas.
We're very, very
excited to have them.
This is going to
be an awesome talk.
A little brief intro--
Chris got his MBA from Stanford.
He started E-Loan, which
is a mortgage lender.
It was actually
the first platform
to really give out FICO
credit scores to its users.
He started Prosper, which
is actually the first P2P--
peer-to-peer-- lending
marketplace in the US.
And famously, he co-founded
Ripple Labs, which
is the subject of today's talk.
So we're really excited
to have Chris here.
Stefan Thomas is the
CTO of Ripple Labs.
He was the CTO of numerous tech
companies like E-loan and Tech
Spare.
He founded WeUseCoins, which
created this Bitcoin primer
video which amassed
8 million views
and was a primer
for a lot of people
to just learn about
the basics of Bitcoin,
and it blew up on the web.
So I'd check that out.
And he's on the board of
directors at the JS Foundation,
and he's the current
CTO of Ripple.
Ripple describes itself
as the only enterprise
solution for blockchain.
It allows institutions
to send money globally
in a fast, frictionless,
and cheaper way.
And its broader eventual aim is
to create an internet of value,
which I'm really excited to talk
to both of these guys about.
So without further
ado, please give
a hand for Chris and Stefan.
[APPLAUSE]
Awesome, guys.
So can you guys just give us a
brief bio, in your own words--
your career and how you
came to found Ripple Labs,
and then get involved?
CHRIS LARSEN: Great, happy to.
And first of all, thanks for
having us, and thanks for not
making a Bart Simpson joke.
Appreciate that.
[LAUGHTER]
So yeah, as you
mentioned, we've been
in FinTech for
about 20 years now
with two start-ups previously.
E-loan and Prosper, kind
of the common thread there.
Those were focused
on the consumer.
Ripple, obviously, is
focused on enterprise,
and there's some
learnings that I had from
that I'll share later.
But the idea there
was using the internet
to democratize finance.
I think we did a
lot of good there,
but we were always limited
by just a fundamental lack
of infrastructure in FinTech.
So in my view, FinTech
really hasn't even started.
It has been a stepchild
of the internet boom,
because FinTech really has to
involve both data and money.
And so far, you've only had
the ability to move data.
So both a lot of excitement,
a lot of frustration
that we couldn't go further.
At the same time, it was
always keeping an eye
on what was going on
with virtual currencies.
And Bitcoin, obviously,
was a real breakthrough,
but there have been a lot
of attempts over the years.
And so we were watching
things like Linden dollars,
which was currency that existed
in the early days of Second
Life.
Phil Rosedale-- an amazing guy.
Still the coolest
guy in crypto, right?
Things like Vermont Dollars--
this idea of local currencies
in a very small community,
super interesting.
Obviously, Beenz
and Flooz, which
were two big,
well-funded projects
during the first dotcom boom
that failed spectacularly.
But it just seemed like
it was a matter of time
before you have a global
digital asset with no government
backing and no counterparty.
As far as Ripple itself,
we should actually go back
to about '04.
There was something called The
Ripple Project created by Ryan
Fugger, a Canadian gentleman.
He was just really a neat
guy, and he tried, really,
to give birth to this idea
of a peer-to-peer platform
for people exchanging
their own credit--
essentially, their own currency.
Every person would have
their own currency.
Super interesting concept
that was a big part of what
influenced us.
Fast forward to 2011, and
there was these three geniuses
that got together--
Arthur Britto, Jed McCaleb,
and David Schwartz.
And this is, of course,
after Bitcoin was
created a couple years earlier.
They were fascinated
by what Bitcoin did,
but they were frustrated by
the enormous waste of energy
that is at the heart of mining.
That's the core part of Bitcoin.
So they set out to build a more
efficient consensus algorithm,
and they came up with
something really beautiful.
They also were inspired
by what Ryan Fugger had
done at The Ripple
Project, and also
brought in that idea of
pathfinding algorithm
so that anything of value
can be exchanged along
with that digital
asset to really--
I think that was the birth
point of this internet of value.
STEFAN THOMAS: The
Interledger Protocol,
which we'll show
in a little bit,
actually is almost like
an overlay protocol
over blockchains, but then also
traditional financial systems.
And that allows you to
innovate in different parts
of the network
independently instead
of having this central
governance model where everyone
has to agree to any rule
changes that are happening.
CHRIS LARSEN: Yeah, and I
think this is a critical point.
I think we came to a realization
that a blockchain was not
going to be the solution to
the biggest problem we think
the world has right now in
this whole FinTech area,
which is-- there is
no internet of value.
And a lot of people talk about--
Bitcoin's going to be a
new protocol for money.
Well, it's really
a database, right?
So a single database or a single
network cannot be the network
of networks.
And so that was the big flaw,
and that's what led to, I
think, Stefan having this
ah-ha moment of the need
for something like ILP, which
was a dangerous moment for--
STEFAN THOMAS: It was scary at
first, because we were trying--
we were out there promoting
this asset like XRP.
Telling everyone, hey, you
should put all your balances
on this ledger.
You should do all
your transactions
through this one system.
And we knew the
friction from that,
but then again, stepping back
from that and suddenly saying,
oh, there are going
to be many systems?
Was very scary.
And so we actually
waited almost a year
to publish the white paper
until we had, in our minds,
a result-- a strategy
around, what's
XRP's role in this new
world, and how do we
make sure that our
technologies are
still needed and still necessary
and can benefit this new world?
How do we re-architect
everything
to serve this new world?
So I think we're still in
the process of rolling out
all of the different pieces.
But it was that 1 year
period from, I would,
say mid-2014 when we first
had that realization,
to October 2015 when the white
paper for Interledger came
out--
where we tried to put
all the pieces in place
for [INAUDIBLE].
CHRIS LARSEN: Because
remember, Ripple always
was different from Bitcoin
in that you can put
anything of value in it, right?
So this idea of--
we call it IOUs or balances,
but really being value agnostic,
and that then being the
engine for the exchange
of that thing of value.
But having the combination
of ILP with XRP--
we think that's
the killer formula.
STEFAN THOMAS: Now you can
have any type of value--
any currency-- but also
any type of ledger.
So anything from a
centralized ledger
to a blockchain, et cetera.
CHRIS LARSEN: And
if you look at--
stepping way back, the
macro problem that we think,
again, the world has is lack
of an internet of value.
You argue that this gets
to the heart of the problem
with globalization, which is
obviously under a lot of stress
today, right?
It's not working
for a lot of people.
And we don't think of it as,
well, globalization's bad.
We think of it as,
globalization's actually
incomplete.
Until you have an
internet of value,
you really can't have
true globalization.
You need these three core
interoperability technologies
working all together.
You need interoperability of
data, of goods, and money,
right?
So the world today, of course,
has interoperability of data.
It's completely transformed the
world over the last 20 years.
It has interoperability and
goods through a simple thing
called the shipping container--
which, before that was
invented, shipping stuff
was incredibly inefficient
and labor-intensive.
Stuff would arrive at one port.
It to be ripped
apart and reshipped.
With a shipping container,
your ship to train to truck--
any port in the world,
you have interoperability
of goods since the 1950s.
That's sort of what
internet of value is.
It's like the shipping
container for value.
And again, that can't
be a blockchain.
A blockchain is like a single
shipping company that will--
you'll max out that
shipping company
and you'll have a dependency
on that one shipping company.
A shipping container, you
can create endless shipping
containers.
It has no effect on any other
shipping containers deployed.
That's sort of what ILP--
almost the ultimate
decentralization.
So that's kind of how
we're thinking about it.
STEFAN THOMAS: For the technical
people in the audience,
it's a stateless protocol.
So you can literally just run
it over different systems.
So doesn't keep any
balances, et cetera.
CHRIS LARSEN: And then we
think really good things happen
when the world finally has a
full globalization platform,
but this has to happen.
And again, what is
this meaning now
that we don't have it right now?
It means-- we all
know $750 to Europe
is kind of impossible, right?
We know the example--
the Airbnb host in
Tanzania who should
be making $29 on a rental,
and by the end of the day, $9
is showing up.
This is an actual
example, right?
So that's a problem with
relatively big amounts
of value.
Think about the 2 billion
people in the developing world.
The Gates Foundation would say
they need to be able to send
$0.50 to be real participants
in the global economy.
Take that even further.
If you think about all
the connected devices
and applications
that probably should
be, in power, the
same value, that
might need to be a
thousandth of a penny.
That's just not
possible until you have
this internet value in place.
So the world is being
held back by this,
and we think that's the true
breakthrough that this whole--
whatever you want to
call this industry--
really is all about.
SPEAKER 1: There are
some detractors of Ripple
that say it's this centralized
blockchain, or the enterprise
blockchain.
A lot of Bitcoin loyalists,
and Bitcoin in general,
might have come out of an
anarchist or cypherpunk
movement early--
[LAUGHTER]
--on as part of that.
And so that's the
general criticism.
So I wanted to give you guys
a chance to respond to that,
and then I'll combine
the second question,
because Stefan has an
awesome presentation he's
going to give.
The second question
is, we are living
in a crazy environment in
terms of cryptocurrency-- just
speculation on the price
of tokens and blockchains.
Do you guys think we're
in 1999 right now?
Is this a dotcom bubble
that we're experiencing?
So yeah, those two questions.
STEFAN THOMAS: OK, so
I'll take the first one.
You can--
CHRIS LARSEN: Sure.
STEFAN THOMAS:
--talk about dotcom.
So first of all, the enterprise
part I take as a compliment.
I think that's precisely
what we're trying to do,
is we're trying to build
the first blockchain that
can actually be used
for real use cases.
When you think of any
distributed system, when
you take a distributed
systems class,
the first thing
your professor will
tell you is your
distributed system's
still only going to be as
good as the nodes it runs on.
And so if you think
of bitcoin miners,
they're only incentivized to
basically hash as efficiently
as possible.
They're not incentivized to
provide physical security
for the data centers.
They're not incentivized
to make decisions
in the interest of the network.
So they have a
very pure incentive
to just hash as
much as possible,
get paid, rinse and repeat.
In the case of Ripple,
since the validators
are chosen by the users, if
a validator, for example,
votes against a block
size increase or something
like that if there were
an issue in Ripple, then
you would eventually find
that users would no longer add
that validator to their list.
And so that validator would
slowly lose influence.
And so it's not as
much of a system that's
tailored to users
like Bitcoin is,
where anyone can just
run a node and it just
auto-configures itself,
connects to the network.
You do have to do that
validator selection manually.
You have to think about--
politically speaking--
which validators
do you want to empower
with your node, et cetera?
So it is more
targeted at actively
being managed by companies,
things of that nature.
But I think the reason that
that makes a lot of sense
is because when you
actually go out there
into the market,
the evil people--
you mentioned I'm an anarchist.
So I really want to
empower people, right?
But the people that you've got
to fight are not all the banks.
There are a few very,
very powerful players
in the market that take
a little bit off the top,
and those are the people
that you want to bypass.
And then everyone else--
there's a lot of small
banks and regional banks
and so on that
we've talked to that
are really trying to provide
better user experience.
They're really trying to
provide lower fees, et cetera.
Those are the companies that we
want to work with and empower,
and it's not just banks.
It's payment providers, mobile
money providers, and so on.
So that's where that
different approach comes from.
And on the
centralization point, I
would say that there are a
lot of different definitions
of centralization,
and we're going down
the list of meeting more and
more of them as we progress.
One of the ones that
we don't meet yet
is that we still run a majority
of the trusted validators.
But that's something
that we're--
this year-- going to start
rolling out in terms of,
we have already got a lot of
third-party validators running.
So people are going to start
trusting them this year.
And so that's just one more
step to go in that direction.
And I think if I compare it to
where we were with Bitcoin--
with Bitcoin, we had some
level of decentralization.
Again, meeting some of the
definitions but not all.
For instance, there's
no geographic diversity.
It's very concentrated
in China right now.
But we didn't have a very
good roadmap in order to-- how
to overcome that, because
the system is really--
it's just centers are set up
in a, I would now say, bad way.
Whereas with Ripple, the
incentives are in order.
And so it's just a matter
of validators having
the right amount of
operational histories
so people actually
start trusting them,
and us having enough
confidence in the software
to actually continuously let go
of more and more of the reigns
here.
So I think, for Ripple,
it's a clearer roadmap
to get to a very high
level of decentralization.
CHRIS LARSEN: And bottom
line in decentralization
is-- there's a bright line.
If Ripple did not
exist, would the network
continue to function?
Yes.
So that's that hard line
of which side you're on.
And then, I think, it's
Stefan's point-- a variety
of gradations from there.
And then second, I think, on
what's going on in the market
today--
so obviously, a really
interesting time in this space.
Clearly, there is a lot
of speculative interest
that's going on, and I
break that into two parts.
One is there's
clearly a lot of--
almost crypto day
trading going on.
It's almost like the days
of the early internet
with all the day trading.
And I think, probably
if you look back
on most people that were
day trading back in 2000,
I bet it didn't work
out that well for people
that were doing that.
People shouldn't do that.
You could lose everything.
It's just not a good plan.
People should not be putting
their retirement money
to work day trading
cryptocurrencies.
And I think there's
a lot of skepticism
that you see out there.
Nathaniel Popper, for example,
of "The New York Times"--
he writes about
that skeptically,
and he's right to be skeptical.
So people should be
very careful with that.
But a second part of
speculation, I think,
is being, now, increasingly
driven by institutions.
So institutions' funds-- we
would call it the Wall Street
tidal wave--
is coming into play here.
And I think what's
going on there
is that very sophisticated
people are saying--
investors are
saying-- look, there's
some meaningful percentage.
That this is, in fact,
a second internet.
And this internet of value
can be as transformational.
That's a longer-term call
that that's going to happen.
So I'd say that's more
constructive speculation.
And I think those institutions
and those professionals,
they've seen what's happened in
this last 20 years of the net--
the great promise, the
over-hype, the total bubble,
the crash.
And then fast forward 20
years where we are today.
If you look back,
you'd probably say,
probably the early promise--
it was probably
under-hyped given
the impact that all of this
has had on human existence.
So that's a more
constructive view.
The use cases for industries,
enterprise, payment providers,
and other things--
that is coming on board.
So I suspect that ratio of--
hopefully the long-term
speculative activity
and the use cases
starts to look more
like what you see
in normal markets,
because those things
can actually work
pretty constructively together.
One last point on that
I think interesting is--
in the first internet, that
started with institutions--
VCs and then Wall Street--
and then went on to this day
trader dynamic that you saw.
This is kind of the
reverse of that, actually.
It started with individuals,
and now the institutional wave
is coming on board.
So that's a little
bit different flavor.
But definitely, I
think, the world's
never seen anything
like this before.
So it's trying to grapple,
what are the metrics?
Do you compare it to Visa?
Do you compare it to gold?
Is it the first protocol
that can be monetized?
Lots of new questions.
SPEAKER 1: Awesome, guys.
Really appreciate it.
Stefan's now going to give
an awesome presentation
about what's in store on the
technical side for Ripple,
and then Chris is
going to stay here.
Stefan's going to
come back, and we're
going to do a little
Q&A with the audience.
So take it away.
STEFAN THOMAS: So what this is
trying to illustrate is if you
deploy Interledger
on some network--
and we envision that there will
probably be a global instance
of it, just like the internet
has a global instance--
then you have these
different nodes--
these little blue nodes here.
And we call them connectors,
but they're basically
like routers and IPs.
So they basically take
in packets on one side.
They look at the
destination on the packet.
They compare it to
their routing table,
and then they
forward that packet
towards that destination.
Whenever you look at any kind
of blockchain presentation,
there's a pretty
good chance you'll
see some kind of graphic
that has nodes connected
by lines, some kind of graph.
And you'll hear things like,
Bitcoin is the TCP/IP of money.
And when we hear that, we cringe
a little bit, because if you
know anything about how TCP/IP
works and how Bitcoin works,
they are very
different protocols.
They're two very different
things in a very different way.
And so the challenge
that we always
have when we talk
about Interledger is it
is actually a lot like TCP/IP.
And through this
little presentation,
I want to try to convince
you as to why I say that.
But people already have
usually seen some kind
of blockchain presentation.
It already looks
a lot like this,
but is a little bit
more superficial
in terms of the similarities.
And so if I want to send a
packet into this network,
I just send it to whichever
connect I'm connected to,
and it should find its
way to whatever receiver
I've put on it.
So in that way, it's
a lot like TCP/IP.
Now, you might say, OK, so
you're routing these packets,
but how does actual
money really move?
So the way that that works
is that once you have a path
and you're sending
these packets,
each link is responsible
for its own settlement.
So what we tend to do is if
you have two connectors that
have a peering relationship
with each other,
they're going to
have this packet
traffic going back and forth.
And so they're going to
look at those packets,
and then they're going
to eventually settle.
And for the core
of the network, it
makes the most sense to settle
through a digital asset.
And the reason for
that is that they
are very easy to move
internationally across borders.
You have very low costs in
terms of when you move them.
And since you're
going to have a lot
of inbound and
outbound traffic, it
makes sense to just stay
in that digital asset
to do all of your settlements.
But of course, the
majority of people-- users
out there-- don't actually have
easy access to digital assets
yet.
And so you do need
some form of support
for traditional payment systems.
And the interesting thing
is that all these settlement
networks really do is move
payments across, or move money.
And so that's something
that is supported by all
the legacy payment networks.
So what we can actually
do is we can just
aggregate to a greater degree.
So we wait a little bit
longer before we settle,
and then we send one
big payment across.
So you see that
at the beginning,
here with the sender--
down there-- and the
receiver in the upper-right--
where those settlements
are happening a little less
frequently, and they're
a little bit bigger.
And they're probably a
little bit more expensive,
but they can settle
lots and lots
of these individual packets.
And so with this
architecture, what
that means is that from
an end-to-end perspective,
we can send a packet at
incredibly low latency.
We can send it at an incredibly
low incremental cost.
And so that's
really what makes it
feel a lot like the internet.
You can really just connect
to lots of different services
and pay for lots
of different things
without accumulating a lot
of fees while doing that.
And then, sure there's
a settlement eventually,
and hopefully these
last mile settlements
will get more efficient-- just
like internet connectivity went
from 56K modems all the
way up to what we have now
where I have Google Fiber.
So I'm very happy with that.
So yeah, here's a little chart
of the actual architecture.
And again, if you're
familiar with TCP/IP,
they draw the same
kind of picture
with the four layers,
which is sometimes called
the internet architecture.
It's a little bit less detailed
than the OSI architecture,
but I won't bore you with that.
It's just a reference for
the people that know that.
So the four layers actually
work very similarly
to the four layers in TCP/IP.
So I just want to go
through those four
to give you a sense of how
this all works together.
The way you should think
about the Interledger layer
is-- that's essentially
an abstraction layer.
So that's basically
the thing that you
have all the different ways
of moving money below it,
and then you have
all the different use
cases for moving money
above it, and it brings them
all together.
So in the case of the
internet, it would be--
the internet layer has
all the different ways
of moving information below
it and all the different use
cases building on top
of it, and so now you
can have all these
different combinations.
I can make a Skype
call over my WiFi.
I can send an email over
my satellite internet.
So it really doesn't matter
what use case I'm using
and which network I'm on.
I can combine them
in different ways.
And so this is doing the
same thing for money.
OK, now an application layer--
this would be the
equivalent of HTTP, SMTP.
This is use case-specific.
You would make different
application layer protocols
for different use cases.
So one that we've
designed so far
is called SPSP, or Simple
Payment Setup Protocol.
And basically, all that does
is it defines what a internet
identifier looks like.
So think of that like
an email address.
And you could send to
that type of identifier
if you wanted to pay somebody
as on a peer-to-peer basis,
or you could build
that into simple apps.
It's not super efficient,
so it's like HTTP--
general purpose
application layer protocol.
You could make a much
more specialized one.
So for instance, we
did an experiment
where we built payments
into WebTorrent.
So basically, to pay the
uploaders, but also the content
creators, which I is a
really cool aspect of this.
It's sufficient
enough that you can
pay a lot of different parties
in the flow of whatever app
or interaction that
you're a part of,
and we'll see a demo
of that in a bit.
But I think this is where
I expect a lot of variety,
is on the application layer.
Now we'll talk about
that transport layer.
So if you're
familiar with TCP/IP,
this is where you find your TCP.
And TCP is really common to a
lot of different application
layer protocols
that build on it,
and it gives you some
basic services, right?
It gives you sequencing of
packets so that your data comes
out the right order.
It gives you retransmission.
If a packet gets lost, it'll
send it again, and so on.
And we have a transport
layer protocol called PSK2,
and it does a lot
of the same things.
It's responsible
for doing things
like-- if you send
a large payment,
it'll split it
into smaller chunks
and then reassemble them.
It'll do things
like retransmission
of payment packets, et cetera.
So again, I'm trying
to really get across--
we're copping from
the internet a lot.
And we have to give
them a lot of credit,
because a lot of the things
that they do actually
apply to money very well.
Now, the Interledger layer
is an interesting one,
because that's where
all the routing happens.
And when we first started out--
I'll tell you one
anecdote about the design
of this layer, which is--
when we first started
out, we assumed
that the routing
would have to be
quite different, because we're
talking about money after all.
We're not talking
about information.
And so we knew about BGP
and how it works and so on,
but we thought a lot of those
things wouldn't be applicable.
We wanted to route by
the lowest cost path.
We thought that that was
the most important thing,
was to minimize the fees.
But as we actually
building it, we
realized that if you optimize
by fees, what can happen
is somebody in the network
just advertises a absurd rate.
So they just advertise, hey, I
can exchange $1 for 600 euros.
Now, that's suddenly
the best path
to take for absolutely every
payment in the entire network.
Now, what do you think
is going to happen?
So that node's going to go down.
Obviously, that rate was
never real to begin with.
And so the whole thing
just breaks down.
And so one of the reasons for
the way that BGP is designed
is to make the
length of the path
one of the primary metrics.
And what that does is
if someone advertises
some ridiculous metrics,
you're still only going
to take down his
immediate neighborhood,
because for everyone
else, it's still going
to look like a big detour--
a very long path that
they don't want to take.
And so it turns out
that even for money,
the length of the path is
just a very good proxy for all
the other things you
might be interested in,
like how reliable is it?
What's the latency?
What's the fees?
Those are all lower, or tend
to be lower, for shorter paths.
And so we can do
exactly what BGP
does in terms of
routing by shortest path
first, and then using
other metrics to tiebreak
if paths are the same
length, picking the best one.
And we just basically add
fees and other metric,
just like the
internet has latency.
I already talked a little
bit about the settlement.
The key thing to
mention here is that all
we need from the
settlement layer
is that it can transmit money.
It doesn't have to be very fast.
It doesn't have
to be very cheap.
If it's slower, we
just settle less often.
And just to give you some
examples of the kinds of things
we've integrated
with already, there's
XRP [INAUDIBLE]
plug-in, so that's
settling using the XRP Ledger.
That's the most efficient
plug-in right now.
That's one of the
reasons that we feel good
about this strategy.
We're actually
seeing, in practice,
that our own
products score really
well on these different
metrics in terms of,
what ledger would you actually
choose for settlement?
We've done a
Lightning integration.
So we did a little
test where we actually
connected the Bitcoin Lightning
Network and the Litecoin
Lightning Network together.
If you're not familiar
with Lightning,
it's basically a
scalability overlay network
for currencies like Bitcoin.
And then you could do
something like ACH.
You can even do cash
if you want, right?
So you can have a relationship
with an Interledger service
provider where it
basically says, I give you
cash ahead of time, or you
give me cash ahead of time,
and then we can exchange
packets up to that amount
until we reach that
balance, and then
we have to settle up again.
OK, now with all
that prefix, I'm
going to give you a
bit of a live demo.
And this is going to go fairly
quick, so pay attention.
So basically what we're
going to show here
is the Easy Website Maker.
So Easy Website Maker is an
app that somebody put together,
just uploaded it to GitHub.
And basically, it allows you
to create a website from just
having a little sketch.
And now, obviously we didn't
build all the difficult parts--
the AI parts.
That's what you guys are for.
But we did do all
the payment stuff.
So all the payments are actually
going through Interledger.
There's actual payment
packets being exchanged.
And we try to visualize
that a little bit
later by having
a log of packets.
And basically, what
this app does is--
I put in a sketch and it
goes to one vendor that's
offering an API--
a paid API-- that can turn
sketches into actual HTML.
And then it'll go
pay another vendor
to actually package that
into a Docker container
and upload it somewhere.
And then another vendor to
host the actual live website,
and then another
vendor to buy a domain.
And finally, we'll
tip the developer.
So I'll go show you
what that looks like.
So first thing I need to do
is I need to pick my sketch.
So I'm just going
to grab one here.
And so this is the
sketch of my website.
This is probably a
little bit small to see,
but it has some text and
it has a little chart,
and it has some more text.
And just to be clear,
again, the AI's mocked up.
We didn't actually create
the AI just for the demo.
That would be ridiculous.
But yeah, in the future, this
could very well be possible.
So now I'm going to
say, Make My Site.
And now things are going
to happen very quickly.
So it's going to upload
that sketch to that AI.
It's already done.
And now it's uploaded
the finished HTML
to get back to a
service that turns it
into the Docker container.
And as you can
see on the right--
and I might do the demo twice
just so you can see it again.
On the right, you saw
the total amount paid.
This is in XRP
Drop, so this would
be one-millionth of an XRP.
So total paid would be
0.1 XRP, which is about--
what is that, like $0.02, $0.03?
Sorry, $2, $3.
CHRIS LARSEN: No many cents.
STEFAN THOMAS: Point--
CHRIS LARSEN: Sorry, $0.20.
STEFAN THOMAS: Yeah, it's like
$0.30 or something-- whatever.
So you can see the
individual packets,
and there's a couple
things going on.
And I think I will run
through the demo again,
just so you can see.
So first, when we paid that AI,
we paid a one lump sum amount.
And then the
packager is actually
a streaming paid
end point, so that's
a paid end point where
as we send it data
and we ask it to do things,
we'll stream packets
to it to keep it paid.
And if we ever
don't keep up, it'll
stop working until
we pay it more.
And then we deployed it to
a host, bought a domain,
and then sent a tip
to the developer.
And I can actually click
this button here and then
look over here.
And as you can see,
our website is now up,
and I can actually show you.
All this is running locally,
but we got a domain, et cetera,
just like set it up.
So let's go through
the demo one more time
just so you can see
the streaming payments
part a little bit better.
So I'll pick the same website.
So here on the right, you
can see total paid right now
is 500 drops.
That's to pay for the AI.
Now we're streaming to
pay for the packager,
so this is going in
250 drop intervals.
And then we have a large
expense to host the web site--
9,000 drops.
It's over 9,000!
[LAUGHTER]
To actually buy the domain.
And then finally, we tip
the developer 1,000 drops.
And so if I make
an app like that,
I have a built-in
business model.
And I that's really the key
point to get across here,
is I think this will have
a huge impact on the web.
Think about-- if I start
a convenience store,
I don't need to think about
what my business model is.
My business model
is-- people pay me
when they come buy things.
When I open a
restaurant, I don't
think about my business model.
My business model is--
people pay for the
food that they eat.
On the internet, we
have this weird thing
where there isn't a good
way to charge people
for using your website, and
so we build advertising.
We build subscriptions and
all kinds of hacky workarounds
for how to get money
out of people just
from visiting your website.
And I think this will present
a pretty efficient alternative
in the future, where
people can just
pay you for using your site.
So that's it.
And we can go back to this.
Thank you.
SPEAKER 1: Thank you, Stefan.
[APPLAUSE]
Cool.
Now we'd like to open it up
to questions from you guys.
Does anybody have any questions?
AUDIENCE: Thanks for
the presentation again.
Yeah, so there's a
lot of different coins
that deal with payments, like
Ripple, Litecoin, Stellar,
for example, that I've heard of.
Can you go a little bit
over the basic differences
between all those different
payment platforms?
And then also, do you see
one payment platform just
dominating and we all just
use one of them, or can
these somehow live in
harmony, kind of like USD
and euros and whatnot?
CHRIS LARSEN: So
on the second part,
I think it's going to shape
out a lot like what you're
seeing with fiat currencies.
I mean, the world kind of has
four majors, maybe five majors,
and then there's
everything else.
And I think that probably plays
out here, simply because--
particularly with this Wall
Street wave that's coming,
a lot of those institutions,
they're not buying--
how many?
2,000 different coins
and platforms out there.
They're grabbing top 10 or
5 or some smaller number.
And in currencies,
liquidity begets liquidity.
All of this is about,
how much liquidity
is supporting these platforms
and these currencies--
or commodities, whatever
you want to call them?
There's still a lot of debate
on what they actually are.
So I suspect that's
going to accelerate.
And that liquidity, then,
attracts more use cases.
For example, Ripple the company
focuses on the enterprise use
case.
But we see XRP as very much a
general, global digital asset
without a counterparty.
So you'll see more
and more use cases
popping up from
different angles,
and that just drives
more liquidity.
So I think that's
probably the way it--
might be how it pans out.
STEFAN THOMAS: Yeah, I think the
reason we developed Interledger
and the reason we built an
interoperability protocol
was because of that
exact realization.
It wasn't going to be
everyone using one system.
There was going to be a
number of different systems.
And actually, behind it
is another realization,
which is-- my goal
has always been
to solve the problem of
friction payments, right?
And so I realized that
the centralization
wasn't necessarily the solution,
because you see PayPal.
They come out.
They're free.
Then eventually they
jack up their fees
when they have an
established market position.
But then you see Bitcoin
doing the same thing.
Not necessarily
with as much agency,
but it still happens that way.
And so what you got to think
about is, right now, when
you're on a payment
network, you can only
send money to the people
on the same network.
And that's kind of pre-internet
online services, where
you could have CompuServe
and you can email anyone
on CompuServe and you
can use any services that
are on CompuServe, but you
can't access any services that
are on GEnie, right?
And so CompuServe has this moat.
They have a defensibility
around their reach.
And so that's really what
you got to commoditize
and what you got to attack.
And so with payments,
it's still that way today
where if you're on the
same payment network,
you can pay each other.
If you're on different
networks, you can't.
If you want to pay from
your Paypal account
to a mobile money account
in Tanzania, you're screwed.
You can't.
Yet I can totally go on my
mobile phone in Tanzania
and open any website
in the world, right?
So we need that
interoperability,
and that's really what
creates the competition that
drives down the costs.
The reason we think
that XRP is going
to have a role in this system
is because we've been doing--
I mean, not to toot
our own horn too much,
but we've been doing really
well in terms of the performance
and the characteristics
of the protocol.
So I think a lot of
people will choose
to use XRP if there is
a lot of competition.
Because right now,
you use Bitcoin
even though it's expensive.
You use Bitcoin even
though it's slow.
I think if there's a
lot of competition,
people will pick
the most efficient,
which would be XRP right now.
CHRIS LARSEN: Yeah,
I'll add that as well.
It's an environment where a
lot of the volume, I think,
is speculative.
I actually think
that kind of use case
has a greater tolerance
for cost speed--
doesn't really care, right?
Whereas as you start
getting into these use cases
where you need millions
of some kind of unit,
that matters a ton, right?
So as the ratio of real use
cases to speculative volume
changes, I think that dynamic
becomes more important.
SPEAKER 1: Next question?
CHRIS LARSEN: Thanks.
AUDIENCE: Thank you.
AUDIENCE: Hey, thanks
so much for coming.
My question is around--
so if you're talking about
that XRP and cryptos are
the internet of money,
the big difference
between money and data
is that money is regulated.
And banks-- certainly if
they were the equivalent
of running the
phone lines before,
have a pretty big incentive
to innovate and get ahead
of a change that is coming.
So you could see them easily
upgrading the Swift protocol
to be able to move money
internationally a lot quicker.
And so I'm curious how you guys
see specifically XRP living
in a more regulated space.
I think cryptos took the
world by storm and governments
are going to certainly
respond the next year or two.
So why do you think
that XRP is going
to be able to live in a
much more regulated industry
than data is, especially because
you could see banks upgrading
Swift to be able
to support, maybe,
sub-minute transactions instead
of transactions that take days?
STEFAN THOMAS: I want
to like quickly question
some of the premises in there.
So I think a lot of
the people in the room,
I think, are young.
And so we grew up after
the deregulation of data.
So the internet came out, and
a lot of the laws that were
around before then-- copyright
law, cryptography laws,
export restrictions
around algorithms,
things of that nature--
actually got removed
and safe harbors
got created, because
the internet posed
the technology that was, on
the one hand, very useful,
and on the other hand, kind
of in a legal gray area.
So I think that the
technology-- just if you use it,
it just feels so
incredibly useful that it's
hard to imagine how regulations
wouldn't be built around it.
I think that there's definitely
an opportunity for people
to be thoughtful and intelligent
about how they approach
the technology in the meantime.
You want to be compliant.
You want to do
everything that you
can to stay within
the letter of the law,
but there are going to be
ambiguities in terms of just--
the law is not written for
these kinds of use cases.
So I think that's one thing.
And then as far as XRP, I think
I'll hand it off to Chris.
CHRIS LARSEN: Yeah, I
mean, you're raising,
I would say, a key part.
And as I mentioned before,
the internet of value
is equal parts capital,
technology, and compliance.
Compliance is hugely important.
And the reason is simple.
I don't think it's just
because governments
want to have a monopoly.
I think it's actually
more a question of--
data's powerful, but money's
more powerful, right?
Data can show you a
life-saving medicine
that your family might need.
You can't buy it.
Money can buy it.
On the flip side, data
can encourage a terrorist
to do something awful.
Money can buy the
weapons, right?
So the stakes are higher--
which, I think, actually,
this is going to have,
maybe, a more profound effect
on our Earth-- good and bad.
So regulators have got to be
there every step of the way.
This fantasy that somehow this
is going to bypass governments
and bypass compliance--
you know what?
That's just B.S.
And you know what?
Nobody wants that.
Nobody wants that.
That is a champagne problem with
a bunch of rich young people
that can sit there behind
their computer screens
and block out a lot of bad
things that can happen.
So it just can't go that way.
And so I think we're trying
to think about that, trying
to be pragmatic about that.
Because that's the only way
we're going to have impact.
And if you look at people that
are trying to support what's
going on in the
developing world,
they are very much
wanting to work.
They're not trying to go around.
They're trying to work
within the system,
because they know that's how
you're going to have impact.
So that's the way we see it.
Your question about
Swift, by the way--
the problem with
that point of view
is Swift only deals
with the data.
They have a correspondent
banking partner
that deals with the value,
and that's off any sense
of an internet of value.
The whole point here is that
something like Interledger
and XRP can eliminate
the correspondent, which
is actually where all
the juice is, right?
That's where all the waste is.
That's where the
sediment risk is.
That's where the failures are.
That's where the time is.
So Swift actually doesn't have
the combination of capabilities
to do what you're saying.
Sorry.
So thank you for the question.
AUDIENCE: That's a
pretty cool demo,
and I just wanted to learn a
little bit behind the scene.
For example, the AI--
how the full build AI
[INAUDIBLE] goes to the AI bot.
STEFAN THOMAS: OK, so
we built a protocol that
takes Interledger on
the one side and takes
HTTP on the other side,
and essentially you're
making REST calls.
You're making API calls
to these back ends.
And the first time you make the
call, they'll respond with 402,
payment required, which is
an error code in HTTP that
was already reserved.
And we were like, great.
That works for our use case.
And basically, it sends you
back a header that tells you
all the information
that you need
to know to make Interledger
payments to that exact end
point, or the API server
that runs that end point.
And so that server
will be listening
for Interledger packets, in
addition to the HTTP requests.
And so when you
start paying, yeah,
it'll go back into
that same receiver,
and then the receiver
will then credit your--
what we call a token.
And then the next time you
make a request, it has--
in the header--
your token.
And so the receiver will
know that you've actually
funded that with some
packets, and then you
can proceed through the program.
The streaming version of
the demo that you saw--
that's a little bit
more complicated.
This probably goes
beyond, but we can maybe
catch up about it later.
And then one thing that's
also interesting is
that one of the services,
which is the thing that builds
a static site into
a Docker container,
actually itself pays
another API, right?
So you have another
API behind that.
And so one of the things
that's really cool
is with these
streaming payments,
we can actually have an
API that takes in money,
and it immediately
spends it as it's
trying to process the request.
And then maybe sends a little
bit as profit to the developer,
and then returns the result.
So there's a lot of cool stuff
you can do with it.
AUDIENCE: Great, thanks.
AUDIENCE: Thank you guys
for coming to speak today.
I'm curious to
learn more about how
you might prevent money
laundering and companies that
participate in--
the payday loan-type companies
from coming on the system, that
exploit people financially.
I'm interested to learn more
about that sort of thing.
CHRIS LARSEN: Yeah,
so I think we really
try to focus on the
bottom of the payment
stack-- so on the
infrastructure part of it.
And again, a reason for that is
that a lot of the things that
prevent bad things from
happening are top of the stack,
and a lot of that
actually doesn't
need to be reinvented, right?
And the way we think
of it is, let's focus
on what's really changing.
And we think this is
the interoperability.
It's the idea of a digital
asset with no counterparty that
can be sent anywhere in
the world that's neutral.
So those are the
things, I think,
that we can change and
then piggyback off of.
The enterprise focus now
is that first beachhead.
Piggyback off of what
already exists for hundreds
of millions of people.
The other thing I would say is
that if this internet of value
becomes a reality, I
think the prevention
of things like payday lending--
obviously, that has
to be regulated.
That's a big part of
it at every level.
But the other big thing to
what Stefan mentioned before
is the commoditization of reach.
If you have that,
suddenly now every market
has way more competitors
for financial products.
And there was some
that we saw-- we
had Prosper and E-loan-- we
got frustrated with because we
were US-only.
You couldn't transport
it to another market,
because you were in
another network, right?
This future vision, I
think, is that the world
is one big financial
supermarket,
and everybody is
competing in every market.
I think that goes a long way.
But you still need all the
other regulatory components
pretty much existing.
Some may go away, but I'd say
probably most of them don't.
I don't know what you
want to add to that.
STEFAN THOMAS: Yeah,
I think that with--
you mentioned
anti-money laundering.
I think there's a
long list of things
that are actually completely
separate issues, right?
There's consumer risk.
There is any money laundering.
There is anti-terrorism finance.
There's all kinds
of different things
that you have to think about
when you're building a payment
system.
And so if you have
a stack like this,
they'll fit in different
parts of the stack.
For instance, consumer
protection-- that
would fit in the
application layer.
So if you're building an
application where consumers
are sending money,
you have to think
about how to protect those
consumers from sending it
to the wrong people.
If you think about
counterparty risk,
that would fit in the
ledger layer, right?
So you have a counterparty.
They settle with you
on a certain schedule.
How do you make sure they
actually settle with you?
So there are a myriad of
things to think about.
I think that it's
illusory for us
to come up with
all the solutions.
I think we're trying to
be thoughtful in terms
of getting it to a point where
we can start experimenting
with it and get more
experience with it,
but that's going to
require commercialization
of the technology to
really think about all
of those use cases.
And I would also highlight that
Ripple has a commercial stack
and a commercial feature set.
And that is very
much, like Chris
said, riding within the
existing regulatory framework.
And then we have
the open protocols,
which are maybe a little
bit more forward looking.
And I think some
of those questions
are more difficult there.
So what you saw us present today
is the more forward looking
stuff.
So I think some of those
questions are still open there.
AUDIENCE: Thank you very much.
CHRIS LARSEN: Thank you.
AUDIENCE: Hi, thanks
for the presentation.
So since the tech is
currency agnostic,
what would be the incentive
to choose XRP over fiat
or any other cryptocurrency?
STEFAN THOMAS: So this
is where I'd almost
love to ask my colleague up
on stage, because we have
our team who is actually
trying to integrate
with these different digital
assets and different payment
systems.
And it's just many
orders of magnitude
of difference between XRP
and, let's say, Bitcoin.
And still several
orders of magnitude
between XRP and
something like Litecoin,
which is known as a
more efficient asset.
And it's just a
pleasure to work with.
And part of it is it's been
designed for that, right?
It's been designed to be
used as the settlement
asset in Interledger, and so
has a lot of functionality--
like payment channels
built in a certain way that
are incredibly efficient for
this particular use case.
And so I think the big
answer-- the main answer-- is,
right now, it's just
the best thing to use.
We talked to people.
Hey, let's set up a connector.
Well, what do we peer with?
Well, we could use Litecoin,
or we could use XRP.
But XRP will just be
cheaper, so let's use XRP.
And so I think to the extent
that these connectors are going
to be competing with
each other and they're
trying to think
about their margins,
XRP is just going to look like
a very good option for them.
CHRIS LARSEN: Yeah,
in this world,
you'll need some
digital asset that
is super fast, super cheap,
endlessly scalable that
will serve the world
very well, right?
Better than, let's say, using
$1 or using a euro, right?
Something that is
neutral to any network.
So we're absolutely confident
that some digital asset will
be a key part of this
internet of value,
but we think that fast
cost and scalability are
going to be those key things.
And that's what's going to
drive the liquidity that's
going to make these
things really useful.
STEFAN THOMAS: XRP is
not static, either.
We're constantly thinking
about how to help improve it.
There's a community
out there that's
thinking about
how to improve it.
So you can expect that
it will get better,
as well, as time goes on.
SPEAKER 1: Final question.
AUDIENCE: Hi.
So I was listening in the very
beginning of your presentation
about how you think XRP's
better over Bitcoin in the sense
that Bitcoin's a lot slower,
a lot more expensive.
But it's there for
a reason, right?
Because it requires at least
six confirmation across network
in order for instance
action to happen, and that
is their [INAUDIBLE] to address
the double-spending problem.
So I was just curious,
in your own words,
how does the XRP address
the double-spend problem
if it's just a confirmation
between the two nodes?
STEFAN THOMAS: Yeah.
So if you're not
technical, please
do something else
for a little bit,
because there's no way to answer
that question without getting
into some of the technology.
So Bitcoin uses a
consensus process
which is essentially based
around the assumption
that a majority of
hashing power will never
be held by a coordinated
malicious attacker.
And so if you're watching what
the majority of hashing power
is doing, you'll tend to be
on a state of the network that
is reasonable and doesn't
contain reverted transactions
and so on.
However, the protocol as such
does allow rollbacks, right?
So you can-- if somebody
else presents you
with a chain that's longer,
it has more hashing power
behind it-- you will
rollback your transactions
and switch to that.
And I know that, because I
was one of the first people
to implement a full node Bitcoin
reimplementation from scratch.
So I wrote that code, and it's
a very complex, annoying code
to write.
So I will remember that forever.
On the Ripple side, such
code does not exist.
There's no way to
roll back the network.
Now, how is that possible?
Well, the way that
Ripple works is--
as I mentioned before, the
users select these validators,
and then we essentially
use that input
as an input to an
algorithm where
we look at the graph of what
people selected and then we
run a consensus on validators
that are central to that graph,
or that are highly
trusted in that graph.
And so it's this
two-step process.
And what that means is that
when the first step is complete
and you've identified which
validators you're looking for,
you don't have to worry
about there being more
hashing power just
over the horizon.
Once you hear from
the validators that
you've identified as being
the ones that are validating--
or the ones that
you're listening to--
then you don't have to worry
about some other validator
coming in later saying, no,
actually, we decided this.
You just didn't
hear about it yet.
And so there's no need to roll
back or to rewrite history.
Once the validators have
committed to a decision,
they can't change their
minds, essentially.
And so that has a
couple of impacts--
a couple of ways
that the protocol's
different because of that.
Number one, you only have to
wait for one confirmation.
You wouldn't wait for
multiple confirmations,
because validators
can't change their mind.
You can't roll back, so there's
no probabilistic aspect to it.
Number two is we can
create blocks on a cadence.
So we can create blocks on
a fixed interval as opposed
to a random interval
like Bitcoin,
where blocks can come
out very close together.
There could be no
block for a long time.
Because we know
which validators are
supposed to generate blocks.
They can generate
them on that cadence.
And then finally--
I think-- did I
cover everything?
SPEAKER 1: Yeah.
STEFAN THOMAS: Yeah, whatever.
There's a really good talk on--
well, I shouldn't
call it really good,
but there's a talk by
myself on consensus--
[LAUGHTER]
--that you can find from the
Consensus 2017 conference
where I go into a
little bit more detail.
And I'm also happy to
talk to you afterwards.
But that's the high
level, quick description.
SPEAKER 1: Cool.
Chris--
STEFAN THOMAS: [INAUDIBLE]
SPEAKER 1: Guys, thank
you so much for coming.
Do you have any
final statements,
or do you want to tell people
how they can get involved
in the Ripple community at all?
STEFAN THOMAS: Yeah,
so for Interledger
there's interledger.org--
which, at the time of recording,
is horribly out of date,
but hopefully by next week
should be showing all of
the latest, great stuff.
There's a community group at
the W3C called the Interledger
Community Group.
That's open to anyone
to just register.
We have mailing lists
where we discuss
how these protocols
work together,
all the code for the
demos and everything.
You can find that on
GitHub.com/interledger
and /interledgerjs.
And then for Ripple, ripple.com.
If you're a bank, let us know.
Reach out if you're
a payment provider.
Maybe if you work for Google
Payments or anything like that,
let us know.
And then there's another project
which we didn't really mention
today, but that's also--
was also used in the demo
in the background, which
is called Codius.
So that's basically
the hosting system
that's paid with Interledger,
and we uploaded that website
to it.
There's a lot of cool use
cases around hosting--
if you think about serverless
hosting, et cetera.
So if you're into that,
there's codius.org as well--
C-O-D-I-U-S-- .org.
SPEAKER 1: Awesome.
Chris, Stefan, thank
you so much for coming.
Really appreciate it.
Give it up for them.
[APPLAUSE]
