Chris Larsen Of Ripple (XRP) @Google

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Chris Larsen Of Ripple (XRP) @Google
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Chris Larsen founder of Ripple (XRP), and (very ) briefly one of the richest people in the world, talks at Google on Published on Feb 23, 2018 – topics of course include Ripple, Blockchain, Bitcoin and related cryptocurrency topics- below is an informal transcript of his talk for information purposes only, and it contains errors, please watch the video for a fully accurate version. First an excerpt:

I think this is a critical point. I think we came to the realization that a block chain 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 why block you in a lot of people talking about bitcoins can be a new protocol for money. Well it’s really a database right. So a single database or a single net network cannot be the network of networks and so that was kind of the big flaw and that’s what led to I think you know Stefan having this kind of aha moment of need for something like ILP? which was a dangerous moment for it was scary at first like we were we were out there promoting this acid likeXRP like telling everyone Hey you should put all your balances on this ledger you should do all your transactions through this one system.

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Enter Dave. I’m not the man of the hour though. These two are we have the founder of RIPL Chris Larson and we have it’s current CTO Stefan Thomas. We’re very very excited to have them this can be an awesome talk a little kind of brief intro.

Chris got his MBA from Stanford he started you own which is kind of a mortgage lender. It was actually the first platform to really give out piko credit scores to its users. He started prosper which is actually the first P2P peer to peer lending marketplace in the U.S. And famously he cofounded RIPL Labs which is the subject of today’s tof.

Really excited to have Chris here. Stefan Thomas is the CTO of RIPL labs. He was the CTO of numerous tech companies like you load and tech spare.

He founded we use coin’s which created this kind of bitcoin primer video which amassed 8 million views and was a primer for a lot of people to just learn about kind of the basics of bitcoin and kind of blew up on the web so check that out.

And he’s a board of directors. He’s on the board of directors sorry at the JSA Foundation and he’s the current CTO ripple ripple is describes itself as the only enterprise solution for block chain.

It allows institutions to send money globally in a fast frictionless and cheaper way and it’s brought its kind of 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 give a hand for Chris and Stefan awesome guys.

So can you guys just give us kind of a brief bio in your own words your career and how you came to founder Apple labs and then get involved.

Great to. First of all thanks for having us and thanks for making a Bart Simpson joke.

Appreciate that.

So yeah we’re getting Sentech for about 20 years now with kind of two startups previously e-learning prosper a kind of a common thread there. Those were focused on the consumer RIPL obviously 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 contact. So in my view fintech really hasn’t started. It has sort of 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 we both a lot of excitement a lot of frustration that we couldn’t go further at the same time was always keeping an eye on what was going on with virtual currencies and you know bitcoin obviously was a real breakthrough. But there’s been a lot of attempts over the years. So we are watching things like Linden dollars which was currency and that kind of existed in the early days of Second Life. Phil Rossdale kind of an amazing guy is still the coolest guy in crypto right. You know things like Ramond dollars kind of this idea of local currencies in a very small community. Super interesting.

Obviously beans and floors which were to be a well funded projects during the first dotcom boom that are you know fields actually but it just seemed like as a matter a matter of time before you’d have a global digital asset with no kind of government backing and no counterparty as far as ripple itself that routes actually go back to about 0 4. There was something called the ripple project created by Ryan Fugger a Canadian gentleman. He was just a really neat guy and he tried really to kind of give birth to this idea of a peer to peer platform for people exchanging their own credit and essentially their own currency. Every person would have their own currency. Super interesting concept. That was a big part of what influenced us. Of Fast forward to 2011 and there was these three geniuses that got together. Arthur Breteau Jetton 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 sort of at the heart of mining that’s a core part of Bitcoin. So they set out to build a more efficient consensus algorithm and they came up something really beautiful.

They also were inspired by what Ryan Shuger had done at the project and also brought in that idea of kind of pathfinding algorithm so that anything of value can be exchanged along with that digital asset to really I think that was kind of the birth point of this Internet value the intelligent protocol which will show a little bit actually has it’s almost like an overlay protocol over block chains but then also traditional financial systems and that allows you to innovate in different parts of the network independently instead of having the sort of central governance model where everyone has to agree to any rule changes that are happening.

I think this is a critical point. I think we came to the realization that a block chain 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 why block you in a lot of people talking about bitcoins can be a new protocol for money. Well it’s really a database right. So a single database or a single net network cannot be the network of networks and so that was kind of the big flaw and that’s what led to I think you know Stefan having this kind of aha moment of need for something like ILP which was a dangerous moment for it was scary at first like we were we were out there promoting this acid like SRP like 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 like stepping back from that and suddenly saying like oh they’re going to be many systems was very scary. And so we actually waited almost a year to publish the white paper until we had you know in our minds the result the strategy around what’s next for his 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. Like how do we architect everything to serve this new world. So I think we’re still in the process of like rolling out all the different pieces but it was that sort of one year period from I would say you know mid 2014 first had the realization to October 2015 when the white paper friends villager came out.

What we tried to kind of put all the pieces in place for RIPL always was different from Bitcoin and that you could put anything of value in it. Right. So this idea of kind of we call IOUs or balances but really being value agnostic and that being the engine for the exchange of that thing of value.

But having the combination of ILP with SRP we think that’s the that’s kind of the killer formula that you can have any type of value any currency at all so any type of Legers like anything from a centralized lender to a block chain gets a term and we look at them with that kind of the macro problem that we think the world has its lack of any interest or value. You could kind of argue that this gets to the heart of the problem with globalization which is obviously under a lot of stress. Today it’s kind of not working for a lot of people and we kind of we don’t think of it as like is bad and we think of it globalization is actually incomplete until you have an internet value you really can’t have true globalization. You sort of 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 simply transforming the world of the last 20 years. It has interoperability and goods through a simple thing called the shipping container which you know before that was invented shipping stuff was incredibly inefficient and labor intensive stuff right. One Port had to be ripped apart and reshipped with a shipping container. You know your ship to train the truck. Any port in the world you have in trouble the goods since the 1950s. That’s sort of what an Internet value is. It’s like the shipping container for value.

And again that can’t be a block chain of watching it is like a single shipping company that will know you’ll Max out that shipping company and you’ll have a dependency on that one shipping company shipping container you can create endless shipping containers it has no effect on any other shipping containers that deploy. That’s sort of what is almost the ultimate decentralization.

So that’s kind of what we’re thinking about are the technical people in the audience as a stateless protocol.

So you can just run it over different systems so it doesn’t keep any balances central and then we think really good things happen when the world finally has a full kind of globalization platform. But this has to happen. And and again what does this mean now that we don’t have that right now. It means you know we all know about 750 bucks. Europe is kind of impossible right. Yeah we know they could be example with the Air India hosted in Tanzania who should be making 29 bucks on a rental and by the end of days nine bucks is showing up as an actual example right. So that’s that’s a problem with relatively big amounts of data. You think about the 2 billion people in the developing world the Gates Foundation would say they need to be able to send 50 cents to be reopened as happens in the global economy. Take that even further if you think about all the connected devices and applications that probably should be empowered to send value that might need to be you know thousandth of a penny. That’s just not possible until you have this internet of 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.

There are some detractors of RIPL that say it’s kind of the centralized block chain or the enterprise block chain. You know a lot of bitcoin loyalists and bitcoin in general have come out of kind of an anarchist or cypherpunk kind of movement early on as part of that. And so that’s kind of the general criticism. So to give you guys a chance to respond to that and then I’ll combine the second question because Stefan as an awesome presentation is going to give the second question is. We are living in a crazy kind of environment in terms of cryptocurrency just speculation on the price of tokens and block chains. What do you guys think we’re in 1999 right now is this that you know kind of a dotcom bubble that we’re experiencing.

So yeah those two questions I’ll take the first one you can share. 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 Lockshin that can actually be used for real no real use cases you know like when you think of you know any system when you take a certain systems class the first thing your professor will tell you is like you distribute system was still only going to be as good as the notes 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 you have a very pure incentive to just have so much as possible get paid. Rinse and repeat. And in the case of polls since the volunteers are chosen by the users if a validator for example votes against a block size increase or something like that if that were an issue and ripple then you would eventually find that users would no longer add that validated to that list and so that validated would slowly lose influence. And so it’s not as much of a system that’s like tailored to users like bitcoin is where you know anyone can just run a node and it just auto configures itself that connects to the network. You do have to do that validator selection manually to think about you know politically speaking like bitch validators do you want to empower with your note etc..

So it is more targeted at like you know actively being managed by companies things like 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 you know the evil people you mentioned I’m an anarchist. So I really want to empower people. Right. But the people you’ve got to fight are not the like all the banks there are a few very very powerful players in the market that that sort of take a bit off the top and those are the people that you want to bypass. And then everyone else like 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 to 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 and payment providers. Mobile money providers and so on. So that’s kind of 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 you know we’re slow going down the list of meeting and more of them as we progress. One of the ones that we 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 we’re 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 is just one more step to kind of go in that direction.

And I think if I compare it to where we were with bitcoin like with bitcoin we had some level of decentralization again meeting some of the definitions but not all. For instance there is 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 just sort of incessant centers are set up in a in a sense now say a bad way. Whereas with RIPL we have the incentives are in order. And so it’s just a matter of like you know Baldur’s having the right amount of operational histories of people actually start trusting them and having enough confidence in the software to actually you know continuously let go of more and more of the reins here. So I think it’s for RIPL it’s a clearer roadmap to get to a very high level of decentralization and bottom and decentralization is there’s kind of a bright line.

If Rebelle did not exist would the network continue to function. Yes. So that’s kind of know hard line. Which side you’re on. And then I think it’s Stefans point right. I’m kind of creation’s from there. And then second I think on what’s going on the market today. So obviously a really interesting time in the space. Clearly there is a lot of speculative interest that’s going on and I kind of break that into kind of two parts. One is there’s clearly a lot of almost like Krypto day trading going on. It’s almost like the days of the early Internet with all the day trading. And I think you could 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 all of them. You know you can lose everything. It’s just not a good plan. People should not be putting their retirement money to work day trading. You know crypto currencies. And there’s a lot of skepticism that you see out there. Nathaniel Popper for example the New York Times you know he writes about that skeptically and he’s right to be skeptical. So we think that people should be very careful with that. But there’s a second part of speculation I think it’s being now increasingly driven by institutions so institutions funds that we call it The Wall Street tidal wave is sort of come in 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 of this is in fact a second internet and this entertainer that you can be as transparent transformational. That’s a longer term sort of call that that’s going to happen.

And as I’d say that’s more constructive speculation and I think those institutions and those kind of professionals they’ve seen what’s happened in this last 20 years of the net the great promise the over hype the you know the total bubble the crash and then kind of fast for 20 years where we are today. If you look back you probably say probably the early promise was probably it was probably under hyped. Given the impact that all of this has had on human existence so you know that’s a more constructive view.

They use cases for industries enterprise payment providers and other things that is coming on board. So I suspect that a ratio of sort of hopefully the long term speculative activity and the use case it starts to look more like what you see in normal markets because there’s things can actually work pretty constructively together.

One last point that I think interesting is in the first Internet that kind of started with institutions VCs and Wall Street and then kind of went on to sort of this daytrader you know dynamic that you saw is kind of the reverse of actually kind of started with individuals and now the institutional wave is coming on board. That’s a little bit different you know kind of flavor. But definitely think the world’s never seen anything like this before. So it’s trying to grapple. What are the metrics. What is it compared to VCAT Picard. Gold is it the first protocol that can be monetized. Watson new questions.

Awesome guys really appreciate it Stefans. Now we’re going to give an awesome presentation about what’s in store on the technical side for RIPL and then Chris is going to stay here.

It’s going to come back and we’re going to do a little Q and A with the audience. Take it away.

So what this is trying to illustrate is if you deploy intelligence some network and we envision that there will probably be sort of 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 in IP. So they basically take in packets on one side. They look at the destination on the packet they compared to the routing table and then they forward that packet towards that destination. Whenever you look at any kind of Blokland presentation there there’s a pretty good chance you’ll see some kind of graphic that has you know nodes connected by lines some kind of graph and you know you’ll hear things like bitcoin is the TCAP IPO of money. And when we hear that we cringe a little bit because if you know anything about how TCAP IPO works and how bitcoin works there are very different protocols the two very different things in a very different way. And so the challenge that we always have when we talk about intelligence is it is actually a lot like TCAP IP and in this presentation I want to try to convince you as to why I say that. But you know people already have usually seen some kind of blocking and presentation that 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 receiver I’ve put on it. So in that way it’s a lot like TCAP IP you now you might say okay so are you routing these packets but how does actual money really move.

So the way that that works is that once you have sort of 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 peering relationship with each other they’re going to have this like pay 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’s makes sense to 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 kind of 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 that we where we can actually do as we can just aggregate to a greater degree so we wait a little bit longer before we settle and then we send a one big payment across you see that kind of at the beginning here with the sender done there and the receiver end up right where those settlements are happening a lot less frequently and they’re a little bit bigger and 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 as a settlement eventually and hopefully these last mile sort of settlements will get more efficient just like Internet connectivity went from you know 56 K modems all the way up to what we have now where I have Google Fiber so very happy with that so here’s a little chart of like the actual architecture. And again if you’re familiar with TCAP IP you know they draw the same kind of picture with the four layers. Which is you know something called the Internet architecture. It’s a little bit less detailed than oocyte architecture but I won’t bore you with that it’s just a reference for people that didn’t know that. So the four layers actually work a lot similar to the very similar to the four layers and TCAP. So I just want to go through those four and kind of give you a sense of how this all works together. The way you should think about the intellectual layer is 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 kind of 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 Wi-Fi I can make a you know send an e-mail 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 in different ways. And so this is kind of doing the same thing for money.

OK. Now on the application layer this would be the equivalent of like HD PSM t.p. Is this use case specific you would make different application layer protocols for different use cases. So one that we’ve designed so far is called ASP PSP or simple payments set of 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 is on a putit peer basis or you could build that into simple apps. It’s not super efficient. It’s kind of like HTP or a 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 BitTorrent. So basically to pay the app loaders. But also the content creators which I think is a really cool aspect of. It’s like it’s efficient enough that you can pay a lot of different parties in the flow of whatever app or interaction that you’re 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 that application layer. Now we’re talking about the transport layer. So if you’re familiar with TCAP if he does this where you find your TCAP and TCAP is really common to a lot of different application layer protocols that build on it and it gives you some sort of basic services. It gives you a sequencing of packets so that 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 PIAs K2 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 will do things like retransmission of payment packets et cetera. So again like I’m trying to really get across like we are copying from the Internet a lot and you have to give them a lot of credit because a lot of things that they do actually apply to money very well. Now the intellectual layer is is kind of an interesting one because that’s where all the routing happens and when we first started out of tell you one anecdote about the design of the Slayer which is when we first started out we assumed that the rodding would have to be quite different because we’re talking about money after all we’re not talking about information and so we know 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 that advertises absurd rate. So they just advertise hey I can exchange one dollar 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 is going to go down.

Obviously that rate was never real to begin with. And so you just the whole thing just breaks down. And so one of the reasons for the way the 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 are still only going to take down his immediate neighborhood because everyone else is still going to look like a big detour the long path that they don’t want to take. And so it turns out that even for money the length of the path it’s a very good proxy for all the other things you might be interested in like how reliable is it what’s the latency or 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 kind of tiebreak if path is same length. Picking the best one and we just basically add fee is another metric just like the Internet has latency every kind of 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 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 is Exar patient plug in so that’s settling using the XP ledger. That’s the most efficient plug in right now.

That’s one of the reasons that we feel good about this strategy it’s like we actually seeing in practice that our own products score really well on these different metrics in terms of like 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 lightning and lightning network together you know familiar with lightning. It’s basically a scalability overlay network for currencies like Bitcoin and then you could do something like H.H. you can even do cash if you want right so you can have a relationship with an intelligent service provider where it basically says like I give you cash up 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 is going to go fairly quick. So pay attention. So basically what we’re going to show here is the easy website maker website maker is an app that somebody put together and just uploaded it to get to. And basically it allows you to create a Web site from just having a sketch. And now obviously we didn’t build all the difficult part is the eight parts of what that’s where you guys are for them. But we did do all the payment stuff so all the payments are actually going through into Ledger this actual payment packets being exchanged and we tried to visualize that a little bit later by having like a log of packets.

And basically what it does is I put in a sketch and it goes to one vendor that’s offering an API update API that can turn sketches into an actual email and then it’ll go Pan other vendor to actually package that into Docker container and upload it somewhere and then another vendor to host the actual live Web site and then another vendor to buy a domain. And finally we’ll tip the developer so I’ll go sure what that looks like. So first thing you 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 web site. This will be small to see but it has like some tax than it has a little chart and has some more text. And just to be clear again like the AI’s marked out we didn’t actually create the eye just for the demo that would be ridiculous. But yeah in the future this could very well be possible. So I’m going to say make my site. And now things are going to happen very quickly so it’s gonna upload that sketch to that AI. It’s already done and now it’s uploaded the finished HD Imelda get back to a service that turns into the docker container and as you can see on the right and I might do the demo twice so you can see it again. On the right you saw the total amount paid. This is an excerpt drop’s this would be one millionth of an excerpt.

So total paid would be point one excerpt which is about what is that like two cents three cents to three dollars and cents point. What is it like. That’s like 30 cents or something whatever.

So you can see like the individual packets and there’s a couple of things going on. And I think it will run through the demo again just so you can see. So first when we paid that AI we paid a sort of one lump sum amount and then the packager is actually a streaming paid endpoint so that’s a Paden point where as we sended data and we ask it to do things will stream packets to it to keep it paid. And if we ever don’t keep up it’ll like Stob working until we pay it more and then we deployed it to a host and bought a domain and then sent a tip to the developer that I can actually click the button here and and look over here and as you can see our website is now up and I can show you it’s like all of us running locally but we’ve got a domain set for it it’s like set it up so let’s go through them all over time just to see you can see kind of the streaming payments part a little bit better so I’ll pick the one and website so you are right. You can see like total paid right now as 500 drops to pay for the guy. Now we’re streaming to pay for the packager so this is going and 250 drop intervals and then we have a large expense to host the Web site 9000 drops. It’s over 9000 to actually buy the domain. And then finally we tip the developer a thousand drops.

And so if I make an app like that I have a built in business model and I think that’s really the key point to get across here. I think this will have a huge impact on the web where think about if I started convenience store. I don’t need to think about wha