Ripple CTO David Schwartz likes to say that blockchain has a lot in common with the Model T Ford, and it’s an analogy that he repeated during a Quora session on April 1.
Schwartz also postulated that if Henry Ford had said cars would replace horses in 1910—two years after the First Model T rolled off the assembly line—he would have been ridiculed, “and to some extent rightly so because there wasn’t much evidence to justify that claim at the time.”
That, he says is where blockchain is today. Obviously transformative, but “[i]t just sounds ridiculous today because there are so many people overpromising about what their specific technology will do,” he says. “The key is to look at the limitations and see which are fundamental and which can be eliminated based on what the technology is capable of. If you look at the fundamentals of what blockchain is good at, it’s about creating secure, reliable systems that are easier to build and operate.”
Noting that banks “have many costly and failure-prone security measures in place to make sure your account balance is recorded properly,” Schwartz points out, “blockchain systems make it impossible to report an incorrect balance because every transaction report includes proof.”
Which isn’t to say that cryptocurrency investments are entirely safe right now. Just as the Model T had no seatbelts and a single, inadequate brake on the transmission, cryptocurrency investors lost $1.7 billion dollars in 2018 due to exchange hacks and scams including fraudulent initial coin offerings (ICOs) and Ponzi schemes, according to a report released at the end of January by CipherTrace. Of that, the $950 million estimated stolen by hackers was 3.6 times more than was lost in 2017, it said.
Schwartz also attacked IBM’s centrally controlled Stellar (XLM) and other stablecoins for “miss[ing] the point of blockchain completely.”
He added, “[t]he use of stablecoins doesn’t make sense to me. Even if all these banks got regulatory approval to issue their own stablecoins, would they all use each other’s stablecoins? With the goal of mass adoption, a universal bridge asset has to be geopolitically neutral, and a USD-backed stablecoin doesn’t solve for that.”
Others disagree. On March 18, IBM announced that six banks have committed to issuing Stellar-based stablecoins based on the Brazilian real, South Korean won, and the Philippines’ peso. The next day, JPMorgan launched its JPM Coin, a US dollar-denominated stablecoin.
Stellar was created by Jed McCaleb, who cofounded Ripple and held Schwartz’s job until leaving the company in 2013.
Another issue Schwartz addressed was the benefits of XRP Ledger’s decentralization. It’s use of a distributed agreement system—consensus protocol—rather than proof of work or proof of stake means it is “not vulnerable” to 51 percent attacks like other blockchain, he said.
Other questions he answered included whether Ripple controls XRP (“absolutely not”), if Ripple would explore DApps (they don’t make sense because they limit the type of blockchain you can use), and why interoperability is important in blockchain (it is necessary to deliver truly frictionless global payments).