I'm still trying to understand what's driving Eth's price appreciation. There are two critical areas where I see Ethereum struggling to implement its smart contract platform:
1. Network Scalability
2. The legal framework for Decentralized Autonomous Organization (DAO).
For the longest time, I use to think that it was a poor strategic business move for Ripple to have placed their smart contracts program on the back burner, yielding the space almost entirely to Ethereum and others to build upon. However, in retrospect, it was probably one of the best business decision they could've made. Like Stefan Thomas (Ripple’s CTO) said in his most recent Quora Q&A session, “I worked on Ripple’s smart contract system Codius back in 2013–2015. Back then, our conclusion was that a viable smart contracts ecosystem requires a standard for payments first. Contracts need to be reviewed to be trusted and that’s expensive if you need a new contract for each type of asset because every ledger has a different protocol/API. Thus, Interledger was born.” The folks at Ripple knew that the power of the Internet came from the fact that it connects everyone. It can do this because it is not a single network or system. The Internet is basically a network of networks. Information being sent to multiple providers using open-source protocols like TCP/IP. This allows communication to be seamless irrespective of what provider people are associated with. Ripple understood this same concept needed to be applied to facilitate the instant transfer of money or anything of value. Hence, Interledger Protocol (ILP) was born to serve as this open-sourced TCP/IP-like protocol allowing for the materialization of the Internet of Value (IoV). We see its integration across multiple projects (i.e. Linux Hyperledger project via Quilt and W3C Interledger Payments Group). Ripple, up until now, has been known for its laser-like focus on building its institutional grade network for all things related to payments: cross-border, retail, B2B, and P2P. However, now that Ripple has successfully scaled RippleNet, increased Interledger Protocol (ILP) integrations, and escalated xRapid adoption, they are now beginning their vertical growth strategy. While I’ve spoken about Codius/ILP mashup, I should also mention Ripple's planned foray into what is being dubbed, "Specialty Markets," currently targeted by smaller alt-coins start-ups. Think: Syscoin, Siacoin, Tron, Golem, and Gridcoin.
---Legal framework for Decentralized Autonomous Organizations (DAOs)---
There are some pretty radical applications that can be achieved with smart contracts. There are some basic building blocks of contracts that have to be addressed here so a lot of work still has to be done. Software developers understand the "smart" portion, but not always the "contract" part. This is the 2nd area I see Ethereum struggling to navigate (1st being their network). With any new technological revolution, the devil is always in the details. I think everyone whose jumped onto the Ethereum bandwagon are mere speculators and folks who have little to no understanding of what a smart contract is or how difficult it will be to implement. I have listed below a list of a few questions that were asked in a conversation I had with a corporate IT/contract attorney on this regarding the legal minefield that one must consider when developing a smart contract:
1. How does one apportion legal liability for the operation of the DAO?
2. Who are the directors and/or owners of a DAO if the code is self-propagating and self-sufficient?
3. How will the courts interpret the smart contract or DAO in the event of a dispute?
4. How does one even handle contract disputes (for example if the code fails, produces an erroneous result or is corrupted/hacked)?
Moving money in a ledger requires regulations that have to mesh seamlessly with current laws in all jurisdictions where such said money will reside. This is a huge problem, but Ripple has already solved that with their (xCurrent/xRapid/xVia/ILP) solutions. Moving data in a legally binding way requires legal decisions on a global scale and that won´t happen unless there are set standards. Because Ripple’s blockchain solutions are already in place and being utilized globally, it makes building the legal framework to allow a smart contract platform layer on top so much easier (Remember Stefan Thomas quote noted earlier concerning ILP and interoperability). Smart contracts focusing only on information are much faster and more secure than platforms which try to handle both money and data. This is the reason I see Codius as the premier player when smart contracts really start to become a reality. Also, Ripple has one major advantage over the other blockchain platforms, like Ethereum. It's one of the few in this space that's an established company operating within international regulatory guidelines and rules already. Running code that might be subject to 3rd party IP claims is a real issue at the enterprise level. Ripple's international status with the global financial/banking/regulatory community gives them credibility. Dealing with the regulatory community is nothing new to Ripple as it has had to navigate the tumultuous cross-border payments regulatory terrain over the past 5+ years. It is utilizing a similar strategy to tackle the 4-issues mentioned above that they did to develop their international payments regulatory standards via their RippleNet Advisory Board. So, in essence, build-out the scope of this advisory board to include a rule-book; a set of common standards and best practices that ensure operational consistency and legal clarity for smart contracts. This way all participants on the RippleNet network are bound to such said parameters. To me, it is evident that Ethereum believes a reckoning is coming soon in the smart contract space and senses other players starting to make major moves to become the leader in smart contract development. We’ve already seen them acknowledge that a pure PoW consensus model does not work as they begin the transition to a hybrid PoW/PoS strategy (Casper) and this latest cry for help by Vitalik via his newly minted “Scalability Subsidy Initiative.” It goes to show you just how much time, energy, and thoughtfulness Ripple’s developmental team devoted to the proper execution of their business plan; knowing what processes needed to be done 1st, 2nd, and 3rd to achieve their goal of becoming this facilitator of the Internet-of-Value (IoV).