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My favorite video about ILP/XRP ;)  (The content compensates the quality of the video)

STEFAN THOMAS:
All right thanks Patrick. So here we're gathered to have a quick round table on XRP. I want to go
through the demo pretty quickly so we can get to the actual discussion Q&A which I think is the meat of this session. Basically, what we're trying to do at Ripple is we're trying to make money move like information. This has been our mission since day one, and it has never changed and so we're building a number of different technologies that all integrate to make this vision a reality. And so what we think about how information actually moves I think it's really it's really this chart that captures it.

So what's happened is that the cost of moving information has really declined over the last couple decades and very strongly so. And as a result the volume of information that’s been moving has exploded. And so, very often you know, our customers will be talking to me about, you know:

Oh are you focused on corporate payments?
Are you focused on consumer payments?

I think what you have to realize is that we're somewhere down here in that curve and so you know when you say like two-thirds of all payments are corporate payments you're really talking about two-thirds of almost nothing. I think what we're focused on is this growth that you can create if you increase the efficiency of the system enough. 

And so the way that we're kind of approaching that is we want to streamline the way that liquidity works today. So today you have 27 trillion dollars in float sitting around the world that is essentially there to facilitate real-time payments when the underlying systems are not real time.

So, for instance, I swipe my credit card somewhere there has to be an actual creditor or money available to pay that merchant if that's supposed to happen instantly if the underlying money can't move in real time. And so that's been the case ever since we were using gold and fiat currencies in order to move money internationally, but with digital assets there's actually opportunity to improve upon that and actually move real assets in real time.

So if you have something like XRP you don't need to pre-fund float all around the world. You can actually just have this digital asset and if you want to transfer value to somebody, you want to transfer value internationally, you can just transfer that asset and that moves instantly okay?

(demo)

So let's talk a little bit about what is happening there in the background. So first, we basically look at the topology of the network and then we try to find a path. So say it found a path through XRP. Once we select the path, we basically send a code request to figure out what we think that cost is going to be and then we send the money through in two phases as per InterLedger Protocol, and that's enabled on XRP using a feature called escrow that we just launched earlier this year and so now XRP is it's fully InterLedger enabled.

So, if we look at the kind of a cost calculation, this is kind of some fictional numbers but it's correct in terms of order of magnitude, right. So you have Bitcoin, you have Theory, we have XRP, we have Swift, and so our algorithm basically goes in and it tries to select the best option and so people often ask me like why does InterLedger help XRP? or why are you guys working on InterLedger as a completely neutral protocol when you actually have this vested interest in XRP?
Well, because the reason is that XRP is right now by far the best digital asset but it's not being used as much as Bitcoin, for instance, and so in order to close that gap we want to get to a point where the selection of asset is kind of automated and you have algorithms to just pick the best one in which case, right now, XRP would get picked all the time. So that's why we have such a vested interest in just enabling more efficient selection. All right. So as you can see, it's the lowest
fee right now and it’s the fastest turn right.


Now, going a little bit further into the future((=Coil now)) , I was kind of talking about that huge explosion in volume and I think where that comes from is completely new user inter faces that we don't necessarily think about today. So one example would be, you have something like a publisher and a reader and a reporter and the reader is actually browsing an article and they're not having to sign up and go through a paywall in order to do that Their browser just pays them on their behalf automatically and then as a publisher I can see the money sort of coming in, in real time as users are browsing my website. And so you're basically providing the sort of metered access to your content. There's just one example. I think there's a lot of cases of APIs and other parts the industry that could benefit from micro-payments as a more granular way of transacting. So I don't have time to talk about that, but with that I hope you've got sort of a taste of both what XRP looks like today as well as what the future holds in terms of doing micro payments through payment channels, and so on, on InterLedger. So with that, I'll hand it over to Patrick to start the discussion.


DAVID SCHWARTZ:
Yeah, so what is the Internet of Value and what are we working on? Well, the Internet has brought connectivity to billions of people around the world. They have smart phones. They have easy access to the movement of information but money is still siloed. It's still trapped in systems that don't talk to each other. Moving payments are expensive. They're slow. There's high friction. There's trillions of dollars that moves across borders and that's moved mostly by financial institutions, and we need to move that money more efficiently. We need to know where it is. We need to improve that flow.

I don't know if any of you have made international payments or most of you have on traditional systems and you know that it's very hard to know where that money is. It’s very hard to know how much it's going to cost you ahead of time. The user experience is not great. A significant fraction of those payments fail. It takes several days. It's almost easier to ship money than it is to use our existing payment system. So we want to provide an Internet of Value where there is instant payment. Payment on demand, without failure. When you know ahead of time how much money is going to deliver. You know what path is going to take and because that transaction is set up using modern internet protocols you know ahead of time exactly what the requirements are at the destination so you don't have a failure because you didn't have the right information at the beginning.


STEFAN THOMAS:
Yeah so um whenever I think of the Internet of Value, I think the number one thing that happened with the internet was that it kind of commoditized reach. So, before the Internet, if you wanted to be an online service provider like AOL or CompuServe the number one thing that you needed to have in order to be competitive is a lot of users. And if the main thing you're competing over is just having a lot of users it's very hard to get into that market for obvious reasons because you start out with zero users so how do you attract the first couple? But once you have something like the internet where all the different networks are actually tied together, suddenly the number of users you have is completely irrelevant, right? Because all of the networks are tied together you can reach all the websites, you can email all the people on the internet and so the competition has to be about something else and what does it become about? It becomes about about the efficiency of the system.


And so, this fundamental transition has not happened with money yet. Like right now the the biggest consumer payment systems are things like Visa and MasterCard and they're very much competing on: We’re the biggest. We have the most merchants. We have the most customers, and so how are you going to compete with us, right? We would not even have to try to be efficient, necessarily, right? Because we're only competing with each other. It's very hard to get into that market, and so what we're trying to do with InterLedger, by creating an internet working protocol we're allowing you to go across multiple hops across multiple steps through the financial system and as a result you can tie a lot of smaller providers, a lot of smaller banks together and as a result make a system that’s much more competitive.

PATRICK GRIFFIN:
I’ll just add my two cents in. I when I talk about the Internet of Value with customers it's typically the conversation on the cost and opportunities and for us you know, one of the analogies it's overused in the internet I think the Internet of Value, at least for me, is the function of bringing the marginal cost of payment processing down to as close to zero as possible. Now you can do that in one of two ways: Lower the cost of payment processing. Just for the sake of conversation these two things are 50/50. Payment processing: the messaging going between institutions and the cost of reconciling transactions as they go from one siloed network to another siloed network. Those are huge costs that the system currently bears just as a function of tracking down lost payments or fixing mistakes and broken transactions.

...
The second stool, leg of the stool, if you will, this two-legged stool, for this Internet of Value, is liquidity. And this iquidity cost is a huge component of the payments that infrastructure today. And so, when you think about the cost that you pay when you wire money internationally, it's not just processing costs and fees. Banks and financial institutions and payment processors have to cover their cost of capital. They are laying out a massive amount of cash in different overseas accounts to make sure that when you send a payment to Japan there's cash on hand in Japan to service your payment.


... And on leveling the playing field maybe a question back to you Stefan is and a little bit about the strategy so as we go out and roll out these new APIs for bank to bank or financial institution processing, this narrative around using the digital assets upon payment certainly there's no reason why you couldn't insert Bitcoin in there or Ethereum or some other digital assets do you view this as maybe leveling the playing field for all digital assets and creating an opportunity for other digital assets to come in and basically compete for that case?

 

STEFAN THOMAS:
Yeah so, we definitely look at it as as a way to create more competition I think that I'm just looking at the market today, most of the digital assets out there are not really designed for enterprising spaces, right? There they're coming from a background of direct to consumer use. They're kind of designed in a way that maybe isn't always necessarily totally in line with how regulators think about the financial system and as a result it’s quite difficult for companies to use these assets, so I think maybe some of people in the room are Bitcoin entrepreneurs and so you may know some of these struggles and you know some of these difficulties of using an asset like Bitcoin. I think you know me, speaking as CTO, more from the technical side, there are definitely big differences between the different digital assets, and so if you look at things like settlement speed on Ripple you get below four seconds most of the time four seconds on average. On Bitcoin you have to wait nine minutes between just to get one confirmation.

There's things like finality. On Ripple when you get one confirmation you can hundred percent trust it, it cannot get reversed because the set of validators that are known so it can't be some validator you've never heard of suddenly coming up with a different answer. Whereas on Bitcoin, there can always be a longer chain that you just haven't heard of yet so you have to wait for multiple confirmations to gain more confidence. Another difference is that you know Ripple is non-deterministic and so bitcoin is is random so what that means is that the actual delay between blocks on Ripple is pretty consistent. It's four seconds with the standard deviation of 0.8 seconds so it's almost always exactly four seconds. And so, with Bitcoin it's more variable, right? So you could have a block after a minute. You can have a  block after half an hour. And so, it's much harder for businesses to kind of rely on a system that has that high variability because it increases your risk as you holding an asset.

So these are just some examples of why we think that XRP is best suited for payments use cases. And I think I'll give, be giving a talk later today on on going into a bit more depth on some of these differences

17:28
DAVID SCHWARTZ:
And we're not afraid of a level playing field. As Stefan said we think we can succeed on a level playing field but also you can get people to build a level playing field. It's very hard to get other people to stand behind something that has a built-in bias in favor of one company. Twitter doesn’t, it doesn't mind the fact that the internet wasn't built for Twitter. Facebook doesn't mind. They like the fact that there's an open platform that everybody can support and use and they're willing to compete on that level playing field and if they lose on that level playing field you know, so be it, somebody else will win and the world will be a better place for it. We believe that we have the advantages today and we believe that we can get the industry behind an open standard that facilitates these types of instantaneous
payments.

PATRICK GRIFFIN:
So David, this is a question coming back to you. In this level playing field obviously there are digital assets can compete on different characteristics. Obviously I think that Bitcoin as scalability challenges have been I think very famous recently could you comment a little bit on Bitcoin’s recent lows some of the things that have come up around resiliency scalability and maybe draw a contrast to XRP and how XRP is working.

18:32
DAVID SCHWARTZ:
Sure. I think the idea that you don't need governance. The idea that you can just have this decentralized system that magically government itself doesn't really work. The internet is a decentralized system it has governance. Bitcoin currently is experiencing a little bit of a governance failure due to with dis-alignment of incentives. Historically the minerss have had an incentive to keep the system working. Everybody needs the Bitcoin system to work, whether you hold, whether you try to do payment’s, whether you're mining. This system has to work or nobody has anything. Everybody's benefited from the value of Bitcoin going up. If you’re a miner, you want the value to go up. If you hold Bitcoin, you want the value to go up. If you're using it for payments having more liquidity and lower risk and holding bitcoins is good for you.

So everybody's incentives were aligned. They're starting to become dis-aligned recently because miners have been getting a lot of revenue from transaction fees Miners like high transaction fees. Users obviously would prefer to pay less for their payments. People who want to use Bitcoin as a payment platform want frictionless payments and they're not getting them because of the fees. So there's been a little bit of a governance breakdown due to that misalignment of incentives and it's not clear how you resolve that. It's not really clear how the stakeholders can realign their incentives.

I’m confident that Bitcoin will come out come through it but I think it shows that governance is important. You should understand how a system is governed whatever system it is because there is going to have to be governance. It’s not going to magically govern itself. Now Ripple, the stakeholders are the validators and the validators are sort of chosen by the other validators, so right now Ripple is obviously very big in that space. We’re the major stakeholder on the network, but the recent interest into the price increase has begun diversifying the stakeholders and so we hope to see different jurisdictions, different companies and those will be the people who will be the stakeholders and they'll make the decision if there are going to be changes in the rules behind in that market. We think that that will work better and I think if you, once you accept that there has to be governance, you really want it to be the people who are using the network. You don't want the technology to force you into having other stakeholders whose interest may be adverse to the people who just want to use the system to store value and make payments.

PATRICK GRIFFIN:
So what stuff, I mean do you have anything to add just in terms of the underlying design of the systems and how they're confirming transactions? I think when you go way way way back to our company's beginning it was billed as Bitcoin 2.0. And you know we felt like there was another way you could build a decentralized digital asset without without mining. So maybe talk a little about the confirmation engine behind XRP and some of its advantages over other systems

21:04
STEFAN THOMAS:
Yeah, so as I mentioned in the introduction, I was fairly involved in the in the Bitcoin community back in 2010-2011 and one of the features that I contributed to was paid to script hash as a reviewer it was one of the first people to re-implement Bitcoin and I pointed out some flaws and you know we ended up with a much better solution. And so, through that experience going through the cycle of new feature on Bitcoin, even back then when the committee was much smaller I realized that it was actually very painful to do even a uncontroversial improvement to the system and that was partly because people had a very strong tendency to be conservative which is a good thing, for any, like whenever you're modifying a live system. But there was also just like no good process for introducing changes. We had to come up with a process ad hoc. We came up with this whole voting on mining power and so on. Now, from that experience I remember going back to a wiki page on the big part of working called the hard fork wish list and I kind of looked at and is sort of the list of things other things that we wanted to do and a lot of them were in my opinion, in my humble opinion, must haves for any kind of mainstream or enterprise adoption and so I was kind of like putting numbers next to them like this would take eight months this would take 12 months this would take two years and it started to add up like I'm not going to see this get to that point if we go at this rate.

STEFAN THOMAS:
And then you know Ripple approached me and they had a lot of that hard fork wish list already implemented but maybe more importantly they had a different idea on the governance structure and I think there's sort of two key differences: The first key difference is there is an entity that's actually funding the development of the asset and all the technology behind the asset. And so you know, I was looking at the Bitcoin foundation website the other day and they're currently, their most recent blog post is to promote this lawsuit in New York to try to strike down the bit license and apparently the foundation feels that it's strategically important for Bitcoin to kind of fund this lawsuit and they looked at how many people had actually donated to the donation address that they were giving and it was just over a thousand dollars basically. Almost nothing

And I was thinking like well if XRP you know had any strategic issue like that there would be millions of dollars immediately that just Ripple would put behind the issue and so as a holder of the asset that's really important for me to know that, you know, there is some some entity that's actually defending it from a technical standpoint, from a legal standpoint, from a business standpoint. That makes a big difference

And then the second big difference that I saw was how features and how generally the evolution of the technology is managed. So on Ripple, there's voting among the validators, which is not too dissimilar from you know the kind of mining voting that we're doing on Bitcoin. However the validators on Ripple are largely chosen by the users or they are chosen by the users. And so they're not chosen by so this algorithm or just by their virtue of being very efficient in mining. And so as David pointed out earlier, the incentives are very different. On Ripple, the incentives are you know I want the people who are appointing me to be validators to be happy with my validations because otherwise you know there's what they will stop paying me. And so you know there's a much more closely aligned incentive for the value of some Ripple to do what the actual users want to do.

DAVID SCHWARTZ:
And I would add that there there are sort of vulnerabilities in both types of systems. Like with the miners, it would be a double spend. With the validators, they could simply stop validating and the network would halt, but one tremendous difference is that you know how to fix one and it's not clear how you would fix the other so if you had the miners that were being pressured, let's say by a friend in government, or they were double spending or for whatever reason they are holding transaction fees high, let's say the block size issue got to the point where it was absolutely critical and there was no ability to come up with an agreement. It's not clear how you solve that. You change the mining algorithm? Like that's the nuclear option? Nobody knows what you do. With the system on consensus it is clear what you do. You can, you can change the validators. The validators work at the pleasure of the users, the holders, the real stakeholders of the network.
That, I think that is a fairly significant advantage once you realize how important governance is. And it's not just a handle of failure as Stefan pointed out there's going to be evolution of the system unless you think the systems are absolutely perfect today. Well bitcoin is already proven that there they're not absolutely perfect today. I can’t, I certainly wouldn't try to claim the Ripple is perfect today. We have a wish list of features too, limited by engineering time, but we have to get people to agree to implement those features and I think that's also an argument why you can't have one blockchain to rule them all. There are features that also have costs and every feature has a cost because if you have a public blockchain everybody that uses that public blockchain, at a minimum, when there's a new feature they have to do a security review and make sure that that feature doesn't create a vulnerability for them. So there's a fixed cost that's fairly high. There's a huge bug bounty on Bitcoin and on Ripple right? Billions of dollars if you could steal money on the system. So the cost to implement a feature is high. So if there's a feature that somebody really wants it would be really useful for them they're probably not going to get that's not enough to get any feature on the system, so you're going to have a diversified system of multiple block chains and multiple ledger systems of all kinds competing with each other for share. that's why I think InterLedger is important because InterLedger will permit people who use different block chains and different systems, for good reasons, to be able to make payments to each other quickly seamlessly and without the risk associated with little pays problem.


26:53
PATRICK GRIFFIN:
hmm Maybe just a last question before we turn it over to the audience and you've mentioned InterLedger. Stefan is the creator of InterLedger or the chief architect of it. When you walk around the conference today, you'll see a lot of companies that have blockchain offering. So, sort of going back to 2014, now if you remember, the the terminology and the marketing was all about it's not about Bitcoin it's about the blockchain. And so now we have some sound perspective on that. What's your take on the fundamental premise of a de-centralized distributed database without a digital asset and what's the trade-offs in terms of functionality versus utility? What's your opinion given the architecture ILP.

27:42
STEFAN THOMAS:
Well that's a question I could easily spend hours on, so let me try to summarize. So as you mentioned, my colleague Evan Schwartz and I, we we came up with this protocol InterLedger and that came out of actually in a couple of different work streams but one in particular I remember was I was trying to figure out how to make Ripple more scalable and I was thinking about a particular kind of scalability which is similar to what David just mentioned, which was scalability in terms of functionality not just in terms of how many transactions can you do per second. Like how do I serve very different use cases that have you know mutually conflicting trade-offs. So as I was thinking about that problem I was kind of saying well maybe you don't even have to keep that one set of global state. Maybe you can have state in different places and a lot of that is honestly just rediscovering database knowledge that we've had since the 70s. Now just looking at Jim Gray's papers and just oh yeah that works for blockchains too


28:41
STEFAN THOMAS:
So we took those ideas and we combined them with ideas around from the internet from the internet background in terms of networking and the concept of internet working and so on. And so, when I look at these private blockchains type approaches I think they are doing the first of those two steps namely they're applying sort of modern data, modern database thinking or classical database thinking to blockchain but I don't think they're really applying the Internet thinking yet because they're if they're attempting to achieve interoperability just by homogeneity which does not give you that diversity of use cases and so if you want that you have to think about what are the simple stateless protocols they can actually tie these different systems together without dictating how
they work internally. So I can have my private blockchains that has all these like special features and it works in this way and you can have your private box and it works in the other way but we can still talk through a neutral protocol and you know the way that we're thinking about InterLedger, we're not married to InterLedger being a thing like I'm completely happy if it's lightning or if it's something else but I think as an industry to agree on some kind of standard on that layer.
I think one of the reasons that we can is because unlike a blockchain a standard is neutral you know there's no acid anyone's getting rich off of. There's no there's a lot less to agree on. The list of decisions you have to make is a lot shorter. You know my colleague Evan, he makes a point, a very good point about with InterLedger only like seven eight major decisions that you have to make in the architecture to really arrive at it and so I think we have really good reasons for each one of them and so we think that there will be a certain convergence on on one standard protocol for again not just blockchains, but like any kind of ledger.


DAVID SCHWARTZ:
I just ant to add that InterLedger is completely neutral to how the ledger works internally. Any ledger that can support a very short list of very simple operations. Every banking ledger can perform those operations. Almost anything the tracks ownership of value of any kind is capable of confirming that value exists, putting that value on hold, transferring that value between two people and those are the only primitives that InterLedger builds on. It's just by the clever combination of those operations in a way that provides insurance that all of the stakeholders get out of the transaction the thing that they're supposed to get out and get back whatever they were going to put in if they don't get out what they're supposed to get out. It’s, it's astonishingly simple at the
protocol level.

Q&A

QUESTION:
Yeah, I’m kind of new to this and I just have some really basic questions. I read something recently where, Ripple was now the second most funded, or invested. Bitcoin was first, and Ethereum was third. Can you tell me how you got to that position? You seem like you’re poking up about Bitcoin and how Ripple probably is more efficient and better. Then I had a second question - Where do I get a Ripple T-Shirt?

PATRICK GRIFFIN: (...)
DAVID SCHWARTZ:
I think we also sort of crossed an important threshold. If an asset doesn't have value and it doesn't have liquidity you can't really use it even if it has the properties that are perfect for your use case simply because you can't you can't get enough of it without moving the market and I think we crossed a threshold where there is enough value in XRP now that you can use it to make payments and you can use it as a store of value and I think what that also caused an uptick in interest and so people started looking at what what is this what are it's properties? Who is behind it? What are the use cases? and I think people are seeing now the technical superiority of our design, the team that stands behind it, the amazing array of partners that we've managed to align with us and I think they're starting to realize that that we are going after these use cases aggressively and that they can actually just use XRP for many of the same things that they would traditionally use Bitcoin for.

...

PATRICK GRIFFIN:
Okay, so the question is the dichotomy between digital assets as a functional tool and as a store of value. 

STEFAN THOMAS:
Yes. I think that the biggest difference is what kind of features you're looking for? and you can very easily have an asset that has both but they are somewhat conflicting. They're some trade offs. Let me explain. So for an asset that you use as a store of value, I think your biggest criterion is going to be that it's that it's deflationary right? Look, you don't want there to be if you want to invest in gold you don't want there to be a ton of gold in the ground you don't want there to be an asteroid that's made of gold that just lands on earth and suddenly everyone has gold’s coming out of their ears. So you want something that's like scarce, and will continue to be scarce and also something that there is going to continue to be demand for in the future. So with something like gold it is because it has a history of people investing in it, it’s going to continue to have a history of people investing in it and there are some industrial uses that you can fall back on so you can have reasonable confidence that a long time from now you know gold will still be or something and it might go up and it might go down but it will still be worth something. And on the side of an asset used for payment, a medium of exchange the number one thing you care about is liquidity so you want to be able to get into and out of it as cheaply as possible you want it to be accepted as widely as possible if you go to a merchant and they don't accept that that medium of exchange you gotta first convert it. It’s a huge hassle, a huge cost and so it wouldn't be a good medium of exchange. So those are the features you’re looking for.


Now, how are they aligned or in conflict so I think if an asset is a widely used as a medium of exchange that definitely creates some demand and that helps make it a store of value. However, that deflationary aspect is potentially something that that creates some trade-offs because for something like a like an asset used as a medium of exchange, if you can actually use the newly issued assets as a way to incentivize liquidity, which is something that Ripple has started to do, you can increase the liquidity through that measures. You can use newly created units to increase liquidity. And so in our case we have enough of a buffer of XRP that we can keep doing that for, you know, decades if not hundreds of years, but if they're weren’t, if we didn't have a bunch of XRP or if there was nobody doing that it would probably be less useful as a as a medium of exchange because there wouldn't be anything that additionally increasingly put in.

DAVID SCHWARTZ:
And I think that's another reason that XRP can succeed in a level playing field. There isn't really another asset where there’s this company that has a war chest of that asset that they can use to increase its liquidity without having to increase a known fixed supply so it increases the circulating supply but presumably that's known and already figured into the value, so it's not like that’s going to devalue it as much as a sort of variable increase in the supply of an asset.
(...)

46:18
PATRICK GRIFFIN:
I would maybe just add to that before for we go to this question. I mean the part of that volatility equation in the risk equation is a function of use case and as these technologies ultimately start to realize their promise in their use case, there's commercial adoption and there's a real reason for people to be buying it. They're not just buying the promise and I think that as quickly as we can get to the commercial adoption of these digital assets. Not the promise and articulation of the promise of them but the actual commercial roll out. Then you'll start to see some of that risk come down. You'll see the volatility come down with it and you know, we think that there is a race to getting the use cases achieved and ultimately you know I'll talk to my own book. I would say with regard to XRP, XRP is the closest to doing that in a very large-scale way and we have a clear path to basically cross selling of a liquidity tool built on top of the digital asset across today 75 Bank Network and you know I think that story will start to take traction.there's a question over here yep 

47:25
QUESTION:
So what are you guys doing to make Ripple more accessible to end users and consumers?

47:32
PATRICK GRIFFIN:
Okay so, I'm going to jump in on that to start and if you guys have thoughts. We take the view and this maybe goes back five years where five years ago we started with sort of the business development challenge was an interesting one. We had this great technology and then we had to try to figure out like, okay now how is it useful, and we basically took the “throw spaghetti against the ceiling see what sticks approach.” We looked at loyalty points, we looked at merchant adoption we looked at pretty much everything under the sun regarding value transfer. Even sort of like syndicated loans and everything and ultimately what we learned in the course of doing that is that there is infrastructure in place today that provides certain value to consumers. In particular on the consumer side, there's insurance. There's risk controls. There's authorizations. There's authentications. There's there's you know ways in which where you can store your value with assurity. So we stepped back and said this technology's really you know has where all the places are in place all the pieces are in place to adopt today is institutional. And we felt like this technology, and we continue to feel this technology is still very early for retail adoption. It's just company view I think that other people have different views and and so we're just focused on that layer. Now what I would say is that I think that that's just a you know a very very very long first step, but once you get sort of this technology embedded deep within the financial infrastructure then I think you start to see a path to retail adoption. If banks are sending and powering their payments through digital assets, well there's a clear path then for banks to provide accounts for digital assets with insurance behind them and so on and so forth. And then there's path for you know consumer rails to start being really rolled out I mean I think even when you look at the merchant merchants sort of companies, like Bitpay, so forth some of those merchant stories that the merchant adoption has not helped the consumer adoption is not quite there and
there's a real reason why you would not use the volatile digital asset to pay your groceries or whatever the case may be. That will change eventually but for
today it's just not our focus.


STEFAN THOMAS:
So when we first started out we actually had a consumer facing client and we decided to sunset that. We had a credit card. We had all kinds of cool things and that was us coming from a very much like a Bitcoin mindset but if you think about it how many people even in Bitcoin actual end-users use Bitcoin. I'm not talking about using CoinBase. I'm not talking about using BitPay. I'm not talking about using any kind of intermediary that’s on my behalf on Bitcoin, but actually downloading the client downloading a blockchain myself and interacting with the network directly. If it wasn't for the Android well, I think that number would be very very small and even with that it’s a small number. And I think you know my personal experience with Bitcoin you know I lost one fairly large wallet and so, if I think about the user experience of using a digital asset directly it's actually not that creative and experience because there's no one you can go to the complain. There's no consumer protection built in. So it
actually makes a lot more sense to me that there would be intermediaries that take off some of the rough edges for you and then in turn it will be enthusiasts that use it directly just like people run their own email server but I think it's completely unrealistic to think that that will be the majority of people.
You know like the majority people want a nice experience and they're willing to pay for it. They're not worried about everyone's out to get them and so we think it's a more believable model and so once you presuppose that model, the things you start to be interested in is how do those systems integrate with the digital asset and so that's what led us down the path of InterLedger, and so on. Like look at how these different exchanges work today, and I if I want to move money from one exchange the other I have to withdraw it into Bitcoin, I have to get into the wallet, I have to deposit it into the other one, wait for confirmations each time. Like why isn't there a protocol that ties it all together? So that's exactly we're trying to trade with with Interledger.

DAVID SCHWARTZ:
I think you can see an analogy in the early days of the internet where a lot of people were early adopters and they were using you know the earliest technology and there was not broad adoption and it was institutional adoption that drew the people in. It was this idea that that everybody could play on this platform. That there wasn't one company that controled it. I think that was what brought it to the point where it made sense to launch consumer facing products on that platform. The problems that we have today in blockchain are just not there yet.
They just don't provide the basic features that ordinary people want. Customer support is very difficult to do because the underlying systems are so complex I think I think if you talk to any company that has a retail facing blockchain product at this conference, and you ask them how's their customer support been the past couple weeks, I think you'll hear a uniform story. Many of you quit smiling and probably have your own personal issues because you work for those types of companies. The technology is at a point where a very high level of sophistication is required to use it. You know, it used to be you had to be a mechanic to work on a car, you know you have to get a copying machine if you any of you remember back when you're copy machine required regular service. We're in the day where it really isn't ready for retail adoption. I think trying to push that early is a dangerous strategy. People are starting to do that with XRP. We're hearing a lot more interest now that this has that volume the liquidity, but that's not our use case. If you want to do it, we're not going to stand in your way, but we don't think that that really makes sense yet. We’ll get there though.

53:00
PATRICK GRIFFIN:
Okay, there is a question over there.

53:06
QUESTION:
Yeah you showed at the beginning an example of a publisher who was getting paid automatically and that you can enable this type of micro payments and transaction. So can you describe a little bit how do you handle this how do you make it happen? What goes into the background and perhaps the permissionless versus permission environment that you are gonna rely upon? 

53:31
STEFAN THOMAS:
Okay, so in that example, what we're envisioning is there are a couple of technologies that only exist in the form of prototypes today. They have sort of reached maturity and are being used and those technologies are for one the  InterLedger protocol itself. The InterLedger protocol itself creates an overlay network across different Ledger's so you can make payments without having to know which ledger different people are on and that creates that sort of universality, that reach that we need to have something like the internet. You know I don't have to care which provider you use. I don’t have to care which blockchain you like. Which digital assets are your favorite. I don't have to care. You know, I can use whatever I like. You can use whatever you like and InterLedger makes sure that we can transact without caring about it or worrying about it.

So that's one technology. The next one is there has to be some sort of protocol through which the content producers actually making the content available in exchange for payment so we are very engaged with the W3C. We have been for many years. Currently we're members of the web payments working group which has recently put out its first recommendation. It's currently being implemented by Safari and Chrome and Internet Explorer and Firefox and as part of that effort we are actually one of the two co-chairs for that effort. We've been thinking about like, what is the next step? You know right now we're trying to make how how can we make credit card payments that are on the web and I think one of the next steps will be how do we integrate InterLedger payments into this and then if you go even further, it's like how do you integrate sort of autonomous payments into the web? 

So how do you make it to that I can monetize my web application just by having traffic. I have tracking on my web application - there's a stream of money coming in. One of those points I want to make a real quick just to show you some of the thinking that's going into this. If you, if you have something like metered access, you get into a big psychological problem which is people don't want to use metered access. If I am worried about all the time I'm using this app you know I'm paying this much per minute I'm going to try to use as little as possible, log out as quickly as I can and so on. And so a lot of people are raising that as a concern with our proposal for some micro payments on the web, but what I would say immediately to that is that the internet itself is also metered. So if I'm a small-time ISP I will have metered access to the internet, and so I'll pay for gigabytes or terabytes or whatever traffic that I'm causing or even just for the bandwidth itself, but as a user I usually don't have that experience and the reason for that is because of that exact psychological phenomenon where it's actually better for providers to subsidize some of the heavier users and overcharge some of their less active users and give everyone a flat rate because then everyone's thinking okay I already paying for this flat rate I'm going to use the service as much as I can. And then that creates that engagement and so on. And so with micro payments you can do the same thing. So you can have a provider that charges you a flat rate and then as you're browsing the web it makes micro payments to any website that you're visiting and as a result it's financing all these nice web apps premium experiences you know bypassing paywalls, disabling advertising so you're getting a much better experience for that small monthly payment. And so we think that that's a real compelling story and InterLedger’s and enabling technology for that so it may
really good use case example. Does that answer your question? 

(...)

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@cuber " We couldn't have done that without a pure SAP digital core banking platform and we couldn't have done that without great partners such as Reise Bank (...) and Ripple." 

That's beautiful indeed. 

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