Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Miguel Vias: XRP’s Future for Cross-Border Payments

Episode Date: March 21, 2017

For a long time the native asset of the Ripple network XRP was the cryptocurrency with the second biggest market cap. But with much of the supply controlled by Ripple, it remained surrounded by controversy. Still, XRP remains an interesting asset to enable cross-border payments in the future. Miguel Vias recently joined Ripple after a long career on Wall Street to develop XRP as a liquid and widely accepted asset. Topics covered in this episode: How Miguel Vias went from trading precious metals to XRP The similarities between precious metals and cryptocurrencies The role Ripple sees for XRP The connection between XRP and interledger Why the FinCEN fine changed Ripple’s course XRP’s role in cross-border payments How Miguel is trying to create liquid markets for XRP Episode links: Ripple Website CME Group Executive Miguel Vias Joins Ripple | Ripple "Ripple and R3 Team Up with 12 Banks to Trial XRP for Cross-Border Payments | Ripple" Q4 2016 XRP Markets Report | Ripple Welcome | Interledger FinCEN Fines Ripple Labs for Bank Secrecy Act Violations This episode is hosted by Brian Fabian Crain and Meher Roy. Show notes and listening options: epicenter.tv/175

This is Epicenter Episode 175 with guest Miguel Vias. This episode of Epicenter is brought you by the Ledger NanoS, the hardware wallet which sets the new standard in security and usability. Get it today at LedgerWallet.com and use the offer code Epicenter to get 10% off your order. And by Jax. Jax is the user-friendly wallet that works across all your devices and handles both Bitcoin and Ether. Go to J-A-W-X.I-O and embrace the future of cryptocurrency wallets. Welcome to Epicenter, the show which talks about the technologies, projects and startups driving decentralization and the global blockchain revolution. My name is Brian Fabian Crane.

And I'm Meher Roy. Today we'll talk to Miguel Vias, who is head of XRP markets at Ripple. We're going to walk through topics such as the overall vision of Ripple, what XRP is setting out to solve and its utility. And some of the future plans Ripple would have around XRP and around XRP the development math-based currency. So before we start, let's have a quick intro from Miguel. Miguel, tell us a bit about your background and how you came to be interested in this technology. Sure, Mahita. Guys, again, thanks for having me on. It's an absolute pleasure and an honor to be on the pot. I've

been following you guys for about a year and a half. So when I got the opportunity to do it, I was pretty excited. So thank you. So I found Ripple in early 2014. I had started to follow the Bitcoin space tangentially. And after the run-up, started to do research on other coins and seeing what else was out there and read the consensus white paper and was immediately viscerally attracted to the elegance of the solution. It did feel like an iteration on what was already out there and maybe an improvement. So I immediately bought enough XRP as my fiance then would let me and my wife now, no longer. longer lets me. And started following the company.

At the time, I was at the CME, and I was involved in some of the digitization projects internally. I was involved in some of the venture projects and became friendly with Rumi Morales, who runs CMEE Ventures, and she and I, you know, both big ripple fans, CME as an investor, and basically just fly on the wall, kept following the company. And in the fall of last year, I got a call from Justin Strasswell, who is on Rumi's team. And Justin said, hey, Ripple's looking for somebody to help them build the XRP markets. Do you know anybody who might be able to help?

And I said, look, I'd love to help Ripple any way I can. Obviously, I'm a huge fan of the company. And it turns out they had an office in New York, which I was not expecting. That was an easy decision. So you mentioned CME before, right? So that's the Chicago Mercantile Change, right? Yeah, Chicago Mercantile Exchange, largest futures exchange in the world. When I made the move to Ripple, I was running their precious metals desk product suite, if you will.

Largest futures product suite in the world. So there's a lot of synergy there between, and previous to that, I was a trader for 11 years, mostly bold bracket investment banks, all in precious metals and in options. So the move actually over to digital assets is a pretty seamless one, given that there are some pretty significant similarities between precious metals and digital assets, right? I mean, Bitcoin is often called digital gold, you know, the immutability of it, the fact that it doesn't degrade, the fact that there's a limited supply,

all of those things can transfer over. And I think you're watching those worlds meet pretty quickly. In fact, every time I turn around somebody's trying to digitize gold, and I always I always kind of wonder, well, isn't that what, you know, what some of these other assets are supposed to be? So for me, the move from almost a fundamental understanding perspective was pretty simple. And how do those markets that we see today in the cryptocurrency, in the blockchain space compared to, you know, those more mature precious metal markets that you we're working with before.

It's important to recognize that the digital asset space is pretty small. I mean, it's getting bigger. Every day, it seems like there's more interest and more money flowing into the space. But if you take the market capitalization of all of the digital assets, I mean, maybe you get the $30 billion, maybe, and, you know, that is a few hours trading on a really busy FX desk. You know, you're talking, when you're talking capital markets, and foreign exchange and securities,

you're talking trillions and trillions and trillions of dollars. So, you know, I don't mention the point in order to be little of digital assets place, but only to point out that it's very early in its development. It's got a long way to go. One of my goals in particular for XRP is to get it to that level,

some institutional grade liquidity, which we have our work cut out for us there, but that is the goal. The other, the biggest comparison of the thing that always, enamers me about these markets is the volatility. I mean, what's happening now right now is absolutely all inspiring in terms of volatility, especially after last week in the Bitcoin ETF decision, you know, I think the markets have caught

many, many people off guard. And, you know, part of my job internally is to make sure that I communicate to the company what's happening in these markets and try to make sense out of it, which is difficult given how opaque a lot of it is, some of it on purpose, obviously. And, you know, I think if you look at the markets over the last few weeks, after the Bitcoin ETF, I think most people expected Bitcoin to absolutely fall out of, you know, out of the sky. And it didn't. In fact, it had a little down move, and then it came right back up. It feels to me like that gave folks, like Fiat investors, if you will, or speculators,

a lot of confidence. And they jumped back into the space. But as you guys pointed out last week, I watched the Polly Chenexie. podcast and you guys were talking about sort of the scalability issues and the fact that the confirmation times are slow and there's chatter about a hard fork in Bitcoin because the community can't quite seem to figure out what's best for itself. You know, the crypto space knows that very well. I mean, that is not some secret. I'm not even really deeply enmeshed in the space the way it's traditionalists are and even I know that. So I think what you've seen over the last few

weeks is the smart crypto money, if you will, flow out of Bitcoin into these other digital assets right as the Fiat money has flowed in. So you're kind of watching this cycling effect, which has been absolutely mesmerizing to witness. So yeah, it's interesting times. That's very interesting how you point out. You can certainly be right. Where do you think this is going to go with the markets? What are your expectations regarding Bitcoin, regarding Ether, and maybe regarding the overall small space. I mean, I guess Ether is perhaps, you know, at this point, most of some people's nines, because that has just been going up in an insane bubble, like reminiscent of, I guess, Bitcoin

in 2013. You know, it's difficult to tell, given again, I think, the relative small number of players in the space, the relative small market caps, difficult to say, okay, who's going to win this, what are the prices going to be? I mean, it's crystal bar, right? I mean, you just mentioned the fact that I might be right about my analysis to what's happening. I could totally be wrong because truthfully nobody knows. People can conjecture all day.

But I think what is not debatable is that what you're watching is certain digital assets gravitate towards certain use cases and start to prove their utility and as a result are driving value into those coins. So the Ethereum tailwind has very much to do with the fact it seems like it really has some usage. It really has utility for some larger institutions. I will say I do find it somewhat confusing in that most of what the Ethereum use cases are revolve around are private instances of Ether or of Ethereum, not necessarily public instances. So I understand from a marketing perspective how it's a huge. huge boon, I guess time will tell whether or not those worlds all start to interoperate. And one of the things that we're big on, and I know you guys have had Stefan on the pod and Evan

as well, we are very big on interoperability. This idea that one asset will not win the space, one ledger will not win the space, there are likely to be many different use cases, many different coins that fit perfectly for different use cases that then need to talk to each other for value to transfer seamlessly. So, yeah, I think that that is something that we're all going to watch happen and we're very much focused on. So, like, your answer brings me to the next topic, which is, I'd like to, I'd like you to explain what the term internet of value means, right?

So whenever you go to the Ripple website, I think most prominently the stuff features that Ripple is building the internet of value. What is it really? Sure. So the, from a high level, the goal of the company is to move money as efficiently as information moves today. So if you think of, you know, the internet, right, I mean, I can send you information instantaneously, but if I want to send you value, especially cross-border, that's not really possible.

And, you know, Brad, our CEO, likes to always mention the fact that if you wanted to send $10,000 right now to the UK, the fastest way to do it would be to hop on a plane. It's, you know, that's not where we should be in 2017. So when we say we want to create this internet of value, that's at a very high level what we mean. We want money to flow as easily as information, those things. As an international traveler, when I'm traveling around the world, I actually, to me, whenever I swipe a credit card, it feels to me that money does flow instantaneously.

and money does flow cheaply and the whole system seems to work well. Yeah. Like now, now what Ripple is in some sense saying is that, okay, there's a need for an internet of value where money has to flow better. Is it the case that you're solving a non-existent problem? No, I mean, if you look at, if you look at international payments, right, the failure rate is three to five percent. usually, yes, you don't see it because someone is taking the pain on for you. And as a result, you don't end the feeling it directly. You do end the feeling it in terms of what you pay for some of the services that you're receiving.

So if you can streamline the back end, actually cost, lower value flows more easily. Commerce happens more quickly. I mean, if you look at a company like Uber or Amazon that has to send millions of payments a year to thousands of people to hundreds of thousands of people, maybe millions of people, globally using an old batch and file system, you know, many Uber drivers that they still get paid biweekly. Why? Why can't you just swipe your card and have the money flow?

Like, if I'm in Bangalore and I have a U.S. credit card, believe you me, when I swipe that card, that driver is not getting paid instantaneously. That's going to take a little while for him to actually get the money. So, you know, these new corporates in particular are very much driving the demand for small value, high volume, international cross-border payments. And as we've built out our solutions, so if you think of Ripple having kind of three core technologies, one is called Ripple solution, and, you know, that very much solves for operational inefficiencies that the messaging. level between banks, for instance. And that still leaves an issue for funding of payments.

So if a bank wants to send a payment from Brazil to India, it's likely has to, and it's an international bank, it's an HSBC bank, it's like, it likely has to have funds at both those locations. Funds that just sit there do nothing, basically waiting for payments to happen. right that's capital that is not being efficiently used so that drives prices up and capital's not getting any cheaper so the messaging ripple solution will solve for that messaging operational issue it does not solve for the liquidity problem that's where xrp and rcel come in right for small value high volume international payments digital assets and xRP in particular are absolutely perfect right

so the the liquidity on demand if you will so instead of having to fund these payments what the bank could do is take the reailles buy xrp move the XRP and then sell it for rupee and deliver it locally in India. That can happen in seconds, whereas using traditional rails it could take days. So that's the kind of the second leg of the stool. And then the third leg of the stool is IOP in the ledger protocol, which then allows that bank ledger, irrespective of which liquidity solution it's using, connect to other ledgers globally.

So that might be the visa ledger. It might be the MasterCard ledger. It could be the AlleyPay ledger. But allowing all of those ledgers to talk to each other is key, especially as you see more and more growth in these type of payment companies, these are blockchain-based companies. That's quite interesting. I think we'll spend most of the time going through all of these components of the answer.

So Ripples then the thesis is that, I mean, the difference between, let's say, 20 years ago. So I think a lot of the financial systems that exist today came about after the first wave of computerization, like in the 70s and 80s. And at that time, the need of the hour was mostly corporate payments, some company in the U.S. paying another company in China. And corporate payments were like large value and they could afford to be slow, right? because it's a large value payment. So even if it reaches like three days later, that's fine. But what you're essentially saying is now that with the development of like these platforms, like Uber, Airbnb or all of these new internet businesses,

like we're starting to get like global payments that are like, you know, $20 from Miguel to Meher and across different countries. and maybe the need for these small value payments, quick payments, is going to be the trigger for building a new system based on cryptography. You said it much more eloquently that I ever could, Mayor. Thank you. That's exactly right, right? We're building sort of infrastructure 2.0, payment infrastructure 2.0.

The analogy we use internally usually revolves around shipping containers and how, you know, when the infrastructure for shipping things globally went from, you know, wooden crates to standardized metal shipping containers, commerce exploded 700%. So if you can grease the wheels of commerce and payments are certainly one of the pain points of those gears, if you can grease those gears, then things move much more quickly and commerce happens much more, and you create growth as a result. Yeah, and one sort of analogy that I've also heard, or seen a few times that kind of just explains how broken payments are.

It's that, you know, often if I want to pay, you know, you may hear in the U.S. now, then if I'm actually going to go on a plane with the cash and fly over there and hand it to you, right, they will often be faster than trying to make a bank transfer, a bank wire. And also some area where this is not strictly a. payments issue, but where the just the brokenness becomes very obvious is when you look at the international trade and you have, you know, cargo that's being shipped. But the execution of, for example, a letter of credit, which is essentially sort of the payment, right, and the terms around it would take longer than actually it takes the cargo to get there. And so it kind

of makes it obvious, just how ridiculously inefficient a lot of these processes are. It should be no surprise to folks in the tech space that innovation tends to move much more quickly than infrastructure does. And infrastructure is sort of, you know, it's big and clunky, it's hard to change. So it's quite the challenge for infrastructure to catch up to commerce. You know, commerce and technology move at lightning speed. Let's take a break to talk about the Ledger NanoS, the new flagship hardware wallet by Ledger. I'll pass it over to the Ledger's CTO, Nikon.

who can tell you all about Ledger's security features and SDK. So Ledger NanoS is a personal security device based on a secure element, a screen and button, so that you can verify everything that is done on device and make sure that you are really doing what you wanted to do. Compared to our previous solutions, this device is based on the latest generation secure element, the ST-31 from ST-MICOR. The SC-31 is using a secure armcore, which means that you can have the same ease of development that you would have on a generic microcontroller, but benefit from the security features of a secure element. Security features include an application firewall at the lowest level that let you protect applications from each other,

which means that you can load multiple applications on the hardware wallet, even post-issurance, and you as a developer will be able to leverage these features to load your own application without our authorization and without any kind of authorization from the vendor. We will be providing this device with an open SDK, that let you do anything you want with this device. We provide sample applications for cryptocurrencies, different cryptocurrencies, so Bitcoin, Ethereum. We will also provide Fido Authenticator and you will be free to add everything you like. For example, you could add some secure messaging, some encrypted chat,

and you'll see that the solution is quite powerful and very easy to develop with. The NanoS sets the new standard in hardware wallet security and usability. You can get yours today at ledgerwallat.com. And when you do, be sure to use the offer code epicenter to get 10% off your first order. We'd like to thank Ledger for their support of Epicenter. One of the topics we wanted to cover on briefly was basically the transformation Ripple has gone through, because Ripple used to be, Mayher, I guess, you know, he's been following the company for a long time. I mean, you have as well, right where Ripple was more focused on peer-to-peer payments and money, and now it's very institutionally focused.

What is your point of view on that transformation? Like, as I mentioned in Mejahra and I were talking about earlier, I started following them in 2014. In 2014, I had a Ripple trade account. You know, it's where I bought my first XRP. So I was in there with you. And I too saw a bit of a change, right? And a lot of that, some of it was just foresight.

I mean, if you look at the way, and I know this is going to be a little self-serving, so I apologize in advance, but we were ahead in terms of the institutional use cases, I think, of some of these other initiatives, right? So we were talking about Ethereum earlier very much clearly focused on enterprise and businesses, not retail in any way, shape, or form, not C2C in any way share perform. And you're seeing these other blockchain-based initiatives do the same thing now, DAH, H, hyper-ledger, you name it, right? Everybody is focusing on businesses and fixing infrastructure like we were just talking about

using either distributed ledger technology or blockchain. So that actually was happening, I think, in late 2014, early 2015 in the company. And again, I've been here all of four months, so my timeline may be a little skewed. But certainly I think, you know, one of the defining moments for the company was the FinCEN ruling in 2015 when we got finced by FinCEN for some relatively minor KYCAML infractions, but infractions nonetheless. And, you know, looking back on it, I don't think it's a surprise. You know, FinTech startup in San Francisco, having airtight K-Y-C-A-M-L kind of procedures is probably asking a bit much. But neither here nor there, it happened. And at that point, there were some serious restrictions around what we could do with retail use cases.

So luckily for the company, the focus was already moving towards institutions and the banks in particular. And I've said this internally a few times over the last few months. I can only imagine what it must have felt like for the folks inside of Ripple the day after the FinCEN ruling comes out, as they've already decided to focus on banks. It's like, oh, nice, we're going to build this whole startup trying to help financial institutions, but these guys just told us that we're not good at a few things. But interestingly, it actually ended up helping the company quite a bit. bit because when you go through something like that, it means you've been pretty deeply vetted

by a regulator. So the banks have a certain amount of confidence in working with you now because you have been legitimized a little bit. And there's also like this, you've joined the club of getting fined because every bank has gotten fined for something. So it ended up actually not being something bad at all for the bank use case and helping the company quite a bit. And you've seen, I mean, look, you know, we work with 90 banks globally. You know, we have 15 in-production deployments. It has helped the organization become enterprise grade, you know, to the point where, I mean, I don't know if you guys saw the Bank of England announcement today, but Bank of England is using our technology to POC payments internationally using Ripple Solution and IOP. You know, that

doesn't happen, probably, if I'm being honest or fair, without that FinCEN ruling. So at the time, I'm sure, it felt like an existential threat, but it ended up being great for the company. Why did they find exactly happen? So it's all public. And I can send you guys all the wonderful links. It makes for wonderful bedtime reading. But basically, if I remember correctly, there was a few folks on customers of XRP2,

which is our financial entity that hadn't been properly KYC'd AML. KYC means know your customer, AML means anti-money laundering. It's a very big deal when you're dealing with digital assets, given some of the history in the space. So, yeah, that was it. So moving a bit to the topic of XRP. By the way, my favorite topic in the whole wide world, so we could talk about this for a long, long time.

Very good. Okay, well, then let's move to the topic of XRP. Now, XRP is, at least from an outsider's perspective, it seems like in the past XRP was very much at the center of Ripple's strategy. You know, it was like, okay, Ripple is going to build this network, that people are going to use to move money around. Ripple owns a lot of XRP. XRP is going to increase in value, and that's kind of the business model.

And now my impression has been that this has changed in Ripple and that the focus has shifted to other areas where, you know, now the software being built for banks has been licensed and support being done and things like that. So what is XRP and what's the evolution that XRP is taken as part of Ripple's strategy? Yeah, no, it's a great question. It's one I revel in being able to answer in a public forum because I get the question a lot privately. So as we mentioned, there definitely was, there was a shift ongoing early in 15, late 14, to more an institutional use case for the company generally.

And I can't speak to whether or not how deeply that involved XRP RCL directly, because I wasn't there. But obviously, FinCEN sent put the brakes on RCL a little bit in terms of usage. So when we move to start building software for banks, you know, at the time, if you're talking, was that 2015, you know, that was before the term blockchain was very popular. You know, back then it was just cryptocurrencies and, you know, they sometimes didn't have the greatest reputation, right? So banks weren't exactly jumping in or leaning in, if you will, with respect to digital assets, which was fine, right? So all that happened was it became a sequencing sort of strategy. And the idea is, look, we're going to build you software that's going to help you no matter what.

We're going to help you operationally appear. And you'll notice as we move forward and as we develop that the perfect liquidity solution for some of your biggest pain points is going to be XRPRCL. And you'll come around to using it when you realize that and when you become more comfortable. And I think we started to see that in 2016 where all. of a sudden everything blockchain was fine. Like I'll never forget, yeah, it was 2016 consensus versus 2015 consensus in New York. And it was literally like a sea change. Like from 2015 to 2016, I felt like the whole established enterprise world has figured out distributed ledger technology in blockchain. It was unreal. So that then allowed, I think, a reemergence,

if you will, of XRPRCL as a liquidity story. Currently, though, I am absolutely fascinated by where we are with respect to the payment space because in that time, in these 18 to 24 months, you've seen a whole new type of payment company emerge, right? I'm talking about VIM and wire, guys like pay case, that use the blockchain for payments, And today, primarily because of the liquidity, that is all going through Bitcoin. But, you know, and I'm not a Bitcoin basher in any way, shape, or form. But if we're being honest, Bitcoin is not the best asset for payments because the confirmation time is slow and getting slower.

So the strategy right now inside of Ripple is very much, and that's why I'm here, is to build Fiat XRP liquidity in order to run payments through it. So the goal, and you watched our, I don't know if you guys, I don't think you guys follow it that closely. So I will tell you that in December we launched, we launched XRP on BitStamp. We're working with a few other digital asset exchanges to continue to launch it in different currencies, right, so that we can start to build the liquidity for that use case that I described earlier, where someone could easily run a payment from Brazil to India in seconds. And there is no doubt in my mind that, given all the wonderful attributes of every other coin out there, that for payments, because of the operational efficiency, because the consensus mechanism is so efficient and everything happens so quickly, that XRP is the best digital asset for payments. So that's the use case.

And I spoke earlier about how value for any digital asset is going to end up being driven by utility in the long. run in the short run you're going to get whatever you get and people buy and sell things for myriad reasons in the long run if your asset isn't useful then it's not going to be around so that's our that's our use for it is very squarely in payments I mean after all we're a payments company or payments off a company so so the idea is that XRP is going to be used as this bridge currency so when when the flow of money needs to go from say I don't know, from India until Mexico.

So that is the INR and the Mexican peso. There may not be a direct market between the INR and the Mexican peso, just because there's very few people that want to do this kind of movement. So you're kind of pitching XRP as this asset in the middle. That asset has a strong market with INR, and that has it as a deep market with the Mexican peso. and then somebody can easily go through, go from INA to Mexican peso or back very easily.

Yep. Like, who do you imagine will do this? Is the future that in the future, it's going to be small banks, medium banks, big banks doing this kind of transfer? Or is it going to be retail people like me and Brian in different countries using the ripple system and XRP to do it?

Yeah, I think it's going to be, I mean, if I have mine, I wish my hair, it will be everybody. But I think people will use it, and it'll end up going through some sort of a funnel that then ends up using that liquidity. So not you directly, right? Like, you are not going to send, you are not going to be a money services business that does this transaction, but you'll deal with a money services business that does it or with a bank

that does it. If you look at the banks that we work with, they're almost exclusively. international, again, because we're trying to very much solve for cross-border payment issues. And the use case for XRP speaks directly to that. So I think if I'm looking at a timeline, right, and one of the reasons that I'm so excited about these blockchain-based MSPs is that this is happening now. So the use case is real, right? This is not a POC.

This is in production. The challenge for me is going to be putting together the ecosystem that then allows for people to do the same thing they're doing now in Bitcoin in XRP. Not easy, right? You know, it's a little like herding cats. You have to list. You have to partner. You have to incentivize. You know, on Bidstamp, we put together a volume incentive program or we helped Bitsdamp put together a volume center program and funded that.

We put a market rebate program so that people could come in and trade for free. sort of attract some of that retail paper to trade on the exchange. If you look at a market, and this is not a hard and fast rule, but if you have a market where you have a third liquidity providers and market makers, a third traders, whether they're professional or retail, it doesn't really matter, and then a third hedgers, people who actually are using that liquidity for something, you have a very healthy market. The first bit is pretty easy to get.

I mean, you know, I've been building liquidity for a while, and all you do is pay folks to provide liquidity. The other two are a little bit more challenging, and, you know, we can partner with the hedgers, and then we have to build interest in XRP and RCO in order to bring more of the sort of trader community, if you will. Like back in 2015 or 2016, I used to see a lot of articles and a lot of interest around using Bitcoin as an international payment rail where I am sending money to somebody else across the world. I am in my fiat currency. That other guy is in his own fiat currency. But the way I send the payment is in the middle there is like some company that uses Bitcoin as the rails. so it takes money from me in my fiat currency,

converts it into Bitcoin, transfers it over the Bitcoin network, and does another exchange on the other side and sends it to the recipient. So the retail user doesn't get to see Bitcoin at all. Like behind the curtain, it's like the Bitcoin rails that are doing all of the work, right?

And I remember they were like venture capitalists that were like saying, this is the future, there's lots of it. And now what, what I feel as if you're saying is it's a very similar model to that with the exception that you're saying that instead of Bitcoin you want to

push XRP in that role and the reason you're trying to push XRP in this role is A you work for ripple but B that you're designing the ripple ledger or the ripple infrastructure just for that particular use case. Well it's designed it's it's it's it's very much a payments focused ledger so you know for instance we have a we have this feature on

ledger called payment channels which allows you to do i think upwards of 50,000 transactions per second just like lightning except that we're live right so um you know we have these things that are already scalable in order to run really high volume through the ledger so yeah it's it's designed for it the One of the reasons I joined Ripple is that they had the perfect sort of app, if you will, right, in Interledger Plus Solution for the perfect digital asset for that app. So it was like a marriage, to me it made so much sense. It was like, well, yeah, this is perfect. Like you marry these three pieces of technology together and you basically revolutionize international payments.

So, yeah, I want to do that. And it's why I join, obviously now that I'm an employee, I want to do it even more. But if you look at everything that we did directly on RCL, on ledger in 2014, if you look at two examples in particular, Ripple Trade and RPP, the Ripple Payments platform, both of which had to go away. both of those use cases, Ripple trade being an on-ledger exchange where people can trade, and then RPP basically being exactly that mechanism you just described

where Fiat comes in, transfers to XRP moves and then transfers out the Fiat. Both those use cases are happening. They are, it's a thriving part of the digital asset ecosystem, right? So, you know, again, I think the the sequencing of it from an external perspective seems odd,

Right? Because it seems like, oh, well, and look, I get the question a lot. You know, is XRPRCL still part of the ripple kind of story? And I can't tell you how much it is. And the fact that, you know, now it's sort of clear as day how all of these worlds are merging and we have the perfect asset for it or maintain the perfect ledger for it is incredibly excited. So, yeah, that's definitely what we want to do. So, Ripple and XRP have, you know, there's been a lot of controversy around it. I think this is even in the past.

And a lot of it was around, at least my understanding, is one XRP and the distribution of XRP. Can you run us a little bit through what those controversies are? I think the thing that I remember. Controversy. Brian, what are you talking about? Come on. No way. I've never heard any of this before. Yeah, sure. And look, when David and Arthur created the ledger and created basically the whole amount of XRP, they donated a bunch to the company, right, with the idea that the company would use these funds to basically usher the technology forward.

instead of depending on a broad network of folks who may have interest or not have interest in developing the technology, they went another route. And they said, look, we're going to take this big stash of XRP, we're going to give it to this company. And the company is going to build out the technology using it as a source for funding. I can see how that might have seemed somewhat disingenuous four years ago. I mean, here these people create all this value, and there was a lot of kind of shady things happening in the space at the time. So you have no way to tell whether or not the folks who are doing this

are actually being honest and truthful, or whether or not it's going to end up being something that's not real, right, and some sort of a fraud. Four years later, we fund through VC money and through XRP, I don't know, maybe the best C++ team in the world in our RippleD team that constantly maintains and updates that ledger. Basically 24 hours a day.

And I only know that because I'm on slack at weird hours of the night and see these guys working. We've taken, you know, like if you go to our office, it's not like the office is filled with Ferraris and Lamborghinis and we're all throwing, you know, champagne truffle parties. The money goes right back into the tech. So I feel like the company's been a hell of a steward of the technology and has really worked incredibly hard to build a mature product that works well, that is scalable, that is stable.

Yeah, I mean, look, it was a different model. And I think there's a certain ethos in the space that wasn't at the time in favor or understood it or believed it. But I don't know. I think at this point, it would be hard to argue with the track record. So right now, can you run us through? Like, how many XRP exist and like how many are owned by Ripple Labs? And how many are owned by, you know, do you have some idea about who else owns the rest of, you know, purchase those, those institutional individuals?

Yeah. So we own, I think it's roughly 63 billion of the 100 billion. billion that was created initially, the 37 that's out in the wild, if you will, some of it is founders, some of it is institutionals, a lot of it is folks like myself, right, who have been buying it for a while. So, yeah, I mean, we have a rough idea of the mix, obviously not perfect, because once you let it go, it's gone, or people buy it, they buy it. So, yeah, that's the rough breakdown. And look, we, so I mentioned that we've been building, we've been building some interesting functionality on the ledger. And just yesterday we put out a release for this, this function on ledger that allows you to cryptographically lock, you know, basically a payment.

So I think one of the things that we struggle with is the fact that there's no supply schedule for XRP. right? It's just like lump sum of XRP sits over at Ripple Labs and people are like, what are you guys doing with that? What are you guys going to do with that? I'm starting to think about, you know, maybe putting some real structure around a supply schedule and figuring out a way if maybe cryptographically we can do that to placate some of the controversy and fears around the supply. My here, I would actually love your opinion on that actually because I know you've been in the space for a long time. Do you think that would be worthwhile? Yeah, I'm sure that could provide some certainty, right? If you're like,

like okay you're gonna you know sell this amount of xRP you know at a specific frequency you know for the next five years uh i can certainly can imagine that that would help you know alleviate concerns people might have around around buying xrp yeah with all of these cryptocurrencies especially the ones that have become very successful There's always this narrative, right? So with Bitcoin, the narrative now has become its digital gold predominantly. It's something that will be scares, right? With Ethereum, the whole narrative is smart contracts are important.

There's going to be one platform that wins and smart contracts. And you're going to need something as gas. And this currency will do that. Like in this interview, what's kind of coming out very clearly is, that for Ripple, the thing you're saying is like XRP, that you're going to make all the efforts in order to make XRP as this bridge currency between currency pairs for payments. So if XRP ends up becoming this bridge currency,

then a lot of people would find utility. I like to say that the goal is to make it the institutional digital standard for international value transfer. institutional digital standard for international value transfer I think I think that that is good so that is the target it's going after

so I think I think for a prospective from the perspective of prospective investor that is good to see what it is going after what would definitely be nice is more clarity on what the total supply is going to be because some people seem to be

uncertain that can you create more than 100 billion units of XRP? Nope No, it's literally impossible. You would have to, you know, you would have to fork the network and create another coin. Like imagine, you know, every single one, not every single one, but many other digital assets have a supply schedule and you know exactly what the max is. And once you hit that max, that's it.

You're done. Same thing in XRP, except the max happened at inception. So there's 100 billion that we can't do. In fact, every time XRP is used, a infinitesionally small amount gets destroyed. So it's actually, the supply is actually going down. With XRP, most of the XRP will be distributed by Ripple Labs, right? So are you taking some measures in order to introduce transparency into where these XRP are being distributed and how they will be done? So look, at the moment, one of the ways, one of the most aggressive ways that we're distributing XRP is by funding liquidity programs on all ledger exchanges, right?

So the Volumin Center program at Bit Stamp and the market rebate program at BitStamp were all funded through XRP. You know, if we partner with folks and there's a payment involved, it happens through XRP. So I think as we build out, so one of the things that I find very interesting about the Bitcoin space is that everybody's long Bitcoin in the Bitcoin space. And as a result, they all really want Bitcoin to do well. So they all work together. They all build this ecosystem. They invest in each other, right? And there's a sort of virtual cycle that's created a really healthy ecosystem.

That starts with ownership of the asset. So as we start to build out our ecosystem off-ledger and start to partner with digital asset exchanges and folks like Bitcoin, I don't know if you guys saw the announcement with Bitcoin, but we're working on an XRP solution for storage with Bitcoin. We end up putting XRP in different hands, right? So it starts to proliferate a little bit inside of the ecosystem so that people then have a best. of interest in making it work. So you start to tie those incentives together. Look, we, I don't know if you guys saw a few weeks after I joined, we published the Q4

Markets Report. I did see. You know, and I want to flesh that out more. I want to be more transparent with what we're doing with the XRP in terms of institutional buyers, if we sell any, if we buy any. You know, I want, I want to start to give the market that clarity. There are some things that I can't do, right? Like I can't give names to people like that, you know, we've transacted XRP with.

That's not, you know, there's NDAs and there's confidentiality agreements. So there are limits to how much we can say. But I am very much pushing for more transparency. I think it's good, especially because we're not doing anything wrong, right? So it's like, well, why wouldn't we be more transparent? Part of it, I think, has just been, again, I think that's a little. been a little bit of resourcing. It's a small company. We've gone from 80 to 140 people, I think, in the last 12 months. They haven't had a real, like, down and dirty markets person in the building.

So I definitely build a different, I bring a different point of view in terms of what can help us build these markets out and grow liquidity. And I agree. I mean, I looked four months ago, I was outside these walls and I was having the same questions. So now that I'm inside the wall, I can hopefully start to answer some of those and allay some of the concerns. Let's take a short break to talk about Jax. Jacks is your wallet, your complete user interface to cover all your blockchain needs. I've been using it and I've been loving. Now, Jack supports a lot of different cryptocurrencies.

I suppose Bitcoin, Ether, Litecoin, Ethereum Classic, Zcash, Rager Rep, and they're adding many more, keep responding to users' needs. Now, with Jax, a nice thing is that you can manage all of those coins within a single wallet, and you are in control of your own private keys, they're not on their server, and there's a single 12-word seed that you can use to back up your wallet, all your coins, and sync them across different devices.

Talking about devices, they're on pretty much any device that you can think of. You can get it on PC, Mac, Linux, you can get it on smartphones like Android and Apple and iPhone. You can get it on tablets, or there are even browser extensions for Chrome and Firefox. And on top of that, in Jacks, We can actually exchange different cryptocurrencies for each other because they've integrated a shape shift.

And more partnerships and integrations are coming down the line in 2017 that are going to make Jax even better. So Jax is really making blockchain and cryptocurrency successful for the masses, it's easy to use for the masses. Make sure to get your own Jax wallet at Jax.I.O. or you can get it from any of the app stores you are using. We'd like to thank Jax for their supportive epicenter. So the idea behind like these distributing these XRP tokens it would be like so so imagine like there's this small bank, right? Let me say medium size bank and you today the bank has like system X in order to send money internationally. Right. So that that system X is something else. It's it's corresponding banking or whatever it is.

right? Now, ideally you want like this bank, that might be based in Mexico, to actually transfer some of their international money transfer activities through the triple ledger, right? Sure. So, so you, in a sense, you go to them and you go and tell them that, hey, you guys transfer your activity to this ledger. When they end up making that transfer, that provides liquidity, right? because they will need to exchange Mexican peso for XRP. So that creates liquidity between those two pairs.

But in order to incentivize that behavior of them switching over here, you give them some XRP. You say, hey, take, I don't know, take these 100 million XRP, keep them. And if the ecosystem succeeds, then you will make capital gains on what we've given you. Is it like that? Not quite with banks. you know, the, I think as we sort of early on build the ecosystem, certainly that's the strategy with more sort of the digital asset world, if you will, right?

You know, the example I gave of sort of the Bitcoin ecosystem investing in itself because everybody has Bitcoin definitely does not apply to the banks yet, right, because the banks don't have any digital assets on their books. So, you know, I would struggle to see a, us do that with a bank at least in the next 18 to 24 months. I don't know how useful that would be. I think the pitch to a bank would be, look, and we just put out a cost savings model on the website, I think two days ago or three days ago, which shows very clearly when you integrate all of our solutions, how much you save. So the bank should have an appetite for running certain

payments through our rails using the enterprise software, using Interledger and XRP, quite naturally. I think if I'm being 100% frank, I think the challenge for even a second or a third tier bank is where they're going to source the liquidity from. And that's something that I'm trying to solve for. I mean, if somebody wants to send a payment from Mexico to India at the moment, we don't have a Mexican rail for XRP, right? Not even on a digital asset exchange. And, you know, maybe banks get to a point where they're comfortable dealing at digital asset exchanges because these, you know, like BitSand, for instance, is fully regulated and they have banking relationships, and definitely the worlds are coming together.

So I think we'll get to a point where, yeah, banks, no problem. We'll connect, you know, to Coinbase or Crackin or Bitsow or, you know, whoever it is and source liquidity that way. Or, you know, the other alternative could be that as this space grows and as liquidity for XRP grows and we get more, we get closer to that goal of institutional standard, places like a Bloomberg trade book or an FX All or a Reuters Direct, they start to list digital assets. Now, these are very traditional capital markets, FX liquidity pools.

If we get to that point, then it becomes very easy for a bank to run a payment through the ledger, right? But really, it's all liquidity dependent, which is really what you're solving for with respect to the cross-border payment with XRP. So Miguel, what do you find most challenging and most fascinating in this process of trying to establish these markets, you know, built as liquidity? I mean, it's challenging, and I mentioned the analogy of kind of cat-herding, you know, really trying to put together a rail, if you will, right?

Like an end-to-end rail with two digital applications. asset exchanges with liquidity providers, with traders, and then on top of that, a payments company to run the payments through there, I mean, I get tired just saying that. So if we're talking about the actual work of doing it, it's pretty arduous. But at the same time, you know, I joined the company, I think, maybe somewhat idealistically as we all do when we take big leaps and big risks. Because I've always believed, from the minute I read the consensus,

the white paper on the consensus mechanism for XRP, I believe it had the capability of changing the world. And I've had conversations with Chris Larson and Arthur and David around the fact that it is, I think, transformational software that we, we kind of owe it our best effort to get it to where it belongs and where it deserves to be. So, you know, being part of a team that's focused on doing that and, you know, literally doing something that's never been done before, it's pretty cool.

My wife thinks I'm nuts because every other word out of my mouth these days is XRP and I seem to be working, you know, 27 hours a day and I having dreams about payment rail. but I firmly believe that that's how you get to do something really special. And the company is, it's amazing what it's been able to achieve incredibly solid. Our leadership is amazing. And I think we're on a path that hopefully we'll all look back someday and be like, wow, I can't believe I was a part of that. So, yeah, I'm obviously pretty stoked. Like, how do you intend to distribute the rest of the XRP then?

Yeah, that's a good question, Mahir. And I don't necessarily know that we'll ever distribute all of it. In my mind's eye, there's a possibility where, you know, we end up more of a lending kind of, you know, more of a lending lender of last resort capacity maybe. I think that would be a little strange for a software company and maybe some things would have to change structurally. Maybe we have to have a different organization or something.

Who knows, right? But as these capital markets develop, as liquidity develops, there are going to be folks who, you know, if they want to provide liquidity in the asset, don't want to necessarily own the asset because that puts them in harm's way for price movements. So if you can borrow the asset and create liquidity that way, it's actually a much more efficient way to be part of the liquidity mechanism. It's how traditional capital markets work. I mean, my first job on a trading desk was managing the repo book, the overnight Tomnext kind of liquidation. provision that every day we had to roll, there's nothing like that in digital assets. So partly because the transfers happen instantaneously, but also partly because it just hasn't developed. And one of my longer-term goals, after I get the ecosystem built out, after I get

payments running through there, as I start to merge, I try to merge the two worlds, the digital asset markets and the traditional capital markets, as I try to do that, one of the levers that we'll be able to pull or pull will be lending. And as a result, I don't necessarily know that we'll, I mean, we'll have to, we'll need some XRP, right, in order to do that. So I don't, I guess along with the way of saying, I'm not sure we'll ever get rid of all of it and sort of let it all out into the while, partly because there is some utility for us or maybe some other, you know, organization having it to make sure that the markets are always

liquid. Does that mean there isn't like a clear plan or schedule on how these are going to be distributed? TBD, Mare. It's a TBD. And one question to me would be, so like, looking at the eyes of XRP from a prospective investor, right? So it's like when I try to put, when I think of putting money,

in Ethereum, I go and look at what DAPs are being built, because the assumption is there will be DAPs and this value will go up, right? With Bitcoin, at least I used to go and see blockchain. Dot Infor, the number of wallets growing per year is it really happening? Right. That used to be my metric. Now, XRB is trying to be this liquidity solution or bridge currency. What do you think is the right metric that neutral observers,

can look at and see whether it's working. Whether it's working or not, it's going down a good path. And some data that cannot be just created out of thinner, even by ripple. So what is that kind of data? Yeah. So remember we were talking a little earlier around what's happening in digital asset markets today with Fiat flowing into Bitcoin and then some of that crypto money kind of flowing back into the other digital assets.

if you look at the liquidity of all these other digital assets, if you look at Ethereum and you look at Monero and you look at Dash and Lykecoin, the vast majority of the liquidity is versus Bitcoin. 85% of the trading volume in every single one of those other assets is versus BTC. It is not Fiat. It is not Fiat money running into those spaces, right? So my litmus test, how I know if I'm succeeding, is how much Fiat volume we have versus XRP

because payments happen in Fiat. Nobody is paying for anything in any other digital asset at the moment. So as we build out the ecosystem, as we get listings, as we get liquidity, as we get payments flowing through it, what you should see is more and more Fiat volume and less and less any other digital asset volume

versus XRP. That's how you'll know, at least from an objective perspective. I mean, we'll signal to the market what's happening, we'll give updates, we'll obviously send press releases and, you know, inform everyone of the progress. But to your point, you know, that's our job. So, you know, you want a neutral, a neutral litmus test. And I think that would be the cleanest one. Cool.

Well, Miguel, thanks so much for coming on today and sharing a bit about XRP. I think a lot of people, you know, they will see an XRP, they kind of know about it, but hopefully there helps and dive a little bit deeper and understanding what exactly SRP is and what's coming for SRP. Thanks so much for coming on. Cool. Guys, again, I can't thank you know if it's been a it's been really fun to be able to talk to you guys about it. I look forward to doing it again sometime. I'm certainly very excited to see what's going to come out of Apple. I mean it is I guess the biggest or certainly one of the

very biggest blockchain companies in the space. you know probably to get away of r3 and consensus or something like that so yeah i'm very thrilled to see kind of what kind of experience in POCs really pan out and what we're going to see going into production coming out of ripple or coming out of any of the other companies that have been working so intensively on this so yeah thanks so much for coming on oh yeah thank you guys i appreciate and thanks so much for our listener for once again tuning in we are part of the lessor bitcoin network, you find this show and other shows on let's talk bitcoin.com. And if you want to support the show, you can do so by leaving us an iTunes review that

helps new people find the show and it makes us very happy. So thanks so much and we look forward to being back next week.