The Pomp Podcast - Brad Garlinghouse, CEO of Ripple: One on One with the Man Running Ripple and XRP

Episode Date: October 9, 2019

Brad Garlinghouse is the CEO of Ripple. In this conversation, we discuss what Ripple does, how XRP is related, the current progress to date, and Brad answers a number of hard questions crowdsourced from Twitter. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO.COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Brad Garlinghouse is the CEO of Ripple. In this conversation, we discuss what Ripple does, how XRP is related, the current progress to date, and then Brad answers a number of hard questions that were crowdsourced from Twitter. This conversation has been highly anticipated, so I want to make a few things clear up front. Brad participated in this podcast episode without he or his team reviewing my questions beforehand. There was no payment of any kind that exchanged hands, and the episode has not been edited in any material way other than the removal of prolonged silences or filler words like uh or um. When I agreed to record this episode, I figured that both supporters and detractors of Ripple or XRP would be unhappy with the final product. That is okay with me. I spent quite a bit of time preparing for this interview, including talking to people from both sides, along with crowdsourcing a lot of questions that people wanted answered.

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Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys.

Bang, bang. Super excited about this episode. I think we broke the internet before you even got here. I've got Brad here who we are going to try to get through a whole bunch of information. And hopefully when people leave here, they will understand his perspective on how Ripple XRP works. Kind of let him describe where they are from a progress standpoint. Answer all of the haters and the detractors online. And the lovers.

And the lovers. Well, we'll get to the XRP army, who, as I, in preparation, was thinking you must be the commander of the XRP army. I'm not sure. Well, I definitely don't consider myself the commander of the XRP army, but I'm not sure. There's a few people who maybe probably contend for that position. I'm not one of them. All right. So let's start from the beginning.

You actually have a life before Ripple, which some people may not realize. You've been in the technology sector for a really long time, Yahoo, AOL, et cetera. Did you just call me old? No. getting off to a tough start experienced one of my partners is mid-50s and i when we go through everything i always say this is our experienced partner uh let's talk about aol and yahoo um kind of give us a quick overview what'd you do at each one and we talked some of that experience i'll start with yahoo just because i think for me that was uh a really formative experience in

lots and lots of ways uh i joined in early 2003 and was there till uh i think the beginning of 2008 or 9 i can't remember which anyway and uh it was a great experience probably because that was you kind of joined when you joined in early 2003 that was kind of a dark period for a lot of internet companies and certainly i would put yahoo on that list and just both measured by stock price but also just engagement and then you know new leadership was coming in and you know we went through a kind of a golden time at yahoo where a lot of growth and it's hard for i think today's younger generation to realize i mean yahoo was google of 2003 right for sure and uh that was an awesome experience had some great mentors professionally ran a whole bunch of things at

yahoo ranging from the home page to yahoo mail to flickr and a handful of other things uh and you know just learned a lot as a leader and manager one of the highlight slash interesting experiences there was uh i ended up becoming a little bit infamous for something called the peanut butter manifesto what is that the peanut butter manifesto was a document i wrote it was an internal document that i wrote it did leak out after about 10 weeks but uh the articulation was basically like yahoo had a problem with spreading itself too thin and i think this is true not just at yahoo but many companies suffer from the almost an identity crisis who are we what are we trying to be and if you try to be all things to all people you're not gonna be anything anybody and

i think yahoo is struggling of like hey are we going to be a search company we're going to be an email company we're going to be a content company in news and sports and fantasy and there's some interesting manifestations of this but the internal characterization we talked about excuse me internal characterization as we talked about the budgeting process and a senior person referred to that as well we spread it around like peanut butter and to me it was this like cringe worthy moment where i'm like that is exactly the problem uh you know if you want to be great at something let's decide to be great at that and then over invest in that and potentially at the expense of other things that maybe we have to divest or exit or whatever but

as the internet grew holistically you had specialization expertise and you know if we were going to compete with google in search which i know people probably hear that and think how is that even possible in 2003 that was really possible 2004 the the whole page i if i remember correctly at yahoo was like one of the most visited if not the most visited web page in the world right yeah for a period of time i don't i mean it was when i was managing it and it was certainly a a high point of kind of you know thinking about programming and a lot of interesting stories uh about kind of you know things that transpired in those eras but uh yeah it was a different time than it is for yahoo today for sure and so you go from yahoo aol uh time frame to uh

you then become the ceo of a technology startup um and when i was doing a bunch of prep work uh It was a file-sharing startup, right? And so I'm assuming that that kind of forays into some stuff you're doing now, but maybe just tell us a little bit about what you guys were doing there and kind of what drew you from the larger kind of tech corporations to something that was a little bit smaller and fast-growing. Well, I've always kind of viewed myself more as a startup entrepreneurial guy. Before Yahoo, I had been the CEO of a small voice-over IP company

kind of early days of VoIP. This is pre-Skype. and so I knew that going from Yahoo to an early stage company was probably in the cards you know anytime I'm thinking about a career shift and my counsel to anybody would be think about long-term trends and I think one of things was pretty maybe overly obvious in 20 I think it was 2011 when I was joining the company at the time it's called you send it we rebranded to Hytale but cloud-based file management you know again now it's like okay everybody's using that all the time that was actually kind of new in 2011 and you send it had a pretty extensive user base and the idea was

you know and it was a bit of a turnaround because you send it it kind of reached its kind of high point if you will and so how can we offer additional services expand that and i think you know things went reasonably okay there we continue to grow it uh the challenge is when you've got you know the microsoft's of the world and google's of the world entering the space with kind of either a loss leader for free and certainly having dropbox and box as competitors it was a really tough slog uh and ultimately we had an opportunity to sell the company uh it did it did end up selling to a company called open text uh but i exited and you know decided to take some time off and look at what's next got it um and so then you pop up again in the crypto world

right kind of after that time off um let's start with kind of what's the first time you remember hearing about crypto blockchain bitcoin some other you know application technology like do you remember what that was and kind of what caught your attention there's a conference that's kind of under the radar that uh generally orn hoffman and peter teal organize each year called dialogue dialogue and uh i attended i've attended dialogue a bunch of times but uh in 2012 i attended dialogue with a number of friends uh and there was a session on bitcoin and on the flight home sitting with some of these guys who often are referred to you know some of these guys are patient zero for many of silicon valley's bitcoin uh energy and by the time we landed i was like okay okay

okay i'll buy some bitcoin what year is this 2012 2012 okay so real early and kind of that nucleus of people who now most people know are uh are excited about it yeah and i mean you know this is with wences casares mickey malka a good friend of mine dave goldberg he passed away but you know remain friends with those guys the thing that i probably was unconvinced of in that era was what's the long-term opportunity of bitcoin in a world where it's fighting against governments and fighting against banks and fighting against the institution the man now obviously that's part of the genesis of bitcoin but i was always kind of it i you know you often wonder okay if you took a slightly different strategy with these things would you reach broader adoption would you impact

more people more quickly and uh when i i had not heard of ripple i got a recruiting call and you know we kind of got one really led to another so basically uh your kind of first foray was bitcoin and more of what i'll call like the crypto ethos if you will uh and then inbound recruiting call ended up kicking off the process for ripple yeah it's kind of amazing yeah it's kind of a colorful story and you know so you'll maybe find it interesting uh i had left tie tail i had time on my hands and so i decided uh i'd be an uber driver i thought that would be fun uh so i drove an uber for about a month and one day a recruiter who i happened to know not super well but knew him uh i remember partly because he kept trying to call me and i kept

hitting ignore because i had a passenger in the car anyway i finally spoke to him and he says uh you know have you heard of ripple and i lied and i said yes but tell me what it does again anyway so he describes what ripple is trying to do and the kind of internet of value and payments and the honest reaction i said look super interesting i'm not your guy i'll give you some names from paypal or visa you know my sense is that's kind of more up the alley of what you're looking for and in what he said which i think is somewhat true is that chris larson is one of the co-founders of ripple he's like no he's really looking for someone if you want to change an industry it's easier to do it a little bit from the outside perspective and then if you hire

someone from the industry it's harder to achieve that same outcome from the time that you got the call till the day you quit driving an uber how how long was that well i i knew that wasn't that long because i didn't drive uber very long it was a one month project but i mean that was a fun experience in a whole different for a different interview for a different day san francisco is probably one of the only you know bay area san francisco is probably one of the only areas where uh the people who are driving for uber could have previously had some crazy other life and then in the future could next day be running a technology company yeah there were a couple funny moments i mean so one i this is 2014 and uh i was i was an early tesla driver and so i was

picking people up in my tesla as an uber x and a lot of people at that time particularly i'd never been in a tesla so you pick people up and there'd be this kind of oh you know holy wait a minute and anyway a couple people did figure out who i was and they would tweet about it after the fact but uh anyways rather amusing that's awesome um all right so let's dive into uh ripple first um you joined in 2015 as a ceo as coo coo okay um what drew you to ripple eventually kind of what what was the the lore if you will as to why to join this one company out of all the companies in the bay area well it's a good question i interviewed a bunch of different companies at the time and i think you know for me given where i was in my career i was less interested in kind of how do

i take a a base hit or a a double it's kind of like look i if you want to do something i would really have a opportunity to borrowing a steve jobs ism put a dent in the universe and there's a whole lot of things uh in the kind of whatever web 2.0 web 3.0 whatever we're in where i look at the thing and i'm like wait this isn't that i mean it's kind of like oh could you as a capitalist make money sure but you know a better marketplace for dog walkers i it doesn't speak to me like it doesn't speak to me as like you're changing and impacting the world in a positive way and i'm not taking anything away from those that have a more efficient dog walking experience the dogs are happier the dogs are happy and by the way the dog walkers are you know there's more money yeah i'm

not i know i'm not trying to be a hater towards that but when i look at brad garlinghouse is a dog walk hater there was a rumor at ripple for a while that i hated dogs and we know it's allowed to have dogs at work and it's not that wasn't true either but anyway uh so i as i was looking you know i wanted to do something i felt like this really if it works could really have a big impact and so my risk tolerance might have been higher than some and you know i had been talking to the team at uber about a position there i'd been talking a couple other things and i was drawn One, to Ripple in part because it felt like it was a big swing, meaning there was a chance that it was going to be, it wasn't going to work, and there's a chance, like, well, wait

a minute. Actually, if this works, it could be really impactful in a lot of ways, and I think through a little bit of luck, a little bit of skill, I think we find ourselves in a pretty interesting spot. Okay. Yeah, we don't want to jump that far ahead. Sorry. Yeah, no, no, no.

Well, for those that don't know, there are, at a high level, two separate components to what you guys are doing. Ripple and there's XRP. I want to make sure that we separate those and talk about each one individually first. So Ripple, when somebody says to you, what does Ripple do? How do you respond and kind of describe the business from your perspective? Well, I usually respond by, I grew up actually in the Midwest, in Kansas. And I explained to people that when my mom asks me, what do I do? I say, mom, we sell software to banks. Pretty simple, pretty straightforward. not a lot of drama about that the fact that the software we're selling includes components of

blockchain technologies includes solutions that leverage digital assets she doesn't i mean at the end of the day i'm not even sure customers care and i think one of my critiques of the crypto ecosystem and before the show we were talking about this conference in montreal last weekend which we can talk more about but you know i think there's this echo chamber of people getting so excited about the technology we lose sight of what problem are we trying to solve for what customer and how are we going to do that and how do you go to market with it? And I think one of the things missing in the crypto ecosystem is really a customer fixation.

These are profound technologies and I think can impact lots of industries in lots of ways. But, you know, when I sit in these conferences sometimes, I hear people talking about and frankly kind of geeking out about different technical things. I think, you know, okay, that's interesting, but if you don't think about the problem you're trying to solve and there's a kind of Silicon Valley statement of, you know,

Are you a technology in search of a problem or a problem in search of a technology? I think with Ripple, we were clear about what problem and how we were going to apply this technology. One of the first things I did when I joined Ripple, there were a number of different projects going on. We had Codeus, which is a smart contract platform. We had something called Global Identity, which is intended to be leveraging a blockchain, leveraging the XRP ledger for identity management. And then there was this payments solution. And one of the hard decisions early on, back to that peanut butter reference,

is we're a small company. We cannot pursue all three of those things and be successful. Let's pick one. Did we pick the right one? I don't know. This is pre-Ethereum as the smart contracts platform and Vitalik and our CTO at the time,

a guy named Stefan Thomas were close and actually Vitalik was staying on his couch and they were talking about smart contracts platforms. There's only a couple hundred people at that point that are into all this stuff, right? So they all knew each other. It's a pretty small community, yeah. Anyway, we decided to focus on payments as a solution and liquidity as a solution for financial institutions.

And again, you can never know, is that the right path? But I think that focus of going very narrow and very deep has served us well. I think there's a lot of people in the industry who have gone wide and thin, where there's a lot of experimentation, but not a lot of traction and clear, demonstrable usage. For sure. So one caveat I should put out in the conversation, which I was somewhat clear on Twitter but I think is important for listeners to know, I actually know very little about Ripple and XRP. And so I've got what I'll call a basic understanding of what I could Google around and learn about. So I was excited to do this because, one, I get to learn from the source. And then, two, is to try to get a counterbalance view of the world.

I reached out to a bunch of people, tweeted a bunch of times saying, hey, send me all the questions, send me all the questions. uh so i think i've got a much more holistic view but my understanding of what ripple is today in terms of products and i want you to kind of gut check me to make sure this is correct is um there's three separate products right there's x current x rapid and x via are the ones that kind of came up from all the research online one is that an accurate portrayal of kind of the different products uh and then two kind of can you take us through each product and what they do exactly sure so that is a reasonably fair characterization you know they're sure i don't get it perfect yeah well part of that is you know anytime you're in a nascent industry it changes

quickly you know even x rapid as a product name we're kind of evolving to something called just on-demand liquidity because that's more descriptive about what it does but that's not that critical for today so those are the three products i'll talk briefly about them uh x current is really the idea that banks today use existing pools of liquidity so pre-funded accounts if i have the bank of pomp and the bank of brad you can be mexican pesos all the u.s dollars i would pre-fund mexican pesos at your bank and you would pre-fund dollars at my bank and then we would use swift to debit and credit that with our first product x current you can do that much more efficiently much more quickly than how the current system works and not surprisingly banks like that that's

good uh and so we have had adoption of x current but to be clear and i think one of the things that there was misunderstanding about years ago is that doesn't touch crypto that is you know it kind of we describe it as kind of a temporary blockchain between two endpoints that's a private transaction it's not going to be published uh you know banks and financial financial institutions have sensitivity about their transactions being broadcast everywhere uh but that's the first product the second product x rapid which we now really call on-demand liquidity is this idea that i don't have to pre-fund to the bank of pomp i don't want to put mexican pesos out there i don't really trust the bank of pomp and increasingly i don't want to have truly there's trillions of

dollars pre-funded in accounts around the world if i as a bank don't have to pre-fund that liquidity out into the world i can use it for other purposes now there's a whole bunch of things to go with that you know one is if i'm funding the mexican peso is reasonably stable but if i was let's say the argentinian peso there's a lot of currencies out there you don't want to hold and if you hold them you're going to try to hedge them on top of that you have things like quarterly compliance requirements about how's the bank of pomp doing i've got uh you know it's frankly one of the things that changed after the financial crisis is something called uh forget the name of it top my mind they changed the regulatory framework basil three is uh basil three changed the

regulatory requirement about how banks tier one capital ratio is calculated it used to be that the bank of brad could trust the bank of pomp and the bank of pomp and your regulators could trust the bank of brad after the financial crisis we realized we don't trust other banks so my deposits that i have at the bank of pomp no longer count towards my capital ratio so when we talk about tier one capital that no longer counts well guess what that means the bank of pomp and the bank of I don't want to have those accounts out there because it means I need more liquidity elsewhere. And it's because if I can bring those back in rather than keep them at your bank, then they count towards my capital. That's correct.

Or I can dividend that money. I can do whatever I want with that money. It's my money. And I don't need to hold it on my end in order to still use for transactions? Like I don't just rather than hold it at your institution, I just now hold it at mine for the transaction? Well, this is what on-demand liquidity solves. So what on-demand liquidity or XRapid allows you to do is say, Bank of Pomp holds a dollar. I'm going to sell the dollar.

I'm going to buy a unit of XRP. I'm going to move that unit of XRP from a U.S. dollar denominated exchange to a Mexican peso denominated exchange. I'm going to sell the XRP. I'm going to buy a Mexican peso. You can have that whole transaction completed in seconds. What today would mean pre-funding and debiting, crediting, and you're wiring in. If you're a financial institution, you might be sending liquidity in every 10 days or something. now i can payment by payment or even it's treasury i can not pre-fund 10 million dollars a week i can

send you know a hundred thousand dollars every four hours and i don't have to pre-fund so that allows me to bring working capital back to me there's payment providers out there some of these are public companies so you know this isn't proprietary information but moneygram has negative working capital to the tune of hundreds of millions of dollars of negative negative working capital why because of these pre-funded accounts got it if they don't have the pre-funded accounts all of a sudden they have a lower i mean by the way i'm not pretending we're going to solve this overnight worldwide but over time if we can bring that from you know a few hundred million to 200 million to 100 million you know the enterprise value of money gram is somewhere around 1.5

billion debt plus the equity you know if you could move that by a couple hundred million dollars that's actually really material to a business like money grams now you extrapolate that to not just other remittance companies but banks it's a very big deal for how global liquidity is managed and the impact frankly to the global economic engine we make global commerce more efficient by making payments more efficient if we can do that at scale we can make the whole economy more successful so one of the questions well let's go through xvia next and then we'll get into the xrp and kind of how that works i'll keep xvia super simple think of it as a corporate api wrapper so that a corporate can write to one api and shoot off payments globally okay and this

is all over uh one of the other terms that kept coming up is ripple net correct is that something separate than these three products or those three products represent ripple net so when you connect into ripple net you're touching those three products so uh if i am a bank can i buy one product and not the other two or do i get kind of all three wrapped up as one one offering if you will from a technical point of view the way we deploy it is you're kind of getting all the pieces that way if you signed up for x current and you want to add on to x rapid later or on-demand liquidity later it's an easy evolution uh but you can sign up for one product and um am i as a bank uh you know ripple comes to me salesperson or customer person and says uh hey we've got this

product here's how it works here's the advantages etc do you want to use it i'm paying to use that product are you uh taking a transaction fee is that an upfront payment like how just how do i interact with ripple as a company we have an enterprise sales force the way i mean back to my kind of we're an enterprise software company uh so we have enterprise sales people out traveling the world meeting with banks other financial institutions and we're signing contracts with them uh you know we've been pretty traditional software contract yeah uh i mean traditional is loose here i mean it's not sales force you just light up an instance this is not that right you're deploying typically deploying behind the firewall okay and so you know generically you know without

disclosing all of how our contracts work you know you're paying a software license fee you're typically paying a professional services fee for deployment costs because again we're typically sending people to your location to do deployment work and the third is transaction fees okay so kind of like uh the first two sound similar like an ibm type model right give or take you you don't have to say ibm but somebody like ibm sure enterprise software enterprise software and then there's a basically some sort of uh revenue you guys derive from how much is used or the transaction volume that somebody uh participates in right got it okay um so you described earlier that um some of the products use xrp let's switch gears from ripple to xrp now what is xrp and i

think this is where a lot of the controversy lays probably so let's be really kind of thorough in terms of how you would describe it and kind of what the purpose is xrp is an open source software xrp ledger is open source software the x uh xrp is the digital asset resident on the xrp ledger uh some of the founders of ripple were involved with the creation of the xrp ledger the xrp ledger started before ripple the company was created uh hold on explain this so uh some of the people from ripple involved in the creation but xrp ledger was actually started before the company ripple so the sequentially yep group of engineers gets together and you know candidly some of these engineers had been early bitcoin engineers their view was hey there's going to be some scalability

limitations of how bitcoin works uh they set out to build a better bitcoin uh i think you know an impressively prescient way they saw look if you extrapolate this out and you really want this to be the future of payments can you scale a proof of work like model to be to enable an internet of value and that's that's challenging so they were like and i think they would attest to their original view was hey we're going to set out to build a better bitcoin we're going to build bitcoin 2.0 and you know we don't talk about that today because i don't view this as a competition between bitcoin and xrp i don't view i mean i think there's going to be multiple winners in this the internet will take care of that competition yeah they definitely see it the marketplace will

take care of the competition meaning you know it's not going to be the chatter of the echo chamber of twitter and the crypto world it's going to be customers you know is this solving a problem for customers i just point out look i think one of the areas of fud is people are like brad hates bitcoin i am long bitcoin i own bitcoin i am not bearish on bitcoin i just don't bitcoin is not going to solve a payments problem so the satoshi white paper says a payments network it's not going to be a payments network and the reason is that the nature of proof of work and from a scalability point of view is significantly limiting how you know the throughput uh transaction time transaction cost the xrp ledger is much much much more efficient i typically say it's about a thousand

times faster per transaction it's about a thousand times cheaper per transaction so one of the questions and we're kind of jumping around a little bit here so if you're listening bear with us um one of the things i think that bitcoiners would say is there's a relationship between security and speed and uh if you speed up the transactions then uh you could be giving up security right and some there's some level of trade-off there agree disagree do you think that there's a kind of a more gray area it's not so black and white just how do you think of you know the trade-off between speed security bitcoin and how xrp works i i'm gonna intentionally somewhat dodge the question okay i mean look i've read that meme

and it's kind of a recent meme in my opinion i i didn't hear that two years ago but now i've kind of read stuff now people say that uh the xrp ledger has existed since 2012 i think 2012 uh we've never had a transaction unwound we've never had a hack against the the ledger like so do i think we have compromised do i do i think the creators of the xrp ledger compromise security to the benefit of efficiency and speed i don't see it i like i'd like to see the data that i mean again i've read that i've read that meme but i've never read it and you know here's an example of where there's a people optimized for speed and efficiency but then there was a security issue yeah and and i think it's a fair point for you to say hey look this has never been

hacked and generalized um i think that there's probably other people who have tried to increase efficiency therefore giving up some security and there has been a hack and so um maybe a fair critique of that would be if it happens one place doesn't mean it's going to happen everywhere and also um what level of security is needed right in order to run a system um and if there is a relationship between security and speed is there some middle ground between the two right Yeah, I guess I'm just, I'm challenging the premise that there's a trade-off between security and speed. I'll be totally candid. The part is I'm dodging the question.

It's like, I am not the cryptographer at Ripple who's going to- We're in the same boat. So, you know, I'm a little over my skis and trying to defend this point, but I think I'm reasonably smart about this stuff. I have read the meme that you're trading off security for efficiency. I haven't seen any proof of that. the people who i trust the most from a technology point of view in this area i think if they were on your show would argue that yeah i don't feel competent enough to do that the twitter detectives go to work yeah go argue about that you can tweet at me about how i'm wrong but tweet at

joel katz on that also and he'll defend me no that's fair um all right so xrp um is a digital asset that goes on the xrp ledger right um and then describe uh kind of how it works into the product itself because it sounds like it's not all three products within the ripple net actually use xrp some of them do some of them don't so just kind of well the only product that we are selling to customers that uses the xrp ledger is on-demand liquidity okay right so i was describing the bank of pomp selling i can't remember if you were dollar peso but you're selling whatever that fiat is you're buying xrp you're moving it you're transacting back uh you know if you're just going point to point on fiat you're not touching xrp and so um some of the pieces here i think are one

uh banks do this with fiat it's slow there's a bunch of issues there's the deposit issue um that stuff two is then somebody would say well why don't you just use bitcoin or some other digital asset instead of xrp that is a great question i know i'm interrupting you but if i may we had a really interesting debate internally when we were architecting and kind of product design around x rapid or on-demand liquidity and one of the debates internally was well wait a what happens if we're launching uh on-demand liquidity into poland and there is i think it's oh no maybe let's not use that because i think that's the euro let's use peru i think it's the lira you know to be honest yeah i'm over my skis on that too if we're going into a market where

there's no liquidity with xrp then our product isn't going to work so we architected the product to be flexible enough to say look maybe eth has a ton of liquidity into peru maybe bitcoin has a ton of liquidity into peru the point here is we were focused on solving the customer's problem if that meant that we were using bitcoin to solve it okay so we made the product flexible enough that it would use the most efficient rail now it happens to be that we have never used anything other than xrp because actually xrp is extremely fast and extremely inexpensive on a per transaction basis do you look at it as xrp is the default and then if there's not the liquidity then you would go to the other ones right yeah i think that's the right way to think about it yeah got

it um okay by the way the reason i'm emphasizing that is back to you even i can't remember what you said earlier but you're talking about what i heard was kind of this there is religions around all things crypto tribalism absolutely tribalism religiosity whatever you know and i think it's really unhealthy okay i just had somebody on who said that toxicity was positive so go ahead go yeah i i don't i don't know who that was but i i look and i i at this i mean i thought this conference i was at in montreal it's supposed to be super confidential i saw an article about a modern consensus so apparently it's not that confidential but one of the things i argued in front of this kind of hundred people is i don't think what ripple is doing is competing with

almost anybody else in that room at that point and i'm sure they're examples of people we're competing with but i want them to be successful i want the eth projects to be successful i want the bitcoin projects to be successful i don't view that as a bad thing for us in fact the more successful they are the better it is for me in fact when i hear about companies in our space that are struggling and might have a bad outcome that's bad for me i think we're at a stage and you know i joined the internet space we didn't get back to my early early time but i moved to silicon valley in 1997 this is you know a year ish past the netscape ipo uh it was early days and i feel very similarly like look all boats can rise here and when i hear about the tribalism

the toxicity i'm not here to hate on almost anybody but i i'm here to hate on people who aren't open-minded and thoughtful and are you know maybe almost pedantic in their approach of just like this is better because uh i want to solve a customer problem using a set of technologies that includes the xrp ledger that includes the digital asset xrp i think we're doing that effectively we're scaling very quickly uh it's going well uh i would think other people would want to root for that success because i think we're the only scaled scaled blockchain crypto solution out there period full stop there's a lot of experiments you think that you're the only scaled say it again i think that what ripple is doing is the only scaled example of crypto and

blockchain being used like at at scale period how do you measure let me qualify that because i know the twitter is gonna go berserk on that i just tried to save you for the record so how do you How do you measure that? Well, I mean, so first of all, I'll back off by saying, look, clearly, Bitcoin is a store of value, is a use case I believe in. I'm long Bitcoin. That is working. It is scaled. What I'm talking about more is that enterprise solution.

There's a lot of experiments around how blockchains can impact different kinds of transactions. I use the word experiments really specifically. I can't point to other examples where, I mean, Ripple has hundreds of customers using these technologies to solve a real problem. We have real volume. You know, we can get into some of that volume information. But, like, things are going really, really well. I want these other projects to do really, really well. So let's get into progress because that's a huge question that people have.

And I think this is coming both from the believers and the detractors camp of just, like, where are you guys today? So hundreds of customers, um, my understanding is some big names, some small names, everyone in between, uh, what kind of data can you share, um, in terms of, you know, kind of milestones or, or data that, that, um, illuminates what that progress has been. Right. So, uh, a whole bunch of thoughts I'll throw in here. One is, uh, so we have publicly disclosed, we have over 200 customers. I don't think we've updated the number since then.

Uh, you know, we have, you can update right now if you want. I don't think I know the exact number at some point. And I'm not trying to be tongue-in-cheek, but, like, you stop counting at some point. It's just like, are we at 248 or 260? I don't know. What I have also publicly shared is that we have been on a pace of signing about two enterprise-grade contracts per week. Okay. So what that basically means is you have 52 weeks in a year.

We're signing, on average, about 100 contracts. We'll sign more than that this year. We beat our forecast for Q3 that just ended last week. And, you know, that's a leading indicator of increased adoption. I'll tell you one interesting kind of anecdote. We were at Sibos big banking conference in London a few weeks ago and meeting with a bank we don't work with today, big transaction bank, correspondent bank. And the team there was sitting down and one of the guys in the room said, well, it's become a question of not if we're going to work with Ripple, it's when. Because 26 of their correspondents are already working with Ripple.

Got it. So if you're this bank and you're not working with Ripple, it actually is inefficient for them not to actually join the network. And this is one of the reasons why I get excited about the business model. The network effects, you know, it's Metcalfe's law. The value of a network expands based on the square of the nodes on the network. We're seeing that happen. You know, the thing that the skeptics should ask is, well, if you were one of the first five customers to sign up for RippleNet, why would you sign up? It's like the first person bought a telephone.

There's nobody to talk to. Which is true. I tell my sales lead that his job gets easier day by day. And look, there's evidence to show that it does. Now, translating that traction with a customer contract, and one of the first OKRs, which is how we kind of manage objectives and key results. You're using Silicon Valley language.

You're going to get them all messed up. OKRs are basically like key performance metrics. Perfect. When I first got to the company, our kind of key performance metric was contracts. And over time, I realized that the contracts wasn't the most important metric. it was deployments because you can sign the contract but if it's not deployed within some

reasonable amount of time you haven't made that much progress then we started tracking deployments as the most important metric and then we realized it's actually not deployments it's actually volume because at some point you want to sell the contract deploy it and then you want volume going over either a new use case being built on a new rail or moving existing volume over to that rail so today are the key metric we track more than anything else is volume and we track primarily volume by number of transactions as opposed to dollar volume okay and the reason is like to some degree you could do a small number we have a handful of customers that are it's uh you know corporate use cases where there's one large bank uh where their average transaction size is tens

of millions of dollars per transaction that kind of skews all the other data because you have other transactions like 30 each ultimately we think about the number of transactions the number transactions has been doubling quarter over quarter for about eight quarters okay well give us a ballpark of where i don't know i honestly don't thousands millions thousands uh we're not yet uh i there's a chance we'll hit millions this year millions per quarter or millions per year there's a chance we'll hit there's a chance we'll hit millions this year so millions in one single 12-month period yeah okay okay all right um i know i mean there's a couple things on you know why we're kind of protective about what we disclose one is these are banks these are

financial institutions like i don't have permission to share you know uh they get rather sensitive when i start sharing specifics about their transaction bank it's it's competent so i i will uh i'll let you off the hook to a degree with uh one question that i saw from twitter and i forget who asked it so i apologize uh but you get credit this is my credit to the twitter user is um they said what percentage of the customers right so they basically said look i believe that you sign up all these customers right it's very obvious that if you have a better software product to give to them they can help them run their business duh they're going to pay for it it's just classic business uh but what percentage of the customers have more than one

percent of all their volume going through uh a ripple net type engagement or product versus that's 99 going elsewhere by the way i think that's a a good and interesting question i thought it presumes that i know their total volume that's fair which i would imagine typically we don't know okay now uh i mean there are some customers where i mean let's let's use money gram as an example that's very public that they're working with us and what have you right now we're only live in you know two corridors okay mexican peso and philippine peso okay so my get i'm i'm purely just conjecture here and they're a public company so somebody could probably figure this out but even if we had a hundred percent of their volume live in the mexican peso and philippine peso what

percentage of the total would that be i don't know i mean my guess is those two core mexico is probably a very very big percentage of business meaning well but big meaning maybe 20 at most maybe 10 i don't know what do you think um let's just take that as an example uh what do you think your volume in mexican peso is in terms of compared to them using ripple net versus not 50 50 it's less than that now in ramping and the reason why that's the case is we are slowly increasing one of the key things we talked about earlier is you need liquidity between xrp and mxn so uh one of the challenges i think for the whole crypto world is uh i've been fond of saying that the long-term value of any digital asset will be derived from the utility it delivers the utility

for most crypto today is purely speculation. Now, we could argue that that's a step forward from illicit use cases of Silk Road. And so we've gone from illicit use cases to speculation. I think the next chapter will be all about real utility. But if today 99.9% is speculation, I have said, look, we want to get all crypto from 99.9 to 99 to 98 to 97, what have you. There have been days over the last handful of weeks where 80% of the volume to XRP and MX in was associated with our on-demand liquidity product so we went from 99.9 to 20 being speculation now that actually creates a different problem the problem that creates is if there's not enough liquidity can we push more value through that pipe unless there's more liquidity and so

we work with market makers and to some degrees liquidity begets liquidity if if there's a market there market makers whether you know in all shapes and sizes will participate uh and hoping to kind of generate their own value from participating there for sure and so um last question around kind of just progress uh as you're signing let's say two contracts per week on average right you're kind of doubling the transactions quarter over quarter um things appear you know based on that data kind of going being up and to the right where are you finding um a bank that is uh kind of the average customer what is the value to them right in terms of you've got these three products are they coming in and saying hey i'm actually using all three of these as part of ripple net

and i kind of get the full experience do you find that they're just using one of the three more than the others like what is the i guess kind of value proposition that the average customer is finding today i would say 90 of the customer's first touch point is for x current okay because it's solving a problem that they it's it's easy to kind of explain the value proposition you already have two pools of liquidity you're using some sort of solution to settle between those to for messaging this is a better way to do that and that's the entry point once we are at the entry point then we can say to the bank of pomp hey you have you know you have a correspondent in the philippines you're the cost to maintain that correspondent is whatever hey there's a better way to do that

let's find a more efficient way to do that and you know oftentimes you know people first hear the word crypto there's a little bit of a particularly in the banking world once you explain to someone that every ripple enabled transaction is kyc'd every ripple naval transaction is checked for aml ofac you know other acronyms filled in all of a sudden they're like oh okay this is just this is better there's a better way to facilitate liquidity i think that the posture for banks changes pretty quickly if you don't mind i'll tell you one anecdote on this it's kind of funny uh about two and a half years ago a very senior guy from a big correspondent bank uh with whom we were working says hey brad you know look we're super excited to be working

with you i just want you to know that this whole like they were using x current and you know he took it upon himself to say look we love what we're doing but just so you know like we're never going to use crypto for liquidity okay i get you thank you you know uh we're thrilled to be working with you happy place 18 months later same guy and the ceo of the entire bank come to visit our office in san francisco and what they said is hey we're ready to start talking about how you can help us with liquidity what was interesting to me about that is you know we had the opportunity to talk to them about how they can use xrp for liquidity because we were already a trusted partner in solving a problem for them and how they already worked and i i think that we keep

kind of breaking down those walls and i think that's good for the whole crypto community by the way dispelling the idea that crypto is inherently somehow you know used for illicit purposes and those things. I think it's talking about real use cases, solving real problems, having real utility, I think is good for the whole industry. So this is a great segue because another set of questions, and this came from a whole different group of people, and I kind of distilled them down into a couple of bullet points, was one of the big things that I think Bitcoin specifically gets uh both praise and detraction about is uh its lack of um ability for law enforcement or governments to stop it right so there's a lot of people who love the fact that hey you can't

censor this stuff you can't seize it you know all the all the things that we you know believe it that bitcoin brings to the table the flip side of that is there's a lot of people who don't like that right hey there's economic sanctions and governments don't like that it's not a lot of people don't like that governments don't like that there's plenty of people right um and so there's a whole set of questions. I kind of just put this under like law enforcement and governments. And so things like, you know, how does Ripple deal with government requests about user information or account blacklisting and the things that I think people say that's not possible when it comes to Bitcoin? How do you guys handle that? Have you guys had those requests? Maybe just

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This rate actually compounds, So you receive a 6.2% APY, which is very attractive given the alternatives. So you can actually take your Bitcoin, you can deposit it with BlockFi and get paid an interest rate of 6% in return. Go check out BlockFi.com slash Pomp. Again, BlockFi.com slash Pomp to sign up and start earning interest on your crypto today. How does Ripple deal with government requests about user information or account blacklisting and the things that i think people say that's not possible when it comes to bitcoin how do you guys

handle that have you guys had those requests maybe just kind of elaborate on some of those issues well i'll start with a rather simplistic answer we don't right we don't onboard customers the bank of pomp does okay if the government wants to come and look at a transaction for the bank of pomp they go to the bank of pomp that nothing changed so i mean i'm being a little bit overly simplistic but the way that the bank of pomp is regulated today whether they're using ripple's technologies underneath or not doesn't change okay so in the when they want to come and this is for ripple yep if they want to come and validate a i can't remember exact example you were yep so let's say that i want to i'll give you two examples let's say that uh i'm a person of

interest to the government and i send a transaction to somebody it goes through ripple net xrp Well, it goes through a bank or a regulated financial institution. And it goes to another regulated financial institution. Yep. And the government says, I want to learn more about that. They go to the bank. And I'm assuming that they send you guys requests as well or no? I mean, we don't necessarily have the identity.

Back to the privacy of, you know, we sign a customer. We don't necessarily have that information. Matter of fact, not just we don't necessarily. I'm trying to think of an example where we would have that information. if the bank of pomps transacted the bank of brad i you know i i don't get the identity because i didn't do an onboarding so basically the way and this is me learning here for a second um there's two ways that these systems work right is uh there could be um i don't want to call it shielded because i think that has a negative connotation but basically this idea that

bank of pomp sends money to bank of brad the processor of that transaction can see personally identifiable uh identifiable information it can see all the details the transaction who it is all that kind of stuff and then there's a way for it to basically happen without any sort of information being shared from the bank to the uh payment processor which bucket are you guys in the latter the latter okay i mean but both endpoints that the bank of pomp and maybe i shouldn't say the bank of brad because i am ripple but uh you know both endpoints see the information and they have access to information and we actually one of the things that we do through ripple net is make the passing of that information much more robust than how Swift works today.

The banks like that. And frankly, governments like that. You know, this idea that independent of my own political views, this idea that crypto is going to kind of take down governments might be for certain segments appealing. I think about this a little more pragmatically. How do we apply these technologies to bring greater efficiency to commerce, to greater efficiency for the immigrant

who lives in San Jose, California and wants to send money home to Guatemala and 30% of their transaction is coming out in fees. That's shitty. That doesn't need to be that way. You're basically saying, like many companies in crypto for sure, hey, there's rules, there's regulations.

We are going to play within the rules and regulations. Yeah. But the only thing you said there that I didn't necessarily agree with is like many in crypto. well i think one of the challenges is a lot of people in crypto i think are doing a disservice by you know championing things that we know that governments aren't going to be on board with yeah i think i it's and and part of it too is right it's always a balance between uh

somebody's got to break the rules to change the rules but at the same time uh if you break the wrong rules or you do the wrong things then there's punishments right and so it's kind of i've got you ready for this i got a saying that uh one of my partners says all the time he goes uh pioneers end up in ditches yeah right well look i also think there's a difference between you know i can on a personal level i can look at what uber was doing and kind of disrupting the taxi union and think okay like i get it you know when you start talking about the disruption of let's say the intentional circumvention of kyc requirements you know i know there are examples and you know uh with governments that maybe aren't to be trusted and

you could argue maybe the u.s government isn't to be trusted we live in a world of governments that's not going to change anytime soon we do a kind of an annual customer conference called swell and a couple years ago actually exactly two years ago we did in toronto and ben bernanke was our keynote and i thought you know first of all i thought it was great back to like it's good for the crypto community ben bernanke is doing a keynote for a crypto conference in effect i mean obviously ripples a little different snoop dogg once right that was for he wasn't speaking at a conference but he was that's another story we can talk about that next i'm just impressed that you got ben bernanke and snoop dogg and two separate things that's always six months apart keep going

all right so what ben bernanke was saying which i i subscribe to is that if you're talking about g20 markets to give up the ability for them to control their money supply is giving up their sovereignty they're going to bring out the tanks before they give up their sovereignty his point was basically that you know if what you are doing is threatening to threatening the sovereignty of a nation that is a that is a very high kind of attack on a nation and they're going to fight that aggressively and so i when i see people doing things in the crypto world that i feel like i use g20 specifically because look there are many countries have already lost control their money supply you know we could choose zimbabwe as a example uh that is amusing to

learn about but there's a whole lot of markets you know when i use the g20 that they're not gonna just sit idly by and you know have their fiat and have their ability to control monetary policy be disrupted for sure one more question on this and then we'll move on um if i am a bank of pomp and since we won't use bank of brad we will for uh laughs and uh and jokes we'll call bank of satoshi that i'm going to send send money to very good uh if i said i think there would be a bank of satoshi by now there probably is so somebody somewhere somebody definitely bought the domain bank of satoshi.com you're welcome for the free advertising um if i send money from bank of pomp to bank of satoshi but bank of satoshi is located in iran let's say right so

a company that, or a country that is sanctioned by the U.S., massive ramifications if you tried to do this in the quote-unquote traditional banking system. One, can I do that through RippleNet? I'm assuming no, but I'll let you clarify. And then two, along with that, can you as Ripple or RippleNet blacklist certain accounts, et cetera, or is that done at a bank level? Like what is your control over in terms of blacklisting and preventing sending of money? In reverse order, we can't blacklist because we don't have PII. Okay. So if I could blacklist POMP, I would.

That's just a general rule. Not POMP, but there's some others out there that I might. On the first question, we don't work with any banks in Iran. You know, when we think about what quality, so first of all, there's obviously U.S. government requirements about certain countries you can't do business with. Iran would be on that list. when we think beyond that you know if if a bank is a swift enabled bank we generally look at that and say okay they're part of the global banking infrastructure ergo there's no reason why ripple shouldn't work with them yeah i think the question is less about the specific country more so uh

whatever the rules of a legacy bank are presented right so if they can't send money to iran xrp can't be sent there as well through ripple net because you're working with these banking partners yeah Keep in mind, the Bank of Pomp, at the end of the day, you, Bank of Pomp, can be connected to RippleNet, and you still are choosing with whom you're settling across the network. So, I mean, let's not use Iran, let's use Zimbabwe, because I imagine a lot of people might have concerns about settling with banks in Zimbabwe. I think you may choose, even though I'm connected to RippleNet, even though it's super efficient, it's super fast, super low cost, do I want to have, as a correspondent, a bank in Zimbabwe? Yeah, that's up to you. It's up to me. Got it.

All right. So I want to play a game that I call Devil's Advocate. But before we play, and the point of this game is essentially to present to you the, I can't say thousands, hundreds of people or tens of people who tweeted at me all kinds of crazy conspiracy theories, detractions, and then even some that seemed pretty valid, right, in terms of what they were saying. before we do that though the number one topic by far that everyone was focused on was xrp sales right there's a whole bunch of stuff around that before i ask any questions you just kind of describe how do the sales work and kind of as you sit on the ripple side as ceo um how do you view xrp escrow sales revenue all this kind of stuff all right so i'm i'll start talking about i'm sure i'm going to miss a couple things you just asked about there because uh there are a whole

bunch of good questions in there it's a great interview technique to throw out a bunch of questions and just see where i bite so uh i mean look i'm glad you're asking about this i think there's a bunch of misinformation you know before the show i said to you look one of the reasons i'm here is because i think there's a bunch of misinformation and i think we need to get a little more aggressive about clarifying some of that the first thing i'll say is that people kind of lose sight of i think is we are the most interested party in the success and health of the xrp ecosystem we being ripple we ripple we own i mean it's very transparent we own a lot of xrp uh anything we do that's not good for the xrp ecosystem is not good for i mean by the way

there's a whole bunch of other players in the xrp ecosystem some other companies we've invested in some are doing their own independent thing just this week you know a bunch of announcements about sdk this is uh an announcement this week around sdks around the xrp ledger that i think are profound and we'll only see more people building on top of the xrp ledger that's good for the whole the whole group when we think about what we're doing we've tried one to be very transparent in the kind of context of leading by example i think one of the limitations that the crypto ecosystem broadly faces is lack of transparency if we're not going to be transparent we shouldn't expect people to you know trust us now in some ways i admit in a frustrating way our transparency

has opened us up to attack okay so hold on pause for a second pause the one thing that i will say is um i do believe that your life would be easier if you didn't provide any information because people sadly i agree because people would what i what i honestly believe and this is across every single company public companies specifically right public companies would have less scrutiny in many cases if they were private right same thing kind of applies here is uh the more information you put out whether you're right or wrong whether uh you're fully transparent or semi-transparent people then now have data points right right and they can use that to all that stuff right now there's an example of this i'll point to i got joe lubin and i were

on a panel in davos earlier this year okay and joe lubin was criticizing i can't remember exactly if there's a video of it somewhere out on the internet but he's criticizing you know ripple and xrp and you know and i was like well you're on the panel with him yeah and by the way i actually like that's pretty ballsy he was being direct you know i don't i think it kind of backfired on him You can go watch the video. You can make your own judgment. But I'm like, okay, wait a minute. Before you're going to criticize what Ripple's doing, how much ETH does Joe Lubin own?

How much ETH does ConsenSys own? How much are you selling? What are you using that for? You know, look, I think the best way to lead is by example. And so Ripple has tried to lead by example. Okay. Talk about the mechanism of escrow sales, kind of how the whole process works. Right.

Just structurally. Don't worry about numbers for right now. Yeah. I'm going to try to remember the exact time. About two years ago, one of the big overhangs, if you will, concerns about the XRP market had been Ripple owns a lot of it. What happens if Ripple decides to sell a lot of it? I always use the argument, well, that wouldn't be in Ripple's best interest, so why would we do that? And the concern there is basically if you dump it all on the market all at once, it would depress the price.

That's one of the concerns. I think there's some others, but yes. And I, of course, would always, you know, I always thought it was a little bit of just a silly argument because that would not be in our best interest. Why would we ever do that? We took that off the table as a concern by saying, look, I'll tell you what. We are going to lock up. So the XRP ledger has a capability called an escrow. It can be cryptographically signed, sealed, if you will.

And we created 55 contracts, 55 escrows that effectively become unlocked once a month for 55 months. There was 1 billion XRP in each escrow. so in months of one so 55 billion xrp went into locked up in in an escrow well in 55 escrows yep and then each one kind of on a month by month basis each one kind of fires off and releases 1 billion xrp correct when it releases where does it go we can do whatever we want with it okay we being we ripple i mean these escrow you know ripple owns the xrp yep we on our own and you guys own the escrow so uh because one of the things that i don't think i understood well and people are asking questions so i apologize anyone who thinks i get this wrong is um they

were like it's not real escrow because ripple still owns it what you're basically saying is it's a cryptographically signed we can't unlock it yeah yeah so it's i guess somebody could make the argument you quote quote own it but there's cryptographic signage on it and you don't you can't violate it correct right that's correct okay so you get the billion xrp once a month for 55 we use some of it for uh deals well back to you asked we sell some programmatically i want to talk i'll digress on that for you asked about it earlier i didn't touch on it we sell xrp two different ways okay one is otc over the counter okay institutions come to us they want exposure to xrp rather than going into the market sometimes they'll come to us and we'll facilitate

facilitate a transaction what okay let's go real slow here because this is where all the questions were um what are the types of institutions that come for otc are these like hedge crypto hedge funds or these little like bank customer types more the former than the latter more than okay so this is more this is more uh crypto speculators okay are coming to you and saying hey we'd like to buy over the counter correct got it so now two things about the over-the-counter piece one is you know so over the history of the time i've been in the company i don't know order magnitude would have 20 to 30 unique players come to us to buy xrp oh that's really not that many i thought it was gonna be way higher than that no okay yeah uh we basically have stopped all otc in large part

because our attitude is look there's enough liquidity out in the market you can go into the market and get it market being you can go on an exchange or you can go to other otc there's a lot of very successful otc desks and we refer people to those otc desks or you could go in and know buy it on exchange it depends on the size but uh so you know we back to our transparency we put out what's called the xrp market report okay once a quarter at the end of each quarter we will publish exactly you know hey this is how much xrp came out this is how much xrp went in uh this is how much we sold we sold some programmatically we some sold otc uh you know last quarter was a high watermark in terms of the dollar value of xrp sold okay and one of the

that we actually agree with is we tried to have a constructive way to engage the market by saying we're going to sell otc and we're going to sell programmatically at 10 basis points of daily market activity okay so and that's a combined otc and programmatic or 10 basis points each 10 basis points well the otc tends to be a little bit uh you know lumpy lumpy yes thank you that's helpful the the 10 basis points is much easier the challenge of the 10 basis points became that we were using coin market cap as the measurement stick oops you know what do you use now we uh crypto compare top tier cctt okay and uh we think that's a much more trusted they have an interesting construct around uh i'm gonna get this slightly wrong we kind of tier a tier b or

tier one you think it's higher quality it's a higher quality i think it's a more trustworthy measure of actual volume in xrp liquidity okay so let me ask one question real quick um this is more personal curiosity 10 basis points of daily market volume or of market volume is that daily monthly okay so basically every day would it be fair to say you guys are 10 basis points of the volume give or take depending on dilution etc yeah i mean yeah i think that's right i mean let's just say that there's a hundred million dollars worth of daily volume before you guys do anything right that means we would be a hundred thousand dollars yeah you'd be 10 10 every day 99.9 of all xrp trading we have nothing to do with got it okay uh we have based upon what

we saw at coin market cap we've continued to kind of constrain what we're doing in part because i think people very appropriately are pointing out like hey coin market cap isn't right the right measure uh you know is coin market cap going to back to the transparency and like i i would challenge them to challenge themselves like it's bad for the whole market that that's not a more trusted source so okay so programmatically let's say the last couple of quarters how much do you think you've sold and again one caveat to this whole conversation right i think a lot of people want me to like hold your feet to the fire and say like oh you said 100 million dollars but it was 102 yeah here's the good news just ballpark there's a public number out there that we have

published uh for every quarter for the last eight to ten quarters the ballpark in terms of i think q1 well no i i don't know if i can parse programmatic from otc top of mind i think q1 both combined is about 170 million usd okay and q2 is about 250 million usd okay q3 is going to be dramatically lower okay we will put that xrp markets report out in a couple or i don't a week or two okay so weeks a couple more questions here um and again i caveat all this but this is where the questions are um one what are you doing with the money so basically uh there's let's call q1 there's three billion xrp right that get unlocked over a three month period yeah you take in the markets report by the way we would have said and i don't know top of mind but three billion came

unlocked and this is how much went back into the 56th 57th 58th contract or escrows got it so you And then we don't contribute some of it back to another escrow. Not just some of it. Most of it, I mean, I would order back to 80% of it goes back in. Okay. You then sell $170 million Q1, $250 million round numbers for Q2. I think one of the, well, we're getting into the devil's advocate game now. One of them is, what do you guys need all the money for?

Well, I mean, one, we're investing in both the company. uh we're investing in uh the you know money gram is an interesting deal we as i think is very widely known we committed 50 million dollars to invest in money gram uh i think that has been a very successful partnership and investment for them and for us uh they're super happy about it we're happy about it and again i think these the more we're doing to demonstrate scaled use cases of solving real problems i think that's good for everybody and how much of the unlock um one of the other questions was around how much of the unlock goes to the company versus what they called company affiliates and that was founders foundations kind of all this other stuff

well what we're talking about right now is only what the company owns okay so the only ripple the billion gets released and you use some of it for selling revenue right that you can then go invest and do all that stuff with and then some of it just gets contributed back into future that's Locked escrows. Correct. Okay. One of the other big ones was misleading market cap, right? And so the big question here was, and I'm literally going to read to you almost verbatim.

I'm good. Just to make sure I don't screw it up. The last thing I want is to ask you tough questions and then have me get yelled at by the internet. Here's the good news. I actually want you to ask tough questions. I honestly think that most of the tough questions, I think there's like, I'm not an irrational human being. All right. So hold on.

I do have to say this. on the record so everyone can hear it we've never met before no we haven't we never talked before uh somebody asked me the other day uh what i thought about this and i said i look i never met the guy before we got some mutual friends they speak highly of you um and i said but i'll tell you what the guy's got balls to come in here like has no clue what i'm about to ask him so i'll give him that well you know i'm glad you said that because i think some people are like oh well you know he has to be have pre-approved questions i think what i said to you before we started is like look anything's fair game yeah i i will even go further as to say uh the folks that know that

i was talking to some of the people at ripple about doing this uh that was going to be one of my um uh what do they call it like uh stopping points is if they said hey i gotta see the questions first i wouldn't have done it yeah so misleading market cap currently stated market cap counts all distributed tokens including those sent to founders affiliated foundations and customers Most of those, though, are held with restricted selling agreements, so they're not actually liquid, which can lead to an overstated market cap. If the market cap did not include those, then the implied inflation rate would be much higher. Therefore, it would be a better signal for the downward selling pressure on XRP. Super complicated question.

I'm going to caveat it with one quick sentence. basically if you look at the data the way that some of this is calculated can be in the detractors eyes misleading therefore people can't run correct models to understand the inflation rate look i get the question actually at a high level my my response is largely how do you calculate so we all look at the quote inflation rate of bitcoin what about the whales who bought bitcoin in you know in year one and they're selling some now do we count that in the inflation rate we don't but isn't that the exact same thing as you know a founder of ripple or the founder of the xrp ledger who's selling some xrp i'm not disputing the kind of i think and i don't

know who asked the question but i'm not disputing that okay if we looked holistically about the introduction of supply of xrp ripple is one component of it i think about ripple's participation in the increase of supply equal to the mining increase and the increase of supply of eth or bitcoin okay because eth has a whole bunch of i mean non-mining related supply that's introduced right yeah so does bitcoin so does xrp i i so i and i'm not trying to dodge the question i'm just saying that like the the question applies to well i guess the question is on more a market cap specifically so here's market cap is i think there's two components this one is um included in the market cap is uh tokens that are held by restrictive selling agreements right well i think

that's really referring to one of the co-founders the xrp ledger and the co-founders of ripple is a guy named jed mccaleb jed had threatened what he didn't just threaten he said he was going to dump all of his xrp he was trying i mean he had left ripple and he's trying to start a competitor ripple called stellar and he said he was going to dump this there was a court activity and a settlement that restricted his ability to sell because he was trying to act in a you know not in a good way to the market got it um and so i'm kind of jumping around a little bit tangentially related to this uh when you guys sell ripple otc xrp or i'm sorry xrp do you guys put restricted selling agreements on anyone who buys otc sometimes yes sometimes it largely depends i mean

look if somebody came to us well keep in mind by the way we the amount of otc we're doing now is dramatically less than we were before for the reasons we've kind of talked about before uh you know if somebody was coming to us and saying i want to buy 20 million dollars of xrp uh you know there is a risk that someone would want to do that and somehow have ill intent and so we might have restrictions on that you know they're also back to the whales point you know and you could argue actually what ripple has done is healthier than what you have in the eth environment or bitcoin because there are no restrictions now i think in all of these environments people are probably acting in the best interest because you're holding yeah generally

right unless you're irrational or not very smart would there be a way for you to and i'll caveat out again uh sitting as a person trying to understand how you guys are thinking about this and also understanding kind of the other side there's sensitivities whenever you're doing business transactions with i'll call them customers partners whoever um and so you don't want to you know uh open source your contracts right for example right but is there a way to be uh more transparent is kind of a negative connotation but just more transparent uh around what those selling uh restrictions are um either on a customer basis or on a more kind of generalized uh basis i mean here's kind of my rack to this okay so we're already 10 or 100 times more

transparent than anybody in the crypto community and we get attacked for doing that and i think you just asked me to be more transparent i think i'm gonna pass yeah i mean i'm not trying to yeah it's just kind of like like we are doing what we think are smart strategic things to leverage our balance sheet in a way that we think is you know rational and thoughtful about catalyzing this whole area uh am i going to you know share our you know the coca formula of like here's how we're doing things i mean is it that secret and special yeah we can debate that but like this is actually so here's what i'll say this is one thing where uh if people were and there actually are some people who want you guys to do this right uh said basically open source the

contracts right like show us exactly what every single contract looks like with every single customer i actually think that's like pretty far overkill right just given that you're trying to run a business etc so so i'll definitely um also if i may i think one of the challenges for how capitalism has evolved period is we're very short-term centric i have been very public and saying look i'm taking a very long view of the company we're trying to create and you know if I piss some people off in the short term I'm okay with that uh I I think I think you know I didn't talk about this earlier but I was in business school when Jeff Bezos is 1996 Jeff Bezos hadn't really launched Amazon he came to my class in 1996 talked about Amazon and it was Amazon books

really and he talked about and I since then I've been enamored a bunch of my classmates ended up working at Amazon and I've been kind of enamored watching the company and I think what they have done has been very very impressive in lots of ways but one of the things I have looked at I think about Ripple is to cross-border payments as Amazon is to books. Okay, you got to explain that. Amazon launched one vertical, books. Had they not succeeded in books,

they never would have been able to do DVDs or music or, you know, now everything else. Right, AWS, right? That's the infrastructure level. When I think about what Ripple's doing, there's a lot of different applications of blockchain technologies. There's a lot of different ways

we could use the XRP ledger. We started with a vertical around cross-border payments, partly because it's a massive market, partly because it's a very clear pain point you have customers who don't like the incumbents they're happy to engage but what i've said to the company is look we have to be successful in books aka cross-border payments or we don't get permission to go to the second vertical but ultimately i see what ripple's doing with blockchain technologies as we're going to enter other verticals for sure what will they be oh my gosh i should open source that too

just throw it out there that that would be another type that you would enter i i mean look we have uh you're a master at dodging i appreciate it that's that that's what look we're looking at lots of different things other types of financial services i'll give you another interesting example real quickly do you know who the largest investor was in pets.com when it went bankrupt i do not amazon really the only way i point that out is Look, we have made a bunch of investments in other projects going on out there. I think right now Ripple is the largest investor in crypto period. We've invested about $500 million in other crypto projects.

We're going to make a bunch of investments in a lot of different things, some of them unrelated to the XRP world, some very related, some related to Ripple, some unrelated, some related to payments, some unrelated. Some of those may be things that we end up buying. Some of those may end up things that we invest in. Yeah, great. Right. My point to some degree is in the nascent stage of a market and watching Amazon lose money

on pets.com, that was totally okay, right? They were learning as they went and we're going to do the same thing. There will certainly be other verticals that we go after at Ripple, and I'm not even sure how I got on this topic. That's good. That's the point of why I'm here to interview you is just to lead you with breadcrumbs. You asked me a question and somehow I got on Amazon. I'm not sure. All right. So as part of this, one of the things that also comes up in the sales, I think it's the last question on sales, is how do you think about when you sell OTC, right? So there's the restrictive selling agreements. Then there's some sort of discounting at times, sometimes not.

Talk just about. Generally not. Okay, generally not. When there is, is it, hey, if you lock this up, there's a discount? Or kind of how do you think about it from a framework standpoint first? I mean, look, so first of all, generally there is not. Okay. To the extent there is, it's, hey, we're doing a bigger, broader deal in some construct.

And we're thinking a lot of different, you know, how do you create value on both sides and a lot of different pieces. And this is likely, would it be fair to say the discounted OTC sales are not with the crypto speculators? They're more with customers and partners? Correct. Okay. Yeah, for sure, correct. A bigger deal would be, and this is me just completely speculating, making this up. But I think generally, if I'm sitting in your seat, it's something like, hey, you're going to be a customer of our software product.

We're going to also give you some XRP for liquidity purposes or whatever. You can basically buy it at some discount and then you can hold on your balance sheet. Or we'll loan it to you and, you know, at a very low interest rate or, you know, there's different mechanisms. Right. We're trying to be thoughtful and creative about how we catalyze the whole marketplace. and you know like there are the good news for us is there's other companies in the xrp world who are doing similar things they're just not as big as we are they don't own as much xrp but there's a lot of other cool stuff going on and uh i think that's good for everybody yeah and by the

way i don't think that doing that is wrong right i mean look everywhere there's people who i should i sell things i discount them so like i i understand um what do you think the average discount is oh i don't know i mean like 50 oh no i would say five i mean like i don't know smaller numbers yeah right i mean look i i think about xrp as a currency i i should i mean would you sell a dollar for my questions is well that was gonna be one of my questions is do you think it's a currency do you look at it more of like a utility token how do you think about it i mean i you know part of the question i was like i don't know what exactly is utility token what is it i I mean, there's some parsing.

Now you're starting to sound like me. I don't even know. Look, what I do know, maybe for better or for worse, in 2015, we had a FinCEN settlement with the government. Okay. The U.S. government called XRP a currency. Okay. I think of it as a currency for purposes of deals like what you're describing. I think of it as a currency.

And so if I were thinking about a deal construct, and back to the whole reason we're talking about this, the discount point, I wouldn't give dollars away for half dollars, right? uh would i give someone a advantageous deal denominated in dollars for some reason sure that makes sense um okay so let's go to xrp army uh in terms of uh all of the uh engagement on twitter yeah you're not the xrp army commander uh what do you what has your reaction been to this what is kind of your um perspective on kind of how enthusiastic people or online look i i love the fact that there's a group of people who uh believe in what we're doing are advocating and if anything i actually think the xrp army is a reaction to the aggressiveness of the fud interesting elaborate on this well i think people are they're sometimes more than

other times people are putting out information that is factually incorrect either about ripple or about the xrp ledger or about the people around the ecosystem or about other companies in the ecosystem and uh you know that that community has been catalyzed to correct that and in that context i think that's awesome uh you know are they a more vibrant group than others i don't know i mean look i get attacked by plenty who are outside of that army those are pretty active people too i think the whole space is super engaged right and then there's some ways that's a beautiful healthy thing but look can we all start with the same basis of facts and you know i think some people just stop listening in a way that i find to be you know frustrating and i i'm still

learning uh we shall still learn there's things that i don't fully understand about what's going on in the bitcoin world there's things i learned in the conference in montreal i found super interesting uh but there's a lot of misunderstandings about what ripple is about what the xrp ledger is uh how it works and you know i look as i said i'm here today to try to correct the record on some of those things for sure i only got a couple more questions that we got to wrap up But in terms of payment to employees, one of the things I find fascinating is there's plenty of companies that are built around Bitcoin. Employees accept Bitcoin as their salary, Binance, BNB. Are there folks at Ripple slash XRP that are working on this and getting paid in XRP?

Well, you said Ripple slash XRP. There's employees at Ripple who choose to get paid in XRP, yes. Okay, got it. I don't think anybody gets paid a hundred percent in XRP, but it's a, you know, it's a kind of an opt-in and we may limit the amount, the percentage they can take an XRP. I'm not sure. Got it. All right.

So last topic I want to cover, I call this like the elephant in the room and it's more from my standpoint, one of the things that we did not do as investors is we did not participate in the whole ICO stuff. Right. And for us, it was more around, I'll call it regulatory uncertainty. Right. And for us, it was, we had so many opportunities on the equity side where we could go invest that it was just like, man, we don't really have an advantage there.

So we'll leave it for other people. What's your perspective on tokens regulation? There's been a bunch of settlements recently that have been announced kind of at the end of the fiscal year for the SEC, et cetera, with EOS and block one and all that kind of just broad based first, just like, how do you view this whole environment given that you've actually been working on this for, you know, what, four or five years now you've kind of seen some evolutions there. What's your perspective?

I think if you go back and look at my Twitter feed, you will find that I was one of the first people to come out and say, I think this whole ICO thing is going to end badly. Really? I think if you go back and look, I was very early in saying, danger, danger. If you said that, kudos to you. I was on a panel, and I remember this well. It was an MIT panel, and I tell you, there was like 800 people showed up for this thing in San Francisco. It was a massive audience, and it was right at the height of the ICO market. I remember there was a lawyer sitting next to me who was kind of advocating.

yeah i do an ico and i all i said was if you're going to do an ico just remember to hold back a lot of that money to pay him as a lawyer to defend you when the sec comes after you now one of the other things i'll just point out is an interesting irony about this whole thing is we at ripple and even i think the xrp community kind of leaned out during that craze and eth community leaned in to really enable the that the ico craze isn't it ironic that by doing that eth was then deemed not to be a security given its distribution and the sec hasn't said anything about xrp okay we decided that hey look we think that actually clearly you know ripple didn't do an ico the xrp ledger predated ripple how was there a quote-unquote ico for xrp on the xrp ledger no the early days

actually ledger giveaways ripple the company raised money through venture capital and they just see financing a series a financing a series b financing got it what have you and and um so i got to ask xrp there's plenty of people who think security plenty of people who don't i think there's plenty of people who don't okay i mean look there's a i don't know exactly the name of it this ranking system that came out this week i saw the rating yeah uh did you read my notes before this so one of my questions is literally going to be if you look at those rankings compared to others you guys actually score pretty well right and then um i think that the big question and i'm very sensitive to the fact that uh i don't want you to say anything that you're uncomfortable saying but

at the same time um how do you think about if you're sitting in the regulator seat deciding what's a security what's not this stuff's new you spoke about eth transitioning possibly from could have been a security to now it's not just talk a little bit about that you know sitting running what do you guys have the third or fourth largest cap uh asset now it depends what you count market cap i think the sec has a really hard job and i i genuinely agree with that Like, this is a new thing. You know, what does it mean? How should it be regulated?

And so I'm respectful of the fact that some of the stuff, it's not black and white. I think that, you know, how that plays out is, I think, yet to be determined. I think the slowly but surely SEC is providing more guidance, both through what they're doing with an enforcement mechanism and what they're doing, you know, kind of what they're publishing on policy stuff. You know, we work with regulators around the world. You know, some regulators have been much kind of quicker than the U.S. has about being specific. You know, the U.K. has come out and said that they view XRP in the same thing as ETH and BTC. We've seen a bunch of other, you know, Japan, that has been true. So, you know, I can't certainly speak on behalf of the SEC.

Suffice to say, I think they've got a hard job and I understand that, you know, they're kind of trying to do their best to work through it. Before we wrap up, I always ask two questions. Oh, you get to ask me one question to end it. But my two questions, most important book you've ever read? We just went from debating the intricacies of securities law to now favorite book. Snow Crash. Snow Crash, oh.

Old school. So there's three books that are given to product managers when they join Facebook, and Snow Crash is one of them. Really? I didn't know that. Yeah, I actually forget the other two. I was given Snow Crash in somewhere around 95, 96, and I thought it was pretty fascinating. Yeah, for those that read it,

I think a lot of people receive it and never read it, but those who read it, it's pretty good. uh aliens believer or non-believer for sure why there's too many things out there it's a law of large numbers if they showed up to the uh u.s would that be a good or i'm sorry to the earth would that be a good or bad thing oh we have aliens here already for sure have you been outside new york city jesus okay i'm kidding about that so brad brad actually went to area 51 all right my one question for you is do you think differently about ripple and the xrp ledger now as compared to 60 70 80 minutes i don't know how long we've been here so i will uh i'm going to

expertly dodge that only because uh i think most people actually don't know what i thought before you walked in here oh that's fair well i just asked if you thought differently yeah so uh i think i'm actually on the podcast on record saying that it's important to separate out software company from xrp i actually think that having software that makes banks run better there's big businesses to be built there right we've actually invested in a bunch of businesses that either trying to disrupt software products that are currently in banks or are helping banks be more efficient that all makes a lot of sense to me xrp my only big thing that i just can't get over right and i understand the academic or i understand the argument as to why is if you can

use xrp right across the rails why not use bitcoin now i think your argument would be volatility the the fact that you can't stop it all the things it's a lot faster and a lot cheaper to use xrp so what i end up coming to is uh there are two there's probably many versions of the future but two of those versions are uh what i will call a corporate company creating a software product that is then sold in an enterprise model into banks which you guys are doing and there is likely to be something other than bitcoin that's used so whether that's xrp or somebody else comes along create something or it's libra or you know whatever whatever it gets created with the white paper we i think you notice i didn't even go there until the end i messed up we're not going there

all right and then the other uh world is a world of um bitcoin which uh yeah there will be people who build this stuff but it's much more kind of empowering people it's fighting back against things like inflation the banking system yada yada yada i really do think that what ends up being the most valuable is which path the world goes down right that's fair like i don't think that it is a uh if we go down the path where uh we need something that is fully decentralized as non-censurable non-seizable etc like i don't think that ripple and xrp end up being the winner right in that world vice versa if we go down a world where uh we need a corporate software company that sells in two banks etc like i actually don't think that bitcoin can win in that world

there's an expression that i use sometimes at work much to the frustration ripple employees it's the tyranny the tyranny of the ore versus the power of the and why is it one or the other of those oh i there's kind of i know we're wrapping up but you know i think one of the mistakes that people make in this kind of broader crypto world is there's not going to be one winner here there's going to be a bunch of interesting winners and by the way i you know i would even yield the point is the xrp environment clearly going to be a winner you know i think there's some interesting dynamics there that make it more efficient in a whole bunch of ways but i think at the end of the day it comes back to like is it so are these technologies being used to solve a real problem

of real customers in a scaled way. And there's a lot of, a long way to go in all of them. One sentence answer at the end of this. Whenever you go do whatever you go do next, it could be 30 years from now. What is the legacy that you want Ripple, XRP, and Bitcoin to leave on the world? I hope that these technologies put a little dent

in the universe in terms of making commerce more efficient. think that's completely fair alright listen you get a lot of credit for coming and doing this completely blind so I appreciate it very much and where can people find you on the internet at bgarlinghouse twitter at bgarlinghouse

the XRP army the lovers the detractors have at it alright guys thanks so much thanks Pomp hey everyone Pomp here if you like this episode of off the chain and want to help us take crypto to the top of the apple spotify and other podcast charts please do us a favor and rate review and subscribe to review simply go to the off the

chain homepage scroll down until you see the five blank stars taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts i appreciate you listening and see you next time on off the chain