Ripple CTO reveals the genesis of XRP, Bitcoin’s secret sauce, and the potential of blockchain and cryptocurrency
Ripple CTO David Schwartz says an insight into Bitcoin’s “secret sauce” led to the creation of XRP. At SXSW in Austin, Texas, Schwartz expanded what got him into the world of blockchain and cryptocurrency in the first place.
“When I first saw Bitcoin, it was one of those things that you could almost call love at first sight. I saw the technology and thought, wow, there is really something here. And I wanted to learn as much as possible about it and found the communities, looked at the source code.
And I happened to be a little lucky that there was a problem back then. This was just around the rise of mining pools and the software was never designed to deal with mining pools. Many people complained about performance issues in the software, and I specialized in improving software performance. And I’ve seen these bounties. Mining pools said, ‘I’ll pay 10 bitcoins if anyone can fix this. I’ll drop in 15 bitcoins if anyone can solve this problem. ‘ And they were worth about $ 15 each, so that was real money …
So I was looking for the direction to solve this problem that mining pools have. So I solved the problem and they paid the bounty. And it’s kind of funny – when I bought a house in Oakland, I used the bounty as a deposit. And it was the first time Wells Fargo had to verify the origin of funds. It actually went to the posts on the Bitcoin forums where people had offered the bounties and I claimed them. “
According to Schwartz, the insight that led to the creation of the XRP ledger centered on the notion that the public ledger is the core innovation that is making Bitcoin revolutionary.
“When we looked at Bitcoin, a lot of people in the community thought that the proof-of-work was the secret sauce or the magic element of Bitcoin. And what I and a few other people – Jed McCaleb realized first – and that was his key insight that led to the formation of the XRP Ledger and ultimately to Ripple, was his insight that the proof-of-work wasn’t the secret sauce.
Bitcoin’s secret sauce is that all government information is public. The ledger is completely public. You can see every transaction, every balance. Everything is public. And that means you don’t have to rely on the word of others. When someone submits a transaction, you can verify that it is valid. You can find out what it does for yourself.
And that was the kind of decentralization magic, and that proof-of-work was just the way the double spending problem was solved, the idea that if I have a bitcoin, what if I try to get it to send to two different people? And that led to the idea that there might be other ways to solve the double-spend problem that might have different properties than Bitcoin. “
As for the biggest use cases for blockchain and cryptocurrency, Schwartz says cross-border payments are clearly a killer app.
“Use case fit? We have that in payment transactions. Make no mistake, these things work especially with international or cross-border payments as domestic payments work pretty well in most parts of the world.
Although there are exceptions. I’m sure most of you have heard of PayPal or Venmo. They belong to the same company – they don’t work together. This is clearly an example of domestic payments not working. But I think the cases where they don’t work are the exception. International payments are the point at which we are really suitable for the product market at the moment. “
As for the additional use of blockchain and crypto, Schwartz says it can take a minute for companies to see the real benefits of the technology.
“Centralized databases are expensive. I’ve spoken to a few pharmaceutical companies looking for a database application that includes tracking their goods movements. And they have been cited by multimillion dollar companies whose job it is to provide centralized databases. Well, you can set up a private Ethereum node if you want. A couple of them. It is much cheaper and the reliability is higher.
And I think the security difference too – people will say there are applications where security isn’t particularly critical. But what they are missing in my opinion is the fact that certain types of attacks on blockchains are fundamentally impossible. Any attack that involves the smuggling of falsified data is absolutely impossible on a blockchain, where this is possible on a database. “
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