Ripple Protocol developer Jed McCaleb on discovering Bitcoin, founding Mt. Gox, and launching Stellar
Jed McCaleb, co-founder and CTO of Stellar, a value transfer network that is pushing for a faster, cheaper way to send money, doesn’t see himself as a disruptor – but he’s been drawn to things that bother him.
“I just like to work on things that are interesting to me and that can change the world for the better,” he told Michael Terpin during a lecture at CoinAgenda 2019, which is hosted by the Transform Group, where he also remembered his trip Bitcoin.
He first worked on a peer-to-peer application called eDonkey, a decentralized, server-based peer-to-peer file sharing network for large files. After this project, while surfing the internet, he came across the Bitcoin whitepaper for slashdot, a social news website for nerds.
“I was super excited,” said McCaleb. “I didn’t think it was possible to solve [the double-spend] Problem before reading the white paper. It was super interesting to me and about two weeks later I had the Mt. learn.”
In order to better understand bitcoin technology, McCaleb decided to create a bitcoin application. Ultimately, McCaleb didn’t care about running an exchange, so he started looking for applicants to take over the exchange and chose Mark Karpeles. McCaleb recalled this process that took place at a time when Bitcoin wasn’t the cultural phenomenon it is today.
He had Mt. Gox as a hobby, and people took advantage of it. Conducting a long-term exchange was not what interested him. He was looking for someone to take him over.
“The Bitcoin world was very different then than it is today,” he said. “When I joined BitcoinTalk, where everyone who knew about Bitcoin had an account, there were about 2,000 people. When I got to Mark Mt. Gox, there were about 5,000, 10,000 people – something like that. ”
It was through this community that he came across Karpeles. Mark seemed to be handling the responsibility.
“Obviously he was incompetent as it turned out,” McCaleb said, noting that he never actually met Karpeles.
He has to work on his next project. The founder of Stellar always thought Bitcoin was a great idea but was bothered by the mining aspect. “Of course, if you can solve the consensus algorithm without mining, that’s a better situation since literally billions of dollars are being spent on mining,” he said. “People don’t really know how much this is hurting the bitcoin economy, essentially because all that money has to be drained every year to pay for the electricity, the people who work on these things, and this is a huge burden on the system – environmental concerns aside. ”
Jed McCaleb and Michael Terpin discuss Jed McCaleb’s journey through blockchain and stellar.
Before Bitcoin, McCaleb thought there was no solution to the consensus problem that Bitcoin was trying to solve.
“Bitcoin, like some other people, inspired me to think about how to solve this consensus problem, and that is what mining is all about,” said McCaleb. “I came up with the idea that led to Ripple, and then we realized that there are a lot of other things you can do with a network, not just a digital token.” He realized that you could do things that other Representing types of value, such as in the form of digital fiat currencies as demonstrated by stablecoins and decentralized exchanges.
McCaleb didn’t want to solve the consensus problem in the same way Bitcoin did, however. “Bitcoin is obviously extremely decentralized and there is no centralized company driving it,” said McCaleb, “and that’s a really great model, but it’s very difficult to replicate. There’s a middle ground in between and just like in a completely centralized Uber-esque thing where there’s a company that helps build the network and then you kind of step back and let that thing run once it’s a certain level of maturity . ”
Instead of being completely dependent on an open source community, Stellar raised money to build a team, which resulted in them raising money from executives like Stripe and PayPal. Mr. Terpin noted that Stellar was one of the most successful projects in building a community.
The subject of airdrops, a strategy widely used in the blockchain industry to distribute tokens to individuals, was broken more than once during the thirty minute discussion. Despite Stellar’s aggressive airdrop strategy, which they recently abandoned, McCaleb admits that Stellar and the entire industry have yet to overcome the difficulty of creating a network effect. This is one of the problems facing crypto in general, he said.
“I do not think so, [projects] really still did it, especially for payments, you need both sides, ”he said. “And that’s why these things aren’t really used yet. This is one reason everyone was really interested in it, but it’s not used in the world because we don’t have a big enough network between people who hold it and people who accept it. So how do you get the flywheel to start? It’s a difficult problem to solve. “
Terpin asked if Stellar, which enjoyed many early supporters including Stripe, had plans for a separate fund like NEO’s New Economic Entrepreneur’s Fund, EOS Blockchain Venture Capital Company, and Cardano’s EMURGO fund.
“We don’t have that today,” said McCaleb. “We have given grants to various companies, but never for operations. We are now discussing internally whether we should go this route and get something like this off the ground. I don’t think we would do it like these other funds, but we could do it. “
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