Ripple's XRP cryptocurrency has spent much of the year playing leapfrog with Ethereum for the second-most valuable coin behind Bitcoin, but Ripple the company is not the same as XRP, the digital asset, and Ripple does not control the open XRP protocol. The company itself is building on top of the decentralized XRP network to create applications like xRapid for on-demand liquidity, xCurrent for enterprise payment processing, and xVia for frictionless cross-border payments.
Asheesh Birla is the Senior Vice President of Product Management at Ripple. Asheesh sat down with PCMag to talk about the difference between cryptocurrency and blockchain technology, regulation around the world, Ripple's cross-border payments goals, and the future of decentralized apps.
PCMag: Let's start with the price conversation and get it out of the way. Ripple hasn't been immune to the big swings and market drops the cryptocurrency market has experienced this year after the boom of 2017. Ripple and Ether have leapfrogged each other a couple times in recent months as the second-largest cryptocurrency. How big a factor is price to Ripple's day-to-day operations?Asheesh Birla: Day-to-day we don't think about the price. Back in 2013, when most digital assets were nearly worthless, we didn't really factor price into it. We don't factor it in all that much right now either; we take a longer-term view of the entire market. I think our founders have done a good job of laying out a vision and making clear that if you're here for a one- or two-year blip, this is not the place to be. Your [crypto] project has to be tuned into the long-term instead of the day-to-day volatility.
This is my third crash now in the crypto-market, and I am not phased by it. The flip side is that sometimes you crash and take out all the folks who are not focused on solving real problems and real use cases. And, I think you are going to see some really interesting companies come out of this next downturn.
That's a sentiment I've have heard from a lot of people as I have covered crypto the last couple of years; blockchain companies separating the coin from the technology. I often find the perception of cryptocurrencies as digital stocks to be frustratingly reductive. How much focus do you think should be put on coin price and market cap compared to the actual underlying technology at work and what it's being used for in the real world?So, at the end of the day, what is going to drive volume and liquidity through a digital app? If you have volume and liquidity, then it remains a prominent digital app. But, it is solving real-world problems. It has to be a product, in Silicon Valley, we call that a 10x better experience, and [if] you can't deliver a 10x better experience using blockchain, then don't use blockchain. We've seen a lot of products come out of the last few years that are sort of like blockchain tourism. Like, that sounds like a database. That sounds like something you should use Google Sheets for, not a sophisticated decentralized blockchain database. So that's been the frustrating part. When prices are climbing, people are using it as marketing either to get funding or to get rid of [their coins].
People always talk about whether next year's the year that "blockchain goes mainstream," but that's a surface-level cocnversation. What does Ripple see as the most widely deployed blockchain based apps that scale? Meaning blockchain apps that go beyond a database or Google Sheet, as you said, to actually use this decentralized computing model to solve real-world problems.The underpinning of this technology is that without friction, without permission, I can move value from one blockchain to another. Today, if you want to money across borders, you are essentially trusting Citi Bank, JPMorgan, or HSBC. Those three banks control most of the cross-border flow. Either directly or indirectly, you are going to trust those three companies to move money on your behalf and they charge whatever fees they want. If they don't care about the emerging market or the other firms then expense just goes up and up and up.
So what a digital app allows you to do is, instead of trusting those three companies, you can now start moving value internationally using digital assets. That's what Ripple has with xRapid. Customers tell us that they either have to trust Citibank, where they have to pay an arm and a leg and it takes days, or if I want an instant payment I have to open up a local bank account in my destination for every country. That takes months. Those are my two options in 2018. You can get an Uber to your house in two minutes, but getting money internationally is still a mess.
What we've done with xRapid is to use a digital asset and this new infrastructure, using digital exchanges like Bittrex and so forth, and convert from US dollars into XRP, move that XRP instantly into let's say Mexico and then have it traded again for Mexican pesos and paid out. That all happens in minutes, for far cheaper than I can today, and I don't have to set up accounts in the destination countries.
On that subject, Ripple has a really interesting perspective on cross-border payments around the world given all the markets in which you're operating. What would you say are the countries or markets where you're seeing the most activit on this front, or citizens in the most dire need of these types of solutions for things like remittances, for instance in Venezuela.Good question; a lot of it is driven by regulation. We are seeing a lot of activity in Southeast Asia, where regulators are realizing that this technology can help boost their economies even further. Just like they did with cell phones and mobile devices, they want to leapfrog the west in terms of modern financial inclusion.
There are a couple of trends behind that. One, the regulators are really friendly. Two, these economies' GDP is growing at 7-8 percent a year, and number three, they are going from cash to digital via mobile payment at a crazy clip. So those countries are now saying we're going build a modern day financial product. We are not going to use the 1950s wire technology or SWIFT technology; we're going to use blockchain.
Regulation is an important point. Beyond whatever government agencies in the US like the SEC are doing, worldwide we're seeing a lot of countries lay groundwork to open up so-called crypto havens for business and investment. Are there particular markets where you think the regulatory environment and the financial factors are ripe for blockchain-based payments tech to scale really fast in the next year or two?All of that criteria is true of most Southeast Asian countries. Even right now, if you just look at the interest in digital apps that 80 some percent of all trading volume in crypto is coming out of Asia. So there is a lot of consumer interest, there is a lot of regulatory interest, and I think in the last trend is that these countries are growing so fast that going from cash to digital you are seeing all sorts of new tech products come out that are going to be the next generation financial companies in the region.
I go to Asia probably twice a year, and every time I go back it's a different story. The last time I went back there was a vegetable stand owner that didn't speak English and couldn't read very well, but accepted payments via a mobile device. Just eight months before that, he said he didn't have a phone and only accepted cash. It's changing right before our eyes.
How is Ripple this potential payment market of however many billions or trillions of dollars? What are the biggest goals for building financial infrasructure on top of that?The big thing is pushing further into the countries that really matter. Let's take India, for example. That market is moving so quickly that I not only need to think about the bank that accepts the payment and the regulated financial institution that receives the payment, but I need to be at the next-generation financial institution as well. We want to connect with mobile phones. In the next five years, especially in India, people will access their bank accounts primarily through their phones. The other goal is educating regulators that this is a fundamentally different and better way to move money. Our regulatory team is continuing to build on that progress.
Going back to this evolution of blockchain technology in 2019 and beyond, aside from payments, where do you fall on the debate over the types of blockchain apps and distributions that will lead the charge? Public vs. private blockchains, cryptocurrency vs. blockchain apps and services, etc.On digital app part of it, you should think of it like the combustion engine. You really can't do anything alone with the digital asset. You need to build something around it. You need the rest of the car. Public digital assets like XRP and Bitcoin hold a lot of value, but they're one piece of the puzzle. What I think Ripple has learned in the past five years is that you have to build around that technology to make it useful.
On private blockchains, my opinion is that I just don't see the point. I think it's another word ofr a database. If you're building your entire product on a private blockchain, you're a great marketing company.
Ripple has partnered with a number of banks and financial institutions, like Santander, AMEX, and BBVA among others, but Ripple CTO David Schwartz told Reuters earlier this year that for banks, blockchain-based cross-border payments still aren't scalable for a number of reasons. How does Ripple straddle that line between working with traditional financial markets while also building these open-source solutions that decentralize what banks have centralized?We decided to work with financial institutions and I think that has paid off, but you also have to think about all the financial requirements and regulations. In 2013 there was that Bitcoin maxim of "we don't need any of that. We don't need government or banks or corporations anymore, just Bitcoin." That approach doesn't work. Working with financial institutions and regulators is a longer road, but it's the right one.
Those two ideas don't always coexist well...to the point where the International Monetary Fund has started talking about governments setting up their own central bank-backed digital currencies.I haven't read the IMF piece, but I do know a lot of the larger banks have some sort of what I call "blockchain tourism." There's always a side team or collection of innovation labs working on a blokchain product. But at the end of the day, even if a country like the United States created a centrally backed coin, the reason Ripple works for cross-border payments is because there is no central bank for the world. It's unlikely that the US central bank would trust the Argentina central bank. That's why it's useful to have a digital asset that both entiities could essentially trust.
But for that level of cross-border trust, central banks would have to give up some control.Yes, they would have to be willing...which doesn't seem likely. All the central banks would have to come together, probably somewhere like Davos. But can you imagine the US government saying '"Wait, hold up, my credit is way up here, and you want me to trust the Argentine peso?"
On that subject of connecting the world, I also wanted to talk about some of the social impact initiatives you guys are working on around cross-border payments and remittances. Specifically in serving the under-banked populations of the world, are there particular markets that you guys are focusing on and that need the most help and that Ripple really thinks you can provide some tools to the people there?Mexico is our first xRapid corridor. We're seeing a lot of traction there because it is an underserved population. In these markets, the larger correspondents don't want that business anymore. They're folding and restricting on it so that the largest banks now only take up 8 percent of their market. It's just too expensive to operate. So I think that is a perfect insertion point for us to come in with something that is far cheaper than anything else they've been seeing, that we can get up and running in a couple weeks.
Lastly, I want to touch on future trends. What are some of Ripple's blockchain payment goals on the horizon for 2019? Maybe a partnership with a big e-commerce provider? I would look at a lot of the companies building apps on top of XRP. Ripple is one company with cross-border payments. Coil is another company building on top of the XRP ledger going after micropayments. It's a technology that goes through the browser and then you go to different websites to automatically pay for streaming content. Omni is another company building on top of the XRP ledger operating to use XRP for renting and storage.
Those are both funded by Xpring, a Ripple initiative that will invest in, incubate, acquire, and provide grants to companies and projects using the XRP digital asset and ledger. Early entrepreneurs Xpring is funding are Scooter Braun, Stefan Thomas (Coil), and Tom Mcleod (Omni).